SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number: 1-12762
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1543819
(State of Incorporation) (I.R.S. Employer Identification
Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
Securities registered pursuant to Section 12 (b) of the Act:
Name of Exchange
Title of Each Class on Which Registered
Common Stock, par value $.01 per share New York Stock
Exchange
Series A Cumulative Preferred Stock, par New York Stock
value $.01 per share Exchange
Series B Cumulative Preferred Stock, Series New York Stock
B, par value $.01 per share Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90
days. [ X ] [ ] No
Yes
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in PART III of
this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, (based on the closing price of such stock ($28.19
per share), as reported on the New York Stock Exchange, on March 13,
1998) was approximately $469,000,000 ( for purposes of this
calculation, directors and executive officers are treated as
affiliates).
The number of shares outstanding of the Registrant's Common Stock as
of March 13, 1998, was 18,553,931 shares, of which approximately
1,923,087 were held by affiliates.
MID-AMERICA APARTMENT COMMUNITIES, INC.
TABLE OF CONTENTS
Item Page
PART I
1. Business 1
2. Properties 5
3. Legal Proceedings 9
4. Submission of Matters to Vote of Security Holders 9
PART II
5. Market for Registrant's Common Equity and Related 9
Stockholder Matters
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
10. Directors and Executive Officers of the Registrant 17
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners and 22
Management
13. Certain Relationships and Related Transactions 23
PART IV
14. Exhibits, Financial Statement Schedule and Reports on 24
Form 8-K
PART I
ITEM 1. BUSINESS
THE COMPANY
Mid-America Apartment Communities, Inc. (the "Company") is a
Memphis, Tennessee-based self-administered and self-managed umbrella
partnership real estate investment trust, ("REIT") ("UPREIT") which
owns and operates 115 apartment communities containing 30,912
apartment units in 13 states (the "Communities"), has 2,660
apartment units under construction in 7 new communities and 5
additions to existing communities, and a further 804 apartment units
in various stages of development. The Company has entered into
definitive agreements to acquire three additional apartment
communities containing 624 apartment units, of which negotiations
are still in progress.
Founded in 1977 by George E. Cates, the Company's Chairman of the
Board of Directors and Chief Executive Officer, the Company's
predecessor grew from an operator of a single 252-unit apartment
community in Memphis, Tennessee into a fully-integrated owner and
operator of 5,580 apartment units in 22 apartment communities in
four southeastern states immediately prior to the Company's initial
public offering in February 1994 (the "Initial Offering"). Since the
Initial Offering, the Company's portfolio has increased by 93
apartment communities containing 25,332 apartment units, including
1) 12 apartment communities containing 3,212 apartment units
acquired in the Company's merger with America First REIT, Inc.
("AFR") in June 1995 (the "AFR Merger") for an aggregate value of
approximately $111 million (as measured by Common Stock issued and
AFR debt assumed) and 2) 30 apartment communities containing 7,691
apartments acquired in the company's merger with Flournoy
Development Company and related partnerships ("FDC") on November 25,
1997 (the "FDC Merger") for an aggregate value of $423 million. The
FDC Merger resulted in the establishment of Flournoy Service
Corporation ("FSC"), the name of which was later changed to Flournoy
Development Corporation, of which the Company owns 100% of the non-
voting common stock, specifically to own and operate the third-party
construction, brokerage and management activities formerly conducted
by FDC. At least 95% of the after tax cash flow after intercompany
interest expense of this subsidiary is distributed to Mid-America
Apartments, L.P., a Tennessee limited partnership (the "Operating
Partnership") through its ownership of the non-voting common stock
in FSC, with the 5% balance to the owners of FSC's common stock,
consisting of Mr. Cates and John F. Flournoy, the Vice-Chairman of
the Company. FSC did not make a distribution to Messrs. Cates and
Flournoy in 1997 and does not currently anticipate a distribution in
1998. The operations of FSC include the management of 43 properties
with 4,971 apartment units owned by third party investors, and the
development and construction of properties for third parties. The
Company believes that this structure is permitted under the terms of
the Internal Revenue Code and also provides the most economic
benefit to its shareholders.
The Company's business is conducted principally through the
Operating Partnership. The Company is the sole general partner of
the Operating Partnership, holding, as of December 31, 1997, 181,844
Common Units or a 1% general partnership interest in the Operating
Partnership. The Company's wholly-owned qualified REIT subsidiary,
MAC II of Delaware, Inc., a Delaware corporation, is a limited
partner in the Operating Partnership and, as of December 31, 1997,
held 15,736,248 Common Units, or 81.1% of all outstanding Common
Units.
In connection with the formation of the Operating Partnership and
the Initial Offering, the Operating Partnership issued 2,460,413
Common Units to the former owners of Communities contributed to the
Operating Partnership. The Common Units held by such former owners
are redeemable by the holders, at their option, for shares of Common
Stock on a one-for-one basis or, at the Company's option, for cash.
The Company has filed a shelf registration statement relating to the
offer and sale of the Common Units by the holders thereof. As of
December 31, 1997, such former owners held 2,384,097 Common Units.
In subsequent transactions and acquisitions of properties, including
in the FDC Merger, an additional 553,205 Common Units have been
issued, resulting in a total of 2,937,302 Common Units being owned
by outside investors.
Certain Communities are owned by limited partnerships of which the
Operating Partnership and the Company or a wholly owned qualified
REIT subsidiary are the only partners. The Company, directly or
through seven wholly owned qualified REIT subsidiaries, owns 19
Communities. The Company also has established Mid-America Capital
Partners, L.P., a single-purpose entity formed in 1997 to own 26
apartment communities containing 5,947 apartment units, of which the
Operating Partnership owns a 99% limited partnership interest and
the Company, through a subsidiary, owns a 1% General Partnership
interest
OPERATING PHILOSOPHY
MID-SIZE MARKET FOCUS. The Company focuses on owning, operating,
developing, constructing and acquiring apartment communities in mid-
size southeastern and Texas cities. The Company believes that these
markets generally have been less susceptible to apartment
overbuilding during past real estate investment cycles, and the
Company believes that apartment communities in these markets offer
attractive long-term investment returns. The Company seeks to
develop and acquire apartment communities in its existing markets
and selected new markets where it believes there is less competition
for acquisitions or new construction from other well-capitalized
buyers. The Company believes it can acquire apartment units at a
significant discount to estimated replacement cost in these markets
and through its experience construct and develop apartments at a
reasonable investment cost to generate higher returns on investment
than is available in large metropolitan areas.
INTENSIVE MANAGEMENT FOCUS. The Company strongly emphasizes on-site
property management. Particular attention is paid to opportunities
to increase rents, raise average occupancy rates, and control costs,
with property managers being given the responsibility for monitoring
market trends and the discretion to react to such trends.
DEDICATION TO CUSTOMER SERVICE. Management's experience is that
maintaining a consistently high level of customer satisfaction leads
to greater demand for the Company's apartment units, higher
occupancy and rental rates, and increased long-term profitability.
The Company, as part of its intense management focus, has
implemented a practice of having highly trained property managers
and service technicians on-site at each of the Communities.
Management undertakes frequent resident surveys and focus groups, in
order to measure customer satisfaction.
DECENTRALIZED OPERATIONAL STRUCTURE. The Company's operational
structure is organized on a geographic basis. The Company's property
managers have overall operating responsibility for their specific
Communities. Property managers report to area managers or regional
managers who, in turn, are accountable to the Company's President.
Management believes that its decentralized operating structure
capitalizes on specific market knowledge, increases personal
accountability relative to a centralized structure and is beneficial
in the acquisition, redevelopment and development process.
GROWTH STRATEGIES
The Company seeks to increase earnings per share and operating cash
flow to maximize shareholder value through a balanced strategy of
internal and external growth.
INTERNAL GROWTH STRATEGY. Management's goal is to maximize its
return on investment in each Community by increasing rental rates
and reducing operating expenses while maintaining high occupancy
levels. The Company (i) seeks higher net rental revenues by
enhancing and maintaining the competitiveness of the Communities and
(ii) manages expenses through its system of detailed management
reporting and accountability in order to achieve increases in
operating cash flow. The steps taken to meet these objectives
include:
* empowering the Company's property managers to adjust rents in
response to local market conditions and to concentrate resident turnover
in peak rental demand months;
* implementing programs to control expenses through investment in cost-
saving initiatives, such as the installation of individual apartment
unit water and utility meters in certain Communities;
* ensuring that, through monthly inspections of all Communities by
senior management and prompt attention to maintenance and recurring
capital needs, the Communities are properly maintained;
* improving the "curb appeal" of the Communities through extensive
landscaping and exterior improvements and repositioning Communities from
time to time to maintain market leadership positions;
* investing heavily in training programs for its property-level
personnel;
* compensating all employees through performance-based compensation
programs and stock ownership programs; and
* maintaining a hands-on management style and "flat" organizational
structure that emphasizes senior management's continued close contact
with the market and employees.
EXTERNAL GROWTH STRATEGY. The Company's external growth strategy is
to acquire and develop additional apartment units and, when
apartment communities no longer meet the Company's long-term
strategic objectives or investment return goals, to dispose of those
Communities. Through the Company's umbrella partnership REIT
("UPREIT") structure, the Company has the ability to acquire
apartment communities through the issuance of UPREIT Units in tax-
deferred exchanges with owners of such properties. Since the Initial
Offering, the Company has grown by 25,332 apartment units, an
increase of approximately 454% over the number of apartment units
immediately prior to the Initial Offering. Typical attributes of
apartment communities which the Company seeks to acquire are:
* well-constructed properties having attractive locations, potential
for increases in rental rates and occupancy, potential for reductions in
operating costs and acquisition prices below estimated replacement cost;
* properties with opportunities for internal growth through (i) market
repositioning by means of property upgrades which typically include
landscaping, selective refurbishing and the addition of amenities and
(ii) realizing economies of scale in management and purchasing; and
* properties located in the Company's existing markets and mid-size
southeastern and Texas metropolitan areas having favorable market
characteristics.
The Company develops new apartments when it believes it can achieve
an attractive return on investment substantially above the rate of
return of acquisitions. In November the Company acquired, through
the FDC Merger, Flournoy Development Company, a builder and
developer of multifamily apartments with 30 years of experience
owning, managing, developing and building apartments. As a result of
this merger, the Company has significantly expanded its commitment
to new development. The Company has established higher investment
return criteria for new development than it maintains for
acquisitions and generally expects that its new development program
will generate higher stabilized returns on investment than most
acquisition opportunities. Since the Initial Offering, the Company
has completed the following development projects:
* 122 apartment units constructed at the Woods of Post House in
Jackson, Tennessee in close proximity to three other Communities;
* 24 additional apartment units at the Reflection Pointe apartment
community in Jackson, Mississippi; and
* 32 additional apartment units at the Park Haywood apartment
community in Greenville, South Carolina.
In 1997, the Company substantially completed construction of a 234-
unit expansion of the 384-unit Lincoln on the Green apartment
community at the Tournament Players' Club at Southwind in Memphis,
Tennessee. The development of expansion for Lincoln on the Green
was managed successfully and began by Flournoy Development Company
prior to the merger with the Company. The Company currently has a
development pipeline of 3,466 apartments that are in various stages
of construction and development, of which 1,690 are anticipated to
be completed in 1998. It is likely that additional opportunities
will be identified for development in late 1998 and 1999.
COMPLETED ACQUISITIONS. During 1997, the Company acquired the
following apartment communities (the "Completed Acquisitions")
containing an aggregate of 3,314 apartment units (dollars in
millions):
NUMBER
OF DATE OF CONTRACT
PROPERTY MARKET UNITS ACQUISITION PRICE (1)
- ---------------- ---------------- ------ ----------- ----------
Howell Commons Greenville, SC 348 1/15/97 $ 13.0
Balcones Woods Austin, TX 384 3/18/97 15.8
Westside Creek I Little Rock, AR 142 3/28/97 6.1
Fairways at
Hartland Bowling Green, KY 240 3/31/97 10.4
Woodhollow Jacksonville, FL 450 4/10/97 16.7
The Woods Austin, TX 278 4/15/97 10.0
Hunters' Ridge Jacksonville, FL 336 5/29/97 15.2
Austin Chase Macon, GA 256 8/5/97 14.0
Westside Creek II Little Rock, AR 166 9/24/97 6.5
Woodwinds Aiken, SC 144 9/30/97 5.0
Hermitage at
Beechtree Cary, NC 194 11/3/97 8.9
Sterling Ridge Augusta, GA 192 11/13/97 7.7
Colony at
South Park Aiken, SC 184 11/25/97 7.5
----- -------
Total 3,314 $ 136.8
===== =======
(1) Excluding additional customary closing costs, including expenses and
commissions.
COMPETITION
All of the Company's Communities are located in developed areas that
include other apartment communities. Occupancy and rental rates are
affected by the number of competitive apartment communities in a
particular area. The Company's properties compete with numerous
other multifamily properties, the owners of which may have greater
resources than the Company and whose management may have more
experience than the Company's management. Moreover, single-family
rental housing, manufactured housing, condominiums and the new and
existing home market provide housing alternatives to potential
residents of apartment communities.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS
Since December 31, 1997, the Company has acquired the following
apartment communities (the "Recent Acquisitions") containing an
aggregate of 392 apartment units (dollars in millions):
NUMBER ACQUISITION CONTRACT
PROPERTY MARKET OF UNITS DATE PRICE
- ---------- -------------- -------- ----------- --------
Walden Run McDonough, GA 240 2/5/98 $ 13.4
Van Mark Huntsville, AL 152 2/26/98 5.1
-------- --------
Total 392 $ 18.5
======== ========
The Company funded the cash required to consummate the Recent
Acquisitions with borrowings under the Company's bank line of
credit.
PROPOSED ACQUISITIONS
The Company has entered into definitive agreements to purchase the
200-unit Eagle Ridge apartments in Birmingham, Alabama, the 204-
unit Village Apartments at Carrollwood in Tampa, Florida and the
220-unit Georgetown Grove Apartments in Savannah, Georgia. The
Company plans to fund the cash required to consummate the Proposed
Acquisitions with issuance of Umbrella Partnership units, borrowings
under the Credit Line and assumption of existing mortgages. There
are remaining issues to negotiate on these contracts and there can
be no assurance that these acquisitions will close.
DEVELOPMENT
The Company's Board of Directors has approved the development of
three apartment communities totaling 702 units located in
Montgomery, Alabama, Murfreesboro, Tennessee, and Panama City,
Florida; the Board has also approved the development of a 124-unit
addition to the Company's St Augustine property in Jacksonville, Florida.
The total estimated cost of these projects is $50.5 million to be
invested in 1998 and 1999.
The Company has a total of 1,762 apartments in pre-development or in-
depth feasibility review. If all these are developed, together with
the 1,070 apartments under construction and the 634 apartments under
construction and lease-up, the total planned investment in new
development in 1998 is $118 million, with an additional $70 million
to complete the projects in 1999. The Company has several additional
projects in earlier stages of feasibility study, and it anticipates
that the additional apartment communities will be approved for
development later in 1998 which will require additional funding in
1999.
DISTRIBUTION INCREASE
In January 1998, the Company raised its quarterly distribution to
common shareholders from $.535 per share to $.55 per share,
effective with its distribution paid on January 30, 1998.
ITEM 2. PROPERTIES
The Company seeks to acquire and develop apartment communities
appealing to middle and upper income residents in mid-size cities in
the southeastern United States and Texas. Approximately 71% of the
Company's apartment units are located in Georgia, Florida,
Tennessee, and Texas markets. The Company's strategic focus is to
provide its residents high quality apartment units in attractive
community settings, characterized by extensive landscaping and
attention to aesthetic detail. The Company utilizes its experience
and expertise in maintenance, landscaping, marketing and management
to effectively "reposition" many of the apartment communities it
acquires to raise occupancy levels and per unit average rentals. The
average age of the Communities at December 31, 1997 was 12.2 years.
The following table sets forth certain operating data regarding the
Company for the periods indicated excluding development communities.
1997 1996 1995
------- ------- -------
Apartment units at year end 30,468 19,280 18,219
Average monthly rental per
apartment unit at year end $568 $529 $508
Average occupancy for the year 93.9% 95.4% 95.2%
The following table presents information concerning the properties at
December 31, 1997:
<TABLE>
<CAPTION>
Year
Year Management
Property Location Completed Commenced
<C> <S> <S> <S>
Paddock Club-Huntsville Huntsville, AL 1989 1997
Calais Forest Little Rock, AR 1987 1994
Napa Valley Little Rock, AR 1984 1996
Westside Creek I Little Rock, AR 1984 1997
Westside Creek II Little Rock, AR 1986 1997
Whispering Oaks Little Rock, AR 1978 1994
Tiffany Oaks Altamonte Springs, FL 1985 1996
Marsh Oaks Atlantic Beach, FL 1986 1995
Paddock Club - Brandon Brandon, FL 1997 1997
Anatole Daytona Beach, FL 1986 1995
Cooper's Hawk Jacksonville, FL 1987 1995
Hunter's Ridge at Deerwood Jacksonville, FL 1987 1997
Lakeside Jacksonville, FL 1985 1996
Paddock Club-Jacksonville I Jacksonville, FL 1989 1997
Paddock Club-Jacksonville II Jacksonville, FL 1996 1997
Paddock Club-JacksonvilleIII Jacksonville, FL 1997 1997
St. Augustine Jacksonville, FL 1987 1995
Woodbridge at the Lake Jacksonville, FL 1985 1994
Woodhollow Jacksonville, FL 1986 1997
Paddock Club-Lakeland I Lakeland, FL 1988 1997
Paddock Club-Lakeland II Lakeland, FL 1990 1997
Savannahs at James Landing Melbourne, FL 1990 1995
Paddock Park-Ocala I Ocala, FL 1986 1997
Paddock Park-Ocala II Ocala, FL 1988 1997
Paddock Club-Tallahassee I Tallahassee, FL 1990 1997
Paddock Club-Tallahassee II Tallahassee, FL 1995 1997
Belmere Tampa, FL 1984 1994
Sailwinds at Lake Magdalene Tampa, FL 1975 1994
Hidden Oaks I Albany, GA 1979 1997
Hidden Oaks II Albany, GA 1980 1997
Regency Club Albany, GA 1983 1997
High Ridge Athens, GA 1987 1997
Shenandoah Ridge Augusta, GA 1975/1984 1994
Sterling Ridge Augusta, GA 1986 1997
Westbury Creek Augusta, GA 1984 1997
Fountain Lake Brunswick, GA 1983 1997
Park Walk College Park, GA 1985 1997
2000 Wynnton Columbus, GA 1983 1997
Riverwind Columbus, GA 1983 1997
Whisperwood Columbus, GA 1980-86 1997
Whisperwood Spa & Club Columbus, GA 1988 1997
Willow Creek Columbus, GA 1968-78 1997
Hollybrook Dalton, GA 1972 1994
Whispering Pines I LaGrange, GA 1982 1997
Whispering Pines II LaGrange, GA 1984 1997
Westbury Springs Lilburn, GA 1983 1997
Austin Chase Macon, GA 1996 1997
The Vistas Macon, GA 1985 1997
Wildwood I Thomasville, GA 1980 1997
Wildwood II Thomasville, GA 1984 1997
Hidden Lake I Union City, GA 1985 1997
Hidden Lake II Union City, GA 1987 1997
Three Oaks I Valdosta, GA 1983 1997
Three Oaks II Valdosta, GA 1984 1997
Southland Station I Warner Robins, GA 1987 1997
Southland Station II Warner Robins, GA 1990 1997
Terraces at Towne Lake Woodstock, GA 1997 1997
Fairways at Hartland Bowling Green, KY 1996 1997
Paddock Club Florence Florence, KY 1994 1997
Lakepointe Lexington, KY 1986 1994
Mansion, The Lexington, KY 1987 1994
Village, The Lexington, KY 1989 1994
Stonemill Village Louisville, KY 1985 1994
Canyon Creek St. Louis, MO 1987 1994
Riverhills Grenada, MS 1972 1985
Advantages, The Jackson, MS 1984 1991
Crosswinds Jackson, MS 1988/1989 1996
Lakeshore Landing Jackson, MS 1974 1994
Pear Orchard Jackson, MS 1985 1994
Pine Trails Jackson, MS 1978 1988
Reflection Pointe Jackson, MS 1986 1988
Somerset Place Jackson, MS 1981 1995
Woodridge Jackson, MS 1987 1988
Hermitage at Beechtree Cary, NC 1988 1997
Woodstream Greensboro, NC 1983 1994
Corners, The Winston-Salem, NC 1982 1993
Fairways at Royal Oak Cincinnati, OH 1988 1994
Colony at Southpark Aiken, SC 1989/91 1997
Woodwinds Aiken, SC 1988 1997
Tanglewood Anderson, SC 1980 1994
The Fairways Columbia, SC 1992 1994
Paddock Club-Columbia I Columbia, SC 1989 1997
Paddock Club-Columbia II Columbia, SC 1995 1997
Highland Ridge Greenville, SC 1984 1995
Howell Commons Greenville, SC 1986/88 1997
Paddock Club - Greenville Greenville, SC 1996 1997
Park Haywood Greenville, SC 1983 1993
Spring Creek Greenville, SC 1984 1995
Runaway Bay Mt. Pleasant, SC 1988 1995
Park Place Spartanburg, SC 1987 1997
Hamilton Pointe Chattanooga, TN 1989 1992
Hidden Creek Chattanooga, TN 1987 1988
Steeplechase Chattanooga, TN 1986 1991
Windridge Chattanooga, TN 1984 1997
Oaks, The Jackson, TN 1978 1993
Post House Jackson Jackson, TN 1987 1989
Post House North Jackson, TN 1987 1989
Williamsburg Village Jackson, TN 1987 1994
Woods at Post House Jackson, TN 1995 1995
Cedar Mill Memphis, TN 1973/1986 1982/1994
Clearbrook Village Memphis, TN 1974 1987
Crossings Memphis, TN 1974 1991
EastView Memphis, TN 1974 1984
Glen Eagles Memphis, TN 1975 1990
Greenbrook Memphis, TN 1986 1988
Hickory Farm Memphis, TN 1985 1994
Kirby Station Memphis, TN 1978 1994
Lincoln on the Green Memphis, TN 1988 1994
Lincoln on the Green II Memphis, TN 1997 1997
McKellar Woods Memphis, TN 1976 1988
Park Estate Memphis, TN 1974 1977
River Trace I Memphis, TN 1981 1977
River Trace II Memphis, TN 1985 1977
Savannah Creek Memphis, TN (8) 1989 1996
Sutton Place Memphis, TN (8) 1991 1996
Winchester Square Memphis, TN 1973 1977
Brentwood Downs Nashville, TN 1986 1994
Park at Hermitage Nashville, TN 1987 1995
Balcones Woods Austin, TX 1983 1997
Stassney Woods Austin, TX 1985 1995
Travis Station Austin, TX 1987 1995
Woods Austin, TX 1977 1997
Redford Park Conroe, TX 1984 1994
Celery Stalk Dallas, TX 1978 1994
Lodge at Timberglen Dallas, TX 1984 1994
MacArthur Ridge Irving, TX 1991 1994
Westborough Katy, TX 1984 1994
Lane at Towne Crossing Mesquite, TX 1983 1994
Cypresswood Court Spring, TX 1984 1994
Green Tree Place Woodlands, TX 1984 1994
Township Hampton, VA 1987 1995
Total
<CAPTION>
Approximate Average
Rentable Unit
Number Area Size
Property Location Of Units (Square Ft.)(Square Ft.)
<S> <C> <C> <C> <C>
Paddock Club-Huntsville Huntsville, AL 200 211,576 1,058
Calais Forest Little Rock, AR 260 194,928 750
Napa Valley Little Rock, AR 240 183,216 763
Westside Creek I Little Rock, AR 142 148,030 1,042
Westside Creek II Little Rock, AR 166 156,646 944
Whispering Oaks Little Rock, AR 206 192,422 934
1,014 875,242 863
Tiffany Oaks Altamonte Springs, FL 288 234,224 813
Marsh Oaks Atlantic Beach, FL 120 93,280 777
Paddock Club - Brandon Brandon, FL 308 358,600 1,164
Anatole Daytona Beach, FL 208 149,136 717
Cooper's Hawk Jacksonville, FL 208 218,400 1,050
Hunter's Ridge at Deerwood Jacksonville, FL 336 294,888 878
Lakeside Jacksonville, FL 416 344,192 827
Paddock Club-Jacksonville I Jacksonville, FL 200 216,016 1,080
Paddock Club-Jacksonville II Jacksonville, FL 120 132,280 1,102
Paddock Club-JacksonvilleIII Jacksonville, FL 120 130,544 1,088
St. Augustine Jacksonville, FL 400 304,400 761
Woodbridge at the Lake Jacksonville, FL 188 166,000 883
Woodhollow Jacksonville, FL 450 342,162 760
Paddock Club-Lakeland I Lakeland, FL 200 217,704 1,089
Paddock Club-Lakeland II Lakeland, FL 264 283,365 1,073
Savannahs at James Landing Melbourne, FL 256 238,592 932
Paddock Park-Ocala I Ocala, FL 200 202,282 1,011
Paddock Park-Ocala II Ocala, FL 280 290,496 1,037
Paddock Club-Tallahassee I Tallahassee, FL 192 208,000 1,083
Paddock Club-Tallahassee II Tallahassee, FL 112 124,720 1,114
Belmere Tampa, FL 210 202,440 964
Sailwinds at Lake Magdalene Tampa, FL 798 667,084 836
5,874 5,418,805 923
Hidden Oaks I Albany, GA 128 132,096 1,032
Hidden Oaks II Albany, GA 112 114,624 1,023
Regency Club Albany, GA 100 80,200 802
High Ridge Athens, GA 160 186,608 1,166
Shenandoah Ridge Augusta, GA 272 222,800 819
Sterling Ridge Augusta, GA 192 156,232 814
Westbury Creek Augusta, GA 120 106,998 892
Fountain Lake Brunswick, GA 100 118,046 1,180
Park Walk College Park, GA 124 112,776 909
2000 Wynnton Columbus, GA 72 66,056 917
Riverwind Columbus, GA 44 40,304 916
Whisperwood Columbus, GA 506 610,876 1,207
Whisperwood Spa & Club Columbus, GA 348 380,044 1,092
Willow Creek Columbus, GA 285 246,668 866
Hollybrook Dalton, GA 158 188,640 1,194
Whispering Pines I LaGrange, GA 120 123,904 1,033
Whispering Pines II LaGrange, GA 96 98,572 1,027
Westbury Springs Lilburn, GA 150 137,744 918
Austin Chase Macon, GA 256 293,016 1,144
The Vistas Macon, GA 144 153,792 1,068
Wildwood I Thomasville, GA 120 123,904 1,033
Wildwood II Thomasville, GA 96 101,152 1,054
Hidden Lake I Union City, GA 160 171,192 1,070
Hidden Lake II Union City, GA 160 154,000 963
Three Oaks I Valdosta, GA 120 123,904 1,033
Three Oaks II Valdosta, GA 120 129,200 1,077
Southland Station I Warner Robins, GA 160 186,704 1,167
Southland Station II Warner Robins, GA 144 168,704 1,172
Terraces at Towne Lake Woodstock, GA 264 286,968 1,087
4,831 5,015,724 979
Fairways at Hartland Bowling Green, KY 240 251,180 1,047
Paddock Club Florence Florence, KY 200 207,036 1,035
Lakepointe Lexington, KY 118 90,614 768
Mansion, The Lexington, KY 184 138,720 754
Village, The Lexington, KY 252 182,716 725
Stonemill Village Louisville, KY 384 324,008 844
1,378 1,194,274 867
Canyon Creek St. Louis, MO 320 312,592 977
Riverhills Grenada, MS 96 81,942 854
Advantages, The Jackson, MS 252 199,136 790
Crosswinds Jackson, MS 360 443,200 1,231
Lakeshore Landing Jackson, MS 196 171,156 873
Pear Orchard Jackson, MS 389 338,400 870
Pine Trails Jackson, MS 120 98,560 821
Reflection Pointe Jackson, MS 296 254,856 861
Somerset Place Jackson, MS 144 126,848 881
Woodridge Jackson, MS 192 175,034 912
2,045 1,889,132 924
Hermitage at Beechtree Cary, NC 194 169,776 875
Woodstream Greensboro, NC 304 217,186 714
Corners, The Winston-Salem, NC 240 173,496 723
738 560,458 759
Fairways at Royal Oak Cincinnati, OH 214 214,477 1,002
Colony at Southpark Aiken, SC 184 174,800 950
Woodwinds Aiken, SC 144 165,188 1,147
Tanglewood Anderson, SC 168 146,600 873
The Fairways Columbia, SC 240 213,720 891
Paddock Club-Columbia I Columbia, SC 200 218,872 1,094
Paddock Club-Columbia II Columbia, SC 136 144,720 1,064
Highland Ridge Greenville, SC 168 144,000 857
Howell Commons Greenville, SC 348 292,840 841
Paddock Club - Greenville Greenville, SC 208 212,104 1,020
Park Haywood Greenville, SC 208 156,776 754
Spring Creek Greenville, SC 208 182,000 875
Runaway Bay Mt. Pleasant, SC 208 177,840 855
Park Place Spartanburg, SC 184 195,312 1,061
2,604 2,424,772 931
Hamilton Pointe Chattanooga, TN 362 256,716 711
Hidden Creek Chattanooga, TN 300 259,152 864
Steeplechase Chattanooga, TN 108 98,602 913
Windridge Chattanooga, TN 174 238,704 1,372
Oaks, The Jackson, TN 100 87,512 875
Post House Jackson Jackson, TN 150 163,640 1,091
Post House North Jackson, TN 144 144,724 1,005
Williamsburg Village Jackson, TN 148 121,412 820
Woods at Post House Jackson, TN 122 118,922 975
Cedar Mill Memphis, TN 276 297,794 1,079
Clearbrook Village Memphis, TN 176 150,400 855
Crossings Memphis, TN 80 89,968 1,125
EastView Memphis, TN 432 356,480 825
Glen Eagles Memphis, TN 184 189,560 1,030
Greenbrook Memphis, TN 1,031 934,490 906
Hickory Farm Memphis, TN 200 150,256 751
Kirby Station Memphis, TN 371 310,173 836
Lincoln on the Green Memphis, TN 384 293,664 765
Lincoln on the Green II Memphis, TN 182 241,280 1,031
McKellar Woods Memphis, TN 624 589,776 945
Park Estate Memphis, TN 82 95,751 1,182
River Trace I Memphis, TN 244 205,780 843
River Trace II Memphis, TN 196 194,864 994
Savannah Creek Memphis, TN (8) 204 237,200 1,162
Sutton Place Memphis, TN (8) 252 267,600 1,062
Winchester Square Memphis, TN 252 301,409 1,196
Brentwood Downs Nashville, TN 286 220,166 770
Park at Hermitage Nashville, TN 440 392,480 892
7,504 7,008,475 934
Balcones Woods Austin, TX 384 313,756 817
Stassney Woods Austin, TX 288 248,832 864
Travis Station Austin, TX 304 249,888 822
Woods Austin, TX 278 213,970 770
Redford Park Conroe, TX 212 153,744 725
Celery Stalk Dallas, TX 410 552,220 1,347
Lodge at Timberglen Dallas, TX 260 226,124 870
MacArthur Ridge Irving, TX 248 210,393 848
Westborough Katy, TX 274 197,264 720
Lane at Towne Crossing Mesquite, TX 384 277,616 723
Cypresswood Court Spring, TX 208 160,672 772
Green Tree Place Woodlands, TX 200 152,168 761
3,450 2,956,647 766
Township Hampton, VA 296 248,048 838
Total 30,468 28,082,174 910
<CAPTION>
Average Average
Rent Per Occupancy
Unit at % at
December 31,December 31,
Property Location 1997 1997
<S> <C> <C> <C>
Paddock Club-Huntsville Huntsville, AL $595 96.0%
Calais Forest Little Rock, AR $561 96.2%
Napa Valley Little Rock, AR $543 90.0%
Westside Creek I Little Rock, AR $631 93.7%
Westside Creek II Little Rock, AR $589 95.2%
Whispering Oaks Little Rock, AR $500 94.2%
$559 93.8%
Tiffany Oaks Altamonte Springs, FL $563 97.9%
Marsh Oaks Atlantic Beach, FL $525 98.3%
Paddock Club - Brandon Brandon, FL $747 97.0%
Anatole Daytona Beach, FL $544 97.6%
Cooper's Hawk Jacksonville, FL $644 96.6%
Hunter's Ridge at Deerwood Jacksonville, FL $570 93.8%
Lakeside Jacksonville, FL $559 91.8%
Paddock Club-Jacksonville I Jacksonville, FL $704 90.0%
Paddock Club-Jacksonville II Jacksonville, FL $728 95.0%
Paddock Club-JacksonvilleIII Jacksonville, FL $751 59.0%
St. Augustine Jacksonville, FL $528 90.3%
Woodbridge at the Lake Jacksonville, FL $593 95.2%
Woodhollow Jacksonville, FL $566 92.9%
Paddock Club-Lakeland I Lakeland, FL $648 97.0%
Paddock Club-Lakeland II Lakeland, FL $650 96.0%
Savannahs at James Landing Melbourne, FL $575 96.9%
Paddock Park-Ocala I Ocala, FL $603 94.0%
Paddock Park-Ocala II Ocala, FL $653 94.0%
Paddock Club-Tallahassee I Tallahassee, FL $660 94.0%
Paddock Club-Tallahassee II Tallahassee, FL $679 86.0%
Belmere Tampa, FL $603 98.1%
Sailwinds at Lake Magdalene Tampa, FL $533 96.9%
$601 94.1%
Hidden Oaks I Albany, GA $430 95.0%
Hidden Oaks II Albany, GA $432 96.0%
Regency Club Albany, GA $388 84.0%
High Ridge Athens, GA $743 96.0%
Shenandoah Ridge Augusta, GA $442 86.0%
Sterling Ridge Augusta, GA $529 95.3%
Westbury Creek Augusta, GA $540 93.0%
Fountain Lake Brunswick, GA $748 81.0%
Park Walk College Park, GA $623 94.0%
2000 Wynnton Columbus, GA $431 96.0%
Riverwind Columbus, GA $432 95.0%
Whisperwood Columbus, GA $598 95.0%
Whisperwood Spa & Club Columbus, GA $594 95.0%
Willow Creek Columbus, GA $462 92.0%
Hollybrook Dalton, GA $578 93.0%
Whispering Pines I LaGrange, GA $553 83.0%
Whispering Pines II LaGrange, GA $552 94.0%
Westbury Springs Lilburn, GA $631 99.0%
Austin Chase Macon, GA $646 96.9%
The Vistas Macon, GA $583 90.0%
Wildwood I Thomasville, GA $470 98.0%
Wildwood II Thomasville, GA $509 98.0%
Hidden Lake I Union City, GA $626 95.0%
Hidden Lake II Union City, GA $616 90.0%
Three Oaks I Valdosta, GA $519 92.0%
Three Oaks II Valdosta, GA $537 94.0%
Southland Station I Warner Robins, GA $603 87.0%
Southland Station II Warner Robins, GA $624 93.0%
Terraces at Towne Lake Woodstock, GA $765 96.0%
$572 93.1%
Fairways at Hartland Bowling Green, KY $554 92.1%
Paddock Club Florence Florence, KY $716 84.0%
Lakepointe Lexington, KY $531 98.3%
Mansion, The Lexington, KY $528 96.7%
Village, The Lexington, KY $560 96.4%
Stonemill Village Louisville, KY $552 88.5%
$573 91.9%
Canyon Creek St. Louis, MO $525 94.1%
Riverhills Grenada, MS $392 85.4%
Advantages, The Jackson, MS $445 95.2%
Crosswinds Jackson, MS $604 95.8%
Lakeshore Landing Jackson, MS $500 95.9%
Pear Orchard Jackson, MS $547 97.2%
Pine Trails Jackson, MS $491 85.8%
Reflection Pointe Jackson, MS $556 92.9%
Somerset Place Jackson, MS $491 95.8%
Woodridge Jackson, MS $513 93.2%
$524 94.3%
Hermitage at Beechtree Cary, NC $648 94.8%
Woodstream Greensboro, NC $528 93.1%
Corners, The Winston-Salem, NC $532 95.8%
$561 94.4%
Fairways at Royal Oak Cincinnati, OH $592 96.3%
Colony at Southpark Aiken, SC $548 97.0%
Woodwinds Aiken, SC $580 88.2%
Tanglewood Anderson, SC $515 89.9%
The Fairways Columbia, SC $563 95.8%
Paddock Club-Columbia I Columbia, SC $689 96.0%
Paddock Club-Columbia II Columbia, SC $735 93.0%
Highland Ridge Greenville, SC $479 95.2%
Howell Commons Greenville, SC $497 95.1%
Paddock Club - Greenville Greenville, SC $697 84.0%
Park Haywood Greenville, SC $487 92.3%
Spring Creek Greenville, SC $505 96.2%
Runaway Bay Mt. Pleasant, SC $655 93.8%
Park Place Spartanburg, SC $601 80.0%
$574 92.4%
Hamilton Pointe Chattanooga, TN $455 94.2%
Hidden Creek Chattanooga, TN $489 86.3%
Steeplechase Chattanooga, TN $539 92.6%
Windridge Chattanooga, TN $657 91.0%
Oaks, The Jackson, TN $484 95.0%
Post House Jackson Jackson, TN $567 93.3%
Post House North Jackson, TN $566 95.9%
Williamsburg Village Jackson, TN $523 98.0%
Woods at Post House Jackson, TN $634 95.1%
Cedar Mill Memphis, TN $552 96.7%
Clearbrook Village Memphis, TN $495 96.6%
Crossings Memphis, TN $618 100.0%
EastView Memphis, TN $490 96.3%
Glen Eagles Memphis, TN $556 94.0%
Greenbrook Memphis, TN $498 92.9%
Hickory Farm Memphis, TN $504 97.0%
Kirby Station Memphis, TN $560 98.1%
Lincoln on the Green Memphis, TN $586 91.4%
Lincoln on the Green II Memphis, TN $681 42.9%
McKellar Woods Memphis, TN $443 98.4%
Park Estate Memphis, TN $673 97.6%
River Trace I Memphis, TN $496 95.0%
River Trace II Memphis, TN $533 95.0%
Savannah Creek Memphis, TN (8) $590 99.5%
Sutton Place Memphis, TN (8) $566 99.2%
Winchester Square Memphis, TN $575 93.7%
Brentwood Downs Nashville, TN $633 94.1%
Park at Hermitage Nashville, TN $588 91.6%
$537 93.5%
Balcones Woods Austin, TX $656 96.4%
Stassney Woods Austin, TX $585 94.1%
Travis Station Austin, TX $537 96.4%
Woods Austin, TX $671 95.0%
Redford Park Conroe, TX $488 90.6%
Celery Stalk Dallas, TX $640 93.9%
Lodge at Timberglen Dallas, TX $574 94.6%
MacArthur Ridge Irving, TX $696 96.8%
Westborough Katy, TX $502 97.4%
Lane at Towne Crossing Mesquite, TX $521 95.6%
Cypresswood Court Spring, TX $510 91.8%
Green Tree Place Woodlands, TX $566 94.5%
$584 94.9%
Township Hampton, VA $571 88.5%
Total $566 93.6%
<CAPTION>
Encumbrances at
December 31, 1997
Mortgage
Principal Interest Maturity
Property Location (000's) Rate Date
<S> <C> <C> <C> <C>
Paddock Club-Huntsville Huntsville, AL -(2) -(2) -(2)
Calais Forest Little Rock, AR $5,610 8.915% 12/01/99
Napa Valley Little Rock, AR -(9) -(9)
Westside Creek I Little Rock, AR -(9) -(9)
Westside Creek II Little Rock, AR $4,958 8.760% 10/01/06
Whispering Oaks Little Rock, AR $3,000 8.915% 12/01/99
$13,568
Tiffany Oaks Altamonte Springs, FL -(9) -(9)
Marsh Oaks Atlantic Beach, FL -(9) -(9)
Paddock Club - Brandon Brandon, FL -(2) -(2)
Anatole Daytona Beach, FL $7,000 5.510% 12/01/27
Cooper's Hawk Jacksonville, FL -(7) -(7)
Hunter's Ridge at Deerwood Jacksonville, FL -(2) -(2)
Lakeside Jacksonville, FL -(9) -(9)
Paddock Club-Jacksonville I Jacksonville, FL -(10) -(10)
Paddock Club-Jacksonville II Jacksonville, FL -(10) -(10)
Paddock Club-JacksonvilleIII Jacksonville, FL -(10) -(10)
St. Augustine Jacksonville, FL -(7) -(7)
Woodbridge at the Lake Jacksonville, FL $3,672 -(1) -(1)
Woodhollow Jacksonville, FL $10,149 7.500% 09/01/02
Paddock Club-Lakeland I Lakeland, FL -(10) -(10)
Paddock Club-Lakeland II Lakeland, FL -(10) -(10)
Savannahs at James Landing Melbourne, FL -(7) -(7)
Paddock Park-Ocala I Ocala, FL $6,805 6.500% 10/01/08
Paddock Park-Ocala II Ocala, FL -(2) -(2)
Paddock Club-Tallahassee I Tallahassee, FL -(2) -(2)
Paddock Club-Tallahassee II Tallahassee, FL $4,727 8.500% 04/01/36
Belmere Tampa, FL -(9) -(9)
Sailwinds at Lake Magdalene Tampa, FL $15,950 8.915% 12/01/99
$48,303
Hidden Oaks I Albany, GA - - -
Hidden Oaks II Albany, GA $2,470 8.000% 02/01/21
Regency Club Albany, GA - - -
High Ridge Athens, GA -(9) -(9)
Shenandoah Ridge Augusta, GA -(9) -(9)
Sterling Ridge Augusta, GA $4,805 8.750% 04/01/17
Westbury Creek Augusta, GA $3,207 7.594% 11/01/24
Fountain Lake Brunswick, GA $3,005 7.750% 04/01/24
Park Walk College Park, GA $3,438 6.370% 11/01/25
2000 Wynnton Columbus, GA - - -
Riverwind Columbus, GA - - -
Whisperwood Columbus, GA -(2) -(2)
Whisperwood Spa & Club Columbus, GA -(2) -(2)
Willow Creek Columbus, GA -(9) -(9)
Hollybrook Dalton, GA $2,520 8.915% 12/01/99
Whispering Pines I LaGrange, GA $2,770 7.750% 01/01/23
Whispering Pines II LaGrange, GA $2,561 6.150% 12/01/24
Westbury Springs Lilburn, GA $4,307 7.500% 07/01/23
Austin Chase Macon, GA $10,182 7.300% 05/01/98
The Vistas Macon, GA $4,130 6.230% 03/01/28
Wildwood I Thomasville, GA $2,112 7.500% 12/01/20
Wildwood II Thomasville, GA $2,046 6.573% 07/01/24
Hidden Lake I Union City, GA $4,583 6.340% 12/01/26
Hidden Lake II Union City, GA -(9) -(9)
Three Oaks I Valdosta, GA $2,894 7.500% 02/01/22
Three Oaks II Valdosta, GA $2,978 6.259% 07/01/24
Southland Station I Warner Robins, GA -(9) -(9)
Southland Station II Warner Robins, GA - - -
Terraces at Towne Lake Woodstock, GA $15,246 8.200% 01/01/37
$73,254
Fairways at Hartland Bowling Green, KY $4,697 8.875% 05/01/00
Paddock Club Florence Florence, KY $9,723 7.250% 02/01/36
Lakepointe Lexington, KY -(9) -(9)
Mansion, The Lexington, KY $4,140 8.915% 12/01/99
Village, The Lexington, KY -(9) -(9)
Stonemill Village Louisville, KY -(6) -(6)
$18,560
Canyon Creek St. Louis, MO -(6) -(6)
Riverhills Grenada, MS $851 7.000% 05/01/13
Advantages, The Jackson, MS -(6) -(6)
Crosswinds Jackson, MS -(9) -(9)
Lakeshore Landing Jackson, MS -(6) -(6)
Pear Orchard Jackson, MS -(9) -(9)
Pine Trails Jackson, MS $1,357 7.000% 04/01/15
Reflection Pointe Jackson, MS $5,882 5.500% 12/01/27
Somerset Place Jackson, MS -(9) -(9)
Woodridge Jackson, MS $4,789 6.500% 10/01/27
$12,879
Hermitage at Beechtree Cary, NC -(9) -(9)
Woodstream Greensboro, NC $5,491 9.250% 12/01/98
Corners, The Winston-Salem, NC $4,306 7.850% 06/15/03
$9,797
Fairways at Royal Oak Cincinnati, OH -(9) -(9)
Colony at Southpark Aiken, SC - - -
Woodwinds Aiken, SC $3,532 8.840% 06/01/05
Tanglewood Anderson, SC $2,576 7.600% 11/15/02
The Fairways Columbia, SC $7,641 8.500% 03/01/33
Paddock Club-Columbia I Columbia, SC -(2) -(2)
Paddock Club-Columbia II Columbia, SC -(2) -(2)
Highland Ridge Greenville, SC -(3) -(3)
Howell Commons Greenville, SC -(9) -(9)
Paddock Club - Greenville Greenville, SC -(2) -(2)
Park Haywood Greenville, SC -(9) -(9)
Spring Creek Greenville, SC -(3) -(3)
Runaway Bay Mt. Pleasant, SC -(3) -(3)
Park Place Spartanburg, SC -(9) -(9)
$13,749
Hamilton Pointe Chattanooga, TN -(6) -(6)
Hidden Creek Chattanooga, TN -(6) -(6)
Steeplechase Chattanooga, TN -(9) -(9)
Windridge Chattanooga, TN $5,558 6.314% 12/01/24
Oaks, The Jackson, TN -(6) -(6)
Post House Jackson Jackson, TN $5,140 8.170% 10/01/27
Post House North Jackson, TN $3,680 5.750% 09/01/25
Williamsburg Village Jackson, TN -(9) -(9)
Woods at Post House Jackson, TN $5,313 7.250% 09/01/35
Cedar Mill Memphis, TN $2,487 -(4) -(4) & (6)
Clearbrook Village Memphis, TN $1,162 9.000% 05/01/08
Crossings Memphis, TN -(6) -(6)
EastView Memphis, TN $3,286 8.630% 12/01/99
Glen Eagles Memphis, TN -(6) -(6)
Greenbrook Memphis, TN $15,477 -(5) -(5)
Hickory Farm Memphis, TN -(6) -(6)
Kirby Station Memphis, TN -(9) -(9)
Lincoln on the Green Memphis, TN -(10) -(10)
Lincoln on the Green II Memphis, TN - - -
McKellar Woods Memphis, TN $8,357 -(5) -(5)
Park Estate Memphis, TN $1,471 -(5) -(5)
River Trace I Memphis, TN $5,832 7.500% 02/01/22
River Trace II Memphis, TN $5,739 6.380% 02/01/26
Savannah Creek Memphis, TN (8) -(9) -(9)
Sutton Place Memphis, TN (8) -(9) -(9)
Winchester Square Memphis, TN -(6) -(6)
Brentwood Downs Nashville, TN $6,678 8.915% 12/01/99
Park at Hermitage Nashville, TN $8,190 5.790% 02/01/19
$78,370
Balcones Woods Austin, TX $8,986 7.630% 11/01/03
Stassney Woods Austin, TX $4,825 6.600% 04/01/19
Travis Station Austin, TX $4,265 6.600% 04/01/19
Woods Austin, TX -(2) -(2)
Redford Park Conroe, TX $3,000 9.006% 12/01/04
Celery Stalk Dallas, TX $8,460 9.006% 12/01/04
Lodge at Timberglen Dallas, TX $4,740 9.006% 12/01/04
MacArthur Ridge Irving, TX $7,524 7.400% 08/15/98
Westborough Katy, TX $3,958 9.006% 12/01/04
Lane at Towne Crossing Mesquite, TX $5,696 8.750% 01/01/98
Cypresswood Court Spring, TX $3,330 9.006% 12/01/04
Green Tree Place Woodlands, TX $3,180 9.006% 12/01/04
$57,964
Township Hampton, VA -(2) -(2)
Total $326,444
</TABLE>
[FN]
(1) Encumbered by two mortgages with interest rates of 7.75% and maturities
of September 7, 1999 and January 1, 2004.
(2) Encumbered by the Credit Line, with an outstanding balance of $45.2
million at December 31, 1997. The line had a variable interest rate at
December 31, 1997 of 7.07%.
(3) These three properties are encumbered by a $10.3 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(4) Cedar Mill is encumbered by two mortgages with interest rates of 7.8%
and 8.35%, with maturities of February 4, 2004 and July 1, 2001 and
Mendenhall Townhomes with a 8.65% loan maturing July 1, 2001.
(5) Encumbered by three mortgages with interest rates of 7.8%, 7.55%
and 8.35% and maturities of February 4, 2004, July 1, 2001 and
July 1, 2001, respectively.
(6) These twelve properties are encumbered by a $43.4 million mortgage
with a maturity of July 1, 2001 and an average interest rate of
8.65%.
(7) These three properties are encumbered by a $16.5 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(8) These properties are located in Desoto County, MS, a suburb of Memphis,
TN. The Company considers the properties part of the Memphis, TN market.
(9) These 26 properties are encumbered by a $140 million loan with a
maturity of March 3, 2003 and an average interest rate of 6.62%.
(10) These six properties are encumbered by a $47.5 million mortgage.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Communities is presently subject to
any material litigation nor, to the Company's knowledge, is any
material litigation threatened against the Company or the
Communities properties, other than routine litigation arising in the
ordinary course of business, some of which is expected to be covered
by liability insurance and none of which is expected to have a
material adverse effect on the business, financial condition,
liquidity or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting of shareholders in November 1997
for the following purposes:
Proposal 1: To approve an amendment to the Company's Charter to
increase the number of authorized shares of Common Stock from 20
million shares to 50 million shares.
Proposal 2: To approve an amendment to the Company's Charter to
increase the number of authorized shares of Preferred Stock from 5
million shares to 20 million shares.
Votes Cast Votes Cast
Votes Cast Against or Abstentions/
In Favor Withheld Non Votes
---------- ---------- ------------
Votes cast by holders of Common Stock:
- --------------------------------------
Proposal 1 12,648,206 2,231,956 99,670
Proposal 2 8,736,016 2,610,523 131,468
Votes cast by holders of 9.5%
Series A Cumulative Preferred Stock:
- ------------------------------------
Proposal 2 1,060,289 71,026 24,025
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock has been listed and traded on the NYSE under the
symbol "MAA" since the Initial Offering in February 1994. On March
13, 1998, the reported last sale price of the Company's common stock
on the NYSE was $28.13 per share and there were approximately 1,640
holders of record of the Common Stock. The Company estimates there
are approximately 16,000 beneficial owners of the Common Stock. The
following table sets forth the quarterly high and low sales prices
of the Common Stock as reported on the NYSE and the distributions
declared by the Company with respect to the periods indicated.
Sales Prices
---------------- Dividends
High Low Declared
--------- --------- ---------
1996:
-----
First Quarter $ 26.875 $ 24.00 $ .51
Second Quarter 26.625 25.00 .51
Third Quarter 25.875 23.75 .51
Fourth Quarter 28.875 24.625 .535
1997:
-----
First Quarter $ 29.750 $ 27.625 .535
Second Quarter 28.875 25.00 .535
Third Quarter 30.500 26.625 .535
Fourth Quarter 30.063 26.625 .55
The Company's current annual distribution rate with respect to the
Common Stock is $2.20 per share. The actual distributions made by
the Company will be affected by a number of factors, including the
gross revenues received from the Communities, the operating expenses
of the Company, the interest expense incurred on borrowings and
unanticipated capital expenditures.
The Company pays a preferential regular monthly distribution on the
Series A Preferred Stock issued in October 1996 and the Series B
Preferred Stock issued in November 1997 at an annual rate of $2.375
per share and $2.21875 per share, respectively. No distribution may
be made on the Common Stock unless all accrued distributions have
been made with respect to the Series A and Series B Preferred Stock.
No assurance can be given that the Company will be able to maintain
its distribution rate on its Common Stock or make required
distributions with respect to the Series A or Series B Preferred
Stock.
In 1997, the Company implemented the DRSPP under which holders of
Common Stock (and Series A and Series B Preferred Stock) may elect
automatically to reinvest their distributions in additional shares
of Common Stock and/or to make optional purchases of Common Stock
free of brokerage commissions and charges. Shares purchased directly
from the Company will be purchased at up to a 3% discount from their
fair market value at the Company's discretion. To fulfill its
obligations under the DRSPP, the Company may either issue additional
shares of Common Stock or repurchase Common Stock in the open
market.
Future distributions by the Company will be at the discretion of the
Board of Directors and will depend on the actual funds available
for distribution of the Company, its financial condition, capital
requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of
Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on an
historical basis for the Company and its predecessor. This data
should be read in conjunction with the consolidated financial
statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this Annual Report on Form 10-K. In the opinion of
management, the data for the periods presented include all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein.
Mid - America Apartment Communities, Inc.
Selected Financial Data
(Dollars in thousands except per share and property data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
Historical
----------------------------------------------------
(Predecessor)
1997 1996 1995 1994 (1) 1993
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Operating Data:
- --------------
Total revenues $139,116 $111,882 $94,963 $51,207 $26,295
Expenses:
Property expenses (2) 52,404 42,570 37,954 19,484 11,316
General and administrative 6,602 6,154 4,851 3,613 1,402
Interest 28,943 25,766 22,684 10,233 7,448
Depreciation and amortization 27,737 21,443 16,574 8,803 3,521
Amortization of deferred financing costs 888 661 593 296 199
Gain on disposition of properties - 2,185 - - -
Income before minority interest in operating
partnership income and extraordinary item 22,542 17,473 12,307 8,778 2,409
Extraordinary item (8,622) - - 485 -
Net income 11,227 14,260 9,810 6,944 2,542
Deferred dividends 5,252 990 - - N/A
Net income available for common shareholders $5,975 $13,270 $9,810 $6,944 N/A
Per Share Data:
- --------------
Basic and diluted:
Before extraordinary item $1.05 $1.21 $1.00 $0.94 N/A
Extraordinary item ($0.62) $0.00 $0.00 $0.07 N/A
---------------------------------------------------
Net income available per common share $0.43 $1.21 $1.00 $1.01 N/A
===================================================
Dividends declared $2.16 $2.07 $2.01 $1.71 N/A
Balance Sheet Data:
- ------------------
Real estate owned, at cost $1,211,693 $641,893 $578,788 $434,460 $125,269
Real estate owned, net $1,134,704 $592,335 $549,284 $421,074 $98,029
Total assets $1,194,070 $611,199 $565,267 $439,233 $104,439
Total debt $632,213 $315,239 $307,939 $232,766 $105,594
Minority interest $62,865 $39,238 $41,049 $43,709 N/A
Shareholders' equity (owners' deficit) $461,500 $241,384 $202,278 $152,385 ($4,684)
Weighted average common shares (000's) $13,897 $10,938 $9,772 $6,484 N/A
Other Data (at end of period):
- -----------------------------
Market capitalization (shares and units) $710,175 $436,739 $331,238 $295,300 N/A
Ratio of total debt to total capitalization(3) 47.1% 41.9% 48.2% 44.1% N/A
Number of Properties 116 73 70 54 22
Number of apartment units 30,579 19,280 18,219 14,333 5,580
</TABLE>
[FN]
(1) Operating data for 1994 includes 34 days of predecessor
financial information and per share data for 1994 is for
the period February 4, 1994 through December 31, 1994.
(2) See discussion of the change in accounting policy during
1996 in Note 1 to the Consolidated Financial Statements.
(3) Total capitalizati on is total debt and market capitalization
of preferred shares, common shares and partnership units.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of the consolidated financial
condition and results of operations of the Company for the years
ended December 31, 1997, 1996, and 1995. This discussion should be
read in conjunction with all of the financial statements included in
this Annual Report on Form 10-K. These financial statements include
all adjustments which are, in the opinion of management, necessary
to reflect a fair statement of the results for the interim periods
presented, and all such adjustments are of a normal recurring
nature.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") represents net income (computed in
accordance with GAAP) excluding extraordinary items, minority
interest in Operating Partnership income, gain or loss on
disposition of real estate assets, and certain non-cash items,
primarily depreciation and amortization, less preferred stock
dividends. The Company computes FFO in accordance with NAREIT's
current definition, which eliminates amortization of deferred
financing costs and depreciation of non-real estate assets as items
added back to net income when computing FFO. The Company adopted
this method of calculating FFO effective as of the NAREIT-suggested
adoption date of January 1, 1996. FFO should not be considered as an
alternative to net income or any other GAAP measurement of
performance, as an indicator of operating performance or as an
alternative to cash flows from operating, investing, and financing
activities as a measure of liquidity. The Company believes that FFO
is helpful in understanding the Company's results of operations in
that such calculation reflects cash flow from operating activities
and the Company's ability to support interest payments and general
operating expenses before the impact of certain activities such as
changes in other assets and accounts payable. The Company's
calculation of FFO may differ from the methodology for calculating
FFO utilized by other REITs and, accordingly, may not be comparable
to such other REITs.
For the year ended December 31, 1997, FFO increased by
approximately $8,102,000 or 22%, when compared to the year ended
December 31, 1996. The increase was primarily attributable to an
approximate $27,233,000 increase in revenues, which was partially
offset by increases in expenses mainly associated with the increase
in the number of apartment units owned by the Company. On a per
share basis, FFO increased approximately 3% from $2.66 per share for
the year ended December 31, 1996 to $2.73 per share for the same
period in 1997.
For the year ended December 31, 1996, FFO increased by
approximately $6,809,000 or 23.7%, when compared to the year earlier
(adjusted only for the new NAREIT definition of FFO). The increase
was primarily attributable to an approximate $16,919,000 increase in
revenues, which was partially offset by increases in expenses mainly
associated with the increase in the number of apartment units owned
by the Company. On a per share basis, FFO increased 8.6% from $2.44
per share (restated for the effect of adoption of the current NAREIT
FFO definition and the change in accounting policy) for the year
ended December 31, 1995 to $2.65 per share for the same period in
1996.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED
DECEMBER 31, 1996
During the 1997 period, the Company acquired 12 communities
containing 3,314 apartment units. In addition, through the November
25, 1997 merger with Flournoy Development Company ("FDC"), the
Company acquired 32 communities containing 8,641 apartment units
including 950 apartment units under development. The total number of
apartment units owned at December 31, 1997 was 30,468 in 115
apartment communities, compared to 19,280 in 73 communities at
December 31, 1996. Average monthly rental per apartment unit
increased to $549 at December 31, 1997 from $529 at December 31,
1996 for the Company's properties owned prior to the merger. For the
communities owned prior to the merger, average occupancy for the
years ended December 31, 1997 and 1996 was 94.5% and 95.4%,
respectively. For the properties acquired through the FDC Merger,
average monthly rental per apartment unit was $613 and average
occupancy was 92.2% at December 31, 1997.
Total revenues for 1997 increased by approximately $27,234,000, due
primarily to (i) approximately $12,743,000 from the 12 Communities
acquired in 1997, (ii) approximately $5,342,000 from the 30
completed Communities acquired through the FDC Merger, (iii)
approximately $6,759,000 from a full years operation of the six
Communities acquired in 1996, (iii) approximately $2,113,000 from
the Communities owned throughout both periods, and (iv)
approximately $277,000 from The Woods at Post House in Jackson,
Tennessee which completed development in the Fall of 1995 and
Lincoln on the Green phase II in Memphis, Tennessee which completed
development early 1998.
Property operating expenses for 1997 increased by approximately
$9,834,000, due primarily to (i) approximately $4,929,000 from the
12 Communities acquired in 1997, (ii) approximately $1,938,000 from
the 30 completed Communities acquired through the FDC Merger, (iii)
approximately $2,298,000 from a full years operation of the six
Communities acquired in 1996, (iii) approximately $583,000 from the
Communities owned throughout both periods, and (iv) approximately
$86,000 from The Woods at Post House which completed development in
the Fall of 1995 and Lincoln on the Green phase II. Utility costs
decreased from 5.5% of revenue to 4.6% of revenue for the year ended
December 31, 1997 compared to the same period a year earlier, due
primarily to over 13,000 units now submetered for water usage and
continued benefits from the 1996 completion of the individual
apartment unit electricity metering at Sailwinds at Lake Magdalene.
General and administrative expense increased $448,000 for the year
ended December 31, 1997 compared to December 31, 1996 and decreased
from 5.5% of revenue to 4.8% of revenue for the year ended December
31, 1997 compared to the same period a year earlier. The reductions
result from $122,000 transfer of landscape overhead to property
costs, $156,000 reduced state and local taxes and increased
operating efficiencies of a larger operation.
Depreciation and amortization expense increased primarily due to (i)
approximately $2,503,000 from the 12 Communities acquired in 1997,
(ii) approximately $1,247,000 from the 30 completed Communities
acquired through the FDC Merger, (iii) approximately $1,493,000
from a full years operation of the six Communities acquired in 1996,
(iii) approximately $1,224,000 from additional capital expenditures
on Communities owned throughout both periods, and (iv)
approximately $54,000 from The Woods at Post House and Lincoln on
the Green phase II. Amortization of deferred financing costs and
unamortized costs in excess of fair value of net assets acquired for
1997 were approximately $888,000 and approximately $309,000,
respectively.
Interest expense increased approximately $3,177,000 during 1997 due
primarily to apartment acquisitions. The Company reduced its average
borrowing cost to 7.41% at December 31, 1997 as compared to 7.92% on
December 31, 1996. The average maturity on the Company's debt was
10.2 and 9.9 years at December 31, 1997 and 1996, respectively. In
1997, the Company recorded an approximate $8,622,000 loss on early
extinguishment of debt, net of minority interest, primarily from the
repayment of certain debt in connection with the FDC Merger.
Income before minority interest for the year ended December 31, 1997
increased approximately $5,069,000 over the same period a year
earlier.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED
DECEMBER 31, 1995
During the 1996 period, the Company acquired six apartment
communities and sold three apartment communities. The total number
of apartment units owned at December 31, 1996 was 19,280 in 73
apartment communities, compared to 18,219 in 70 communities at
December 31, 1995. Average monthly rental per apartment unit
increased to $529 at December 31, 1996 from $508 at December 30,
1995. Average occupancy for the years ended December 31, 1996 and
1995 was 95.4% and 95.2%, respectively.
Total revenues for 1996 increased by approximately $16,919,000, due
primarily to (i) approximately $4,833,000 from the six Communities
acquired in 1996, (ii) approximately $7,156,000 from a full years
operation of the 15 Communities acquired in 1995, including the
Communities acquired in the AFR Merger, (iii) approximately
$4,363,000 from the Communities owned throughout both periods, and
(iv) approximately $567,000 from The Woods at Post House in
Jackson, Tennessee which completed development in the Fall of 1995.
Property operating expenses for 1996 increased by approximately
$4,616,000, due primarily to (i) approximately $1,686,000 from the
six Communities acquired in 1996, (ii) approximately $2,746,000
from a full year's operations of the 15 Communities acquired in
1995, including the Communities acquired in the AFR Merger, and
(iii) approximately $234,000 from The Woods at Post House. These
increases were offset by a decrease of approximately $51,000 from
the Communities owned throughout both periods. Repair and
maintenance expense decreased primarily due to the Company's change
in the capitalization policy to conform with policies currently used
by the majority of the largest apartment REITs. Utility costs
decreased from 6.1% of revenue to 5.5% of revenue for the year ended
December 31, 1996 compared to the same period a year earlier, due
primarily to the installation of 6,400 individual apartment unit
water meters and the completion of the individual apartment unit
electricity metering at Sailwinds at Lake Magdalene.
General and administrative expense increased in 1996 approximately
$1,303,000 primarily due to the opening of the new training center
and other expenses due to the continued growth of the company.
Depreciation and amortization expense increased primarily due to (i)
approximately $893,000 from the six apartment communities acquired
in 1996, (ii) approximately $1,346,000 from the 15 apartment
communities acquired in 1995, including the Communities acquired in
the AFR Merger, (iii) approximately $2,187,000 from additional
capital expenditures on Communities owned throughout both periods,
and (iv) approximately $443,000 from The Woods at Post House in
Jackson, Tennessee which completed development in the Fall of 1995.
Amortization of deferred financing costs and unamortized costs in
excess of fair value of net assets acquired for 1996 were
approximately $661,000 and approximately $192,000, respectively.
Interest expense increased approximately $3,082,000 during 1996 due
primarily to apartment acquisitions. The Company reduced the average
borrowing cost to 7.92% at December 31, 1996 as compared to 8.15% on
December 31, 1995. The average maturity on the Company's debt was
9.9 years at both December 31, 1996 and 1995.
In 1996, the Company recorded an approximate $2,185,000 gain for the
disposition of three apartment communities. The dispositions were
structured as tax-deferred exchanges for federal tax purposes. As a
result of the foregoing, income before minority interest for the
year ended December 31, 1996 increased approximately $5,166,000 over
the same period a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from
approximately $38,018,000 for the year ended December 31, 1996 to
approximately $44,797,000 for the year ended December 31, 1997. The
increase in net cash flow was primarily due to an increase in
depreciation and amortization less an extraordinary loss recorded
due to the early extinguishment of certain debt.
Net cash used in investing activities increased from approximately
$70,436,000 for the year ended December 31, 1996 to approximately
$138,263,000 for the year ended December 31, 1997. The increase was
primarily due to the acquisition of 3,314 apartment units in 1997
for approximately $76,287,000 as compared to the acquisition of
1,760 apartment units in 1996 for approximately $66,258,000. This
increase in net cash flow used in investing activities was partially
offset by the sale of three apartment communities in 1996 for
approximately $17,096,000. Capital improvements to existing
properties totaled approximately $20,205,000 for the year ended
December 31, 1997, compared to approximately $18,437,000 for the
same period in 1996. Of the $20,205,000 capital improvements
approximately $7,743,000 was for recurring capital expenditures,
including carpet and appliances, approximately $6,112,000 was for
revenue enhancing projects, approximately $5,557,000 was for
acquisition capital with the remaining balance for other
miscellaneous expenditures, including corporate. Recurring capital
expenditures averaged $0.47 per share in 1997. Construction in
progress for new apartment units increased from approximately
$2,837,000 for the year ended December 31, 1996 to approximately
$16,093,000 for the comparable period in 1997, due primarily to the
completion of the 234-unit development at Lincoln on the Green in
Memphis, Tennessee which began leasing during 1997 and other
developments including $1,685,000 for the 254-unit Reserve at Dexter
Lake, $1,273,000 for the 288-unit Mandarin, $879,000 for the 154-
unit phase II addition for Whisperwood Spa and $789,000 for the 316-
unit Terraces at Fieldstone.
Net cash provided by financing activities increased from
approximately $33,425,000 during the year ended December 31, 1996 to
approximately $104,218,000 for the year ended December 31, 1997.
During 1997, approximately $202,320,000 was provided by borrowings
under the Credit Line and notes payable and approximately
$46,635,000 was provided from the issuance of preferred shares. The
principal uses of the cash included approximately $30,021,000 for
the repayment of notes payable and approximately $39,771,000 for
dividends and distributions.
At December 31, 1997, the Company had approximately $45,225,000
outstanding on the Credit Line. At December 31, 1997, the Company
had approximately $63,200,000 (including the Credit Line) of
floating rate debt at an average interest rate of 6.5%; all other
debt was fixed rate term debt at an average interest rate of 7.8%.
The weighted average interest rate and weighted average maturity at
December 31, 1997 for the approximately $632,213,000 of notes
payable were 7.4% and 10.2 years, respectively. The Company used the
approximately $46,635,000 of net proceeds from the Preferred Stock
Offering, which closed in November, for the acquisitions of the 192-
unit Sterling Ridge apartment community in Augusta, Georgia and the
184-unit Colony at South Park apartment community in Aiken, South
Carolina and used the balance to reduce the amount outstanding on
the Credit Line. In November 1997, the Company increased its credit
limit under the Credit Line from $90,000,000 to $110,000,000 and in
March 1998 increased the credit limit to $200,000,000. The Company
expects to use the Credit Line for future acquisitions, development,
and to provide letters of credit as credit enhancements for tax-
exempt bonds. In March 1997 the Company issued 2,300,000 shares of
Common Stock in an underwritten public offering. The net proceeds
from such offering were approximately $62.5 million, all of which
were contributed to the Operating Partnership and utilized to repay
outstanding borrowings under the Credit Line. The Credit Line is
secured and is subject to borrowing base calculations that
effectively reduce the maximum amount that may be borrowed under the
Credit Line to approximately $44,300,000 as of the date of this
Annual Report on Form 10-K.
The Company believes that cash provided by operations is adequate
and anticipates that it will continue to be adequate in both the
short and long-term to meet operating requirements (including
recurring capital expenditures at the Communities) and payment of
distributions by the Company in accordance with REIT requirements
under the Code.
During 1997, capital expenditures were approximately $20,205,000
for property improvements and $16,093,000 for the
development of new units. For 1998, the Company plans
approximately $27,000,000 for property improvements and
$120,000,000 for development of new units. The Company expects to
meet its long term liquidity requirements, such as scheduled
mortgage debt maturities, property acquisitions, expansions and non-
recurring capital expenditures, through long and medium-term
collateralized and uncollateralized fixed rate borrowings, issuance
of debt or additional equity securities in the Company and the
Credit Line.
INSURANCE
In the opinion of management, property and casualty insurance is in
place which provides adequate coverage to provide financial
protection against normal insurable risks such that it believes that
any loss experienced would not have a significant impact on the
Company's liquidity, financial position, or results of operations.
INFLATION
Substantially all of the resident leases at the Communities allow,
at the time of renewal, for adjustments in the rent payable
thereunder, and thus may enable the Company to seek rent increases.
The substantial majority of these leases are for one year or less.
The short-term nature of these leases generally serves to reduce the
risk to the Company of the adverse effects of inflation.
YEAR 2000
The Company is aware of the issues associated with the programming
code in existing computer systems as the millennium (Year 2000)
approaches. The "Year 2000" issue is pervasive and complex as
virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or
cause a system to fail.
The Company is utilizing both internal and external resources to
identify, correct or reprogram, and test the systems for the Year
2000 compliance. During 1997, the Company developed a plan to deal
with the Year 2000 issue. Management has conducted a comprehensive
review of the Company's computer systems to identify the systems
that could be affected by the Year 2000 issue and has developed an
implementation plan to resolve potential issues. The Company has
reviewed our core mainframe systems and application subsystems and
have obtained the Year 2000 compliant releases and are developing
the installation and testing plan for each of these applications.
The Company has corresponded with our third party service providers
and other providers of software and hardware for certification of
their compliance with Year 2000 issues. It is anticipated that all
reprogramming efforts will be completed by December 31, 1998,
allowing adequate time for testing. Management has assessed the
Year 2000 compliance expense and believe that the related potential
effect on the Company's business, financial condition and results of
operations should be immaterial. The Company is expensing all costs
associated with the Year 2000 as the costs are incurred.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors
created thereby. These statements include the plans and objectives
of management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the
apartment communities. Although the Company believes that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking
statements included in this Annual Report on Form 10-K will prove to
be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report, Consolidated Financial Statements
and Selected Quarterly Financial Information are set forth on pages
F-1 to F-21 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's independent
accountants and auditors on any matter of accounting principles or
practices or financial statement disclosure.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 23, 1997, the Company acquired its corporate headquarters for
$2,912,000. In connection with the acquisition, the Company formed a
special committee of its external directors to negotiate the transaction
on its behalf because certain executive officers of the Company were also
partners in the partnership which owned the building. The consideration
consisted of approximately $862,000 cash, 22,246 Operating Partnership
Units valued at $634,000 ($28.50 per unit) and the assumption of an
existing loan. Certain executive officers of the Company were partners
in the partnership who owned the building and received 5,831 units of
common shares connected with the exchange.
All transactions involving related parties must be approved by a majority
of the disinterested members of the Company's Board of Directors. The
Company has, and expects to have, transactions in the ordinary course of
its business with directors and officers of the Company and their
affiliates, including members of their families or corporations,
partnerships or other organizations in which such officers or directors
have a controlling interest, on substantially the same terms (including
price, or interest rates and collateral) as those prevailing at the time
for comparable transactions with unrelated parties.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Independent Auditors' Report F - 1
Consolidated Balance Sheets as of December 31, F - 2
1997 and 1996
Consolidated Statements of Operations for the
years ended F - 3
December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity
for the years ended F - 4
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the
years ended F - 5
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements for F - 6
the years ended
December 31, 1997, 1996 and 1995
2. Financial Statement Schedule required to be filed
by item 8 and Paragraph (d) of this item 14:
Independent Auditors' Report F - 17
Schedule III - Real Estate Investments and
Accumulated Depreciation as of F - 18
December 31, 1997
3. The exhibits required by Item 601 of Regulation S-K,
except as otherwise noted, have been filed
with previous reports by the registrant and are
herein incorporated by reference.
Item 16. Exhibits.
Exhibit
Numbers Exhibit Description
- ------- -------------------
2.1* Agreement and Plan of Reorganization made as of September 15,
1997 by and among Mid-America Apartments, L.P., Mid-America
Apartment Communities, Inc. and Flournoy Development Company
3.1 Amended and Restated Charter of Mid-America Apartment
Communities, Inc. dated as of January 10, 1994, as filed with
the Tennessee Secretary of State on January 25, 1994
3.2****** Articles of Amendment to the Charter of Mid-America Apartment
Communities, Inc. dated as of January 28, 1994, as filed with
the Tennessee Secretary of State on January 28, 1994
3.3 Articles of Merger of The Cates Company with and into Mid-
America Apartment Communities, Inc. dated February 2, 1994, as
filed with the Tennessee Secretary of State on February 3, 1994
3.4****** Articles of Merger of America First REIT Advisory Company, a
Nebraska corporation, with and into Mid-America Apartment
Communities, Inc., a Tennessee corporation, dated June 29,
1995, as filed with the Tennessee Secretary of State on June
29, 1995
3.5** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of October 9, 1996, as filed with the Tennessee Secretary of
State on October 10, 1996
3.6 Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter dated November 17, 1997, as
filed with the Tennessee Secretary of State on November 18,
1997
3.7*** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of November 17, 1997, as filed with the Tennessee Secretary of
State on November 18, 1997
3.8 Articles of Merger of Flournoy Development Company (a Georgia
corporation) with and into Mid-America Apartment Communities,
Inc. (a Tennessee corporation) dated November 21, 1997, as
filed with the Tennessee Secretary of State on November 25,
1997
3.9 Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter dated December 15, 1997, as
filed with the Tennessee Secretary of State on December 31,
1997
3.10 Bylaws of Mid-America Apartment Communities, Inc.
4.1 Form of Common Share Certificate
4.2**** Form of 9.5% Series A Cumulative Preferred Stock Certificate
4.3***** Form of 8 7/8% Series B Cumulative Preferred Stock Certificate
4.4** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of October 9, 1996, as filed with the Tennessee Secretary of
State on October 10, 1996
4.5*** Mid-America Apartment Communities, Inc. Articles of Amendment
to the Amended and Restated Charter Designating and Fixing the
Rights and Preferences of A Series of Preferred Stock dated as
of November 17, 1997, as filed with the Tennessee Secretary of
State on November 18, 1997
10.1 Second Amended and Restated Agreement of Limited Partnership of
Mid-America Apartments, L.P., a Tennessee limited partnership
10.2 Employment Agreement between Mid-America Apartment Communities,
Inc. and George E. Cates
10.3 1994 Restricted Stock and Stock Option Plan
10.4******* Promissory Note of the Operating Partnership in favor of
Leader Federal Bank for Savings (McKellar)
10.5******* Promissory Note of the Operating Partnership in favor of Leader
Federal Bank for Savings (Park Estate)
10.6******* Promissory Note of the Operating Partnership in favor of Leader
Federal Bank for Savings (Greenbrook)
10.7******* Promissory Note of the Operating Partnership in favor of Leader
Federal Bank for Savings (Cedar Mill)
10.8******* Assignment of Rents and Leases by the Operating Partnership in
favor of Leader Federal Bank for Savings (McKellar, Park Estate,
Greenbrook, Cedar Mill)
10.9 Revolving Credit Agreement between the Registrant and
AmSouth Bank of Alabama
10.10 Note Purchase Agreement of the Operating Partnership and
the Registrant and Prudential Insurance Company of America
11.1 Statement re: computation of per share earnings
(included within the Form 10-K)
12.1 Statement re: computation of ratios (definition of ratios used
are disclosed as footnotes on the related table(s) within the
Form 10-K
21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
23.2 Opinion of KPMG Peat Marwick LLP on Schedule III (included
in F pages of this Form 10-K)
27.1 Financial Data Schedule
_____________________
* Filed as Exhibit 10.20 to the Registrant's Current Report on
Form 8-K, filed with the Commission on September 19, 1997
(Commission File No. 1-12762)
** Filed as Exhibit 1 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on October 11, 1996
*** Filed as Exhibit 4.1 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on November 19, 1997
**** Filed as Exhibit 3 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on October 11, 1996
***** Filed as Exhibit 4.3 to the Registrant's Registration Statement
on Form 8-A filed with the Commission on November 19, 1997
****** Filed as an exhibit to the 1996 Annual Report of the Registrant
on Form 10-K as of March 31, 1997
******* Filed as an exhibit to the Registration Statement on Form S-11
(SEC File No. 33-81970), as amended, of the Registrant and
incorporated herein by reference.
(b) Reports on Form 8-K
The following report was filed on Form 8-K by the
registrant during the fourth quarter of 1996:
Date of
Form Events Reported Report
------ -------------------------------- -------
8-K Announcement of two apartment 10/07/97
acquisitions and the sale of Common Stock
8-K/A Combined Financial Statements for 11/06/97
Flournoy Properties Group for the years
ended December 31, 1996, 1995, and 1994
(Audited) and six months ended June 30,
1997 and 1996 (Unaudited). Pro Forma
Condensed Combined Financial Statements
for the Registrant and Subsidiaries for
the year ended December 31, 1996 and six
months ended June 30, 1997 (Unaudited).
8-K/A Combined Financial Statements for 11/14/97
Flournoy Properties Group for the years
ended December 31, 1996, 1995, and 1994
(Audited) and six months ended September
30, 1997 and 1996 (Unaudited). Pro Forma
Condensed Combined Financial Statements
for the Registrant and Subsidiaries for
the year ended December 31, 1996 and six
months ended September 30, 1997
(Unaudited).
8-K/A Audited historical summary of gross 11/20/97
income and operating expenses for two
apartment acquisitions.
8-K Announcement of an apartment community 11/20/97
acquisition and the related audited
historical summary of gross income and
operating expenses.
8-K Announcement of an apartment acquisition, 11/21/97
the sale of preferred stock and the
related underwriting agreement.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
MID-AMERICA APARTMENT COMMUNITIES, INC.
Date: March 30, 1998______ /s/ George E. Cates___________
George E. Cates
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on
the dates indicated.
Date: March 30, 1998
/s/ George E. Cates__________
George E. Cates
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Date: March 30, 1998 /s/ Simon R.C. Wadsworth______
Simon R.C. Wadsworth
Executive Vice President
(Principal Financial and Accounting Officer)
Date: March 30, 1998 /s/ H. Eric Bolton
H. Eric Bolton
President and Chief Operating Officer
Date: March 25, 1998 /s/ John F. Flournoy
John F. Flournoy
Vice-Chairman of the Board and Chief Executive
Officer, Flournoy Development Company
Date: March 24, 1998 /s/ John J. Byrne,III
John J. Byrne, III
Director
Date: March 30, 1998 /s/ Robert F. Fogelman
Robert F. Fogelman
Director
Date: March 24, 1998 /s/ John S. Grinalds
John S. Grinalds
Director
Date: March 23, 1998 /s/ O. Mason Hawkins
O. Mason Hawkins
Director
Independent Auditors' Report
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated balance sheets of Mid-
America Apartment Communities, Inc. and subsidiaries (the "Company") as
of December 31, 1997 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in
the three-year period ended December 31, 1997. These financial
statements are the responsibility of the management of the Company. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financials statements referred to above present
fairly, in all material respects the financial position of the Company at
December 31, 1997 and 1996, and the results of the Company's operations
and cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, the
Company changed its accounting method to capitalize replacement
purchases for major appliances and carpet in 1996.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
March 27, 1998
Mid-America Apartment Communities, Inc.
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Assets:
- ------
Real estate assets (note 3):
Land $109,800 $61,150
Buildings and improvements 1,027,853 563,584
Furniture, fixtures and equipment 21,886 12,511
---------- -----------
1,159,539 637,245
Less accumulated depreciation (76,129) (49,558)
---------- -----------
Apartment properties, net 1,083,410 587,687
Construction in progress 33,717 4,648
Land held for future development 8,849 0
Commercial properties, net 8,728 0
---------- ----------
Real estate assets, net 1,134,704 592,335
Cash and cash equivalents 14,805 4,053
Restricted cash 13,397 5,538
Deferred financing costs, net 5,700 2,984
Other assets 25,464 6,289
---------- ----------
Total assets $1,194,070 $611,199
========== ==========
Liabilities and Shareholders' equity:
- ------------------------------------
Liabilities:
Notes payable (note 3) $632,213 $315,239
Accounts payable 10,098 744
Accrued expenses and other liabilities 22,885 12,182
Security deposits 4,509 2,412
---------- ----------
Total liabilities 669,705 330,577
Minority interest 62,865 39,238
Commitments and Contingencies (note 5) - -
Shareholders' equity:
Preferred stock, $.01 par value,
$25 per share liquidation preference,
20,000,000 shares authorized
2,000,000 shares at 9.5% Series A Cumulative 20 20
1,938,830 shares at 8.875% Series B Cumulative 19 0
Common stock, $.01 par value (authorized
50,000,000 shares); issued and outstanding
18,479,046 and 10,949,216 shares at
December 31, 1997 and 1996, respect 185 109
Additional paid-in capital 500,492 256,689
Other (845) (260)
Accumulated deficit (38,371) (15,174)
---------- ----------
Total shareholders' equity 461,500 241,384
---------- ----------
Total liabilities and shareholders' equity $1,194,070 $611,199
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental $135,673 $110,090 $93,509
Other 3,279 1,792 1,454
Management and
development income, net 164 0 0
-------- -------- --------
Total revenues 139,116 111,882 94,963
-------- -------- --------
Expenses:
Personnel 14,623 11,702 9,798
Building repairs and maintenance 6,811 5,305 5,791
Real estate taxes and insurance 14,465 11,642 10,198
Utilities 6,341 6,148 5,753
Landscaping 3,684 2,910 2,361
Other operating 6,480 4,863 4,053
Depreciation and amortization 27,737 21,443 16,574
General and administrative 6,602 6,154 4,851
Interest 28,943 25,766 22,684
Amortization of deferred financing costs 888 661 593
-------- -------- --------
Total expenses 116,574 96,594 82,656
-------- -------- --------
Income before gain on disposition of
properties, minority interest in operating
partnership income and extraordinary item 22,542 15,288 12,307
Gain on disposition of properties - 2,185 -
-------- -------- --------
Income before minority interest in operating
partnership income and extraordinary item 22,542 17,473 12,307
-------- -------- --------
Minority interest in operating
partnership income 2,693 3,213 2,497
-------- -------- --------
Net income before extraordinary item 19,849 14,260 9,810
-------- -------- --------
Extraordinary item: loss on early
extinguishment of debt (note 3) (8,622) - -
-------- -------- --------
Net Income 11,227 14,260 9,810
Dividends on preferred shares 5,252 990 -
-------- -------- --------
Net income available for common shareholders $5,975 $13,270 $9,810
======== ======== ========
Net income available per common share (note 7)
Basic: Before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
Net income available per comm $ 0.43 $ 1.21 $ 1.00
Diluted: Before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
Net income available per comm $ 0.43 $ 1.21 $ 1.00
</TABLE>
See accompanying notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Series A Series B Common
Preferred Preferred Stock
Stock Stock Amount
--------- --------- ---------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY DECEMBER 31, 1994 $ - $ - $ 86
Issuance of common shares - - -
Exercise of stock options - - -
Shares issued in exchange for units - - -
Shares issued in AFR Merger - - 23
Amortization of unearned compensation - - -
Dividends on common stock ($2.00 per share) - - -
Net income - - -
--------- --------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1995 $ - $ - $ 109
Issuance of common shares - - -
Issuance of preferred shares 20 - -
Exercise of stock options - - -
Shares issued in exchange for units - - -
Amortization of unearned compensation - - -
Dividends on common stock ($2.04 per share) - - -
Dividends on preferred stock - - -
Net income - - -
--------- --------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1996 $ 20 $ 0 $ 109
Issuance of common shares - - 59
Issuance of Series B preferred shares - 19 -
Exercise of stock options - - -
Notes receivable issued for shares and units (Note - - -
Shares issued in exchange for units - - 1
Shares issued in FDC Merger - - 16
Adjustment for minority interest of Unitholders
resulting from:
Common Stock Offerings - - -
FDC Merger - - -
Other - - -
Amortization of unearned compensation - - -
Dividends on common stock ($2.14 per share) - - -
Dividends on preferred stock - - -
Net income - - -
--------- --------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1997 $20 $19 $185
========= ========= =========
See accompanying notes to consolidated financial statements.
<CAPTION>
Additional Accumulated
Paid-In Earnings
Capital Other (Deficit) Total
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1994 $150,435 ($542) $2,406 $152,385
Issuance of common shares 106 37 - 143
Exercise of stock options 203 - - 203
Shares issued in exchange for units 200 - - 200
Shares issued in AFR Merger 57,726 - - 57,749
Amortization of unearned compensation - 124 - 124
Dividends on common stock ($2.00 per share) - - (18,336) (18,336)
Net income - - 9,810 9,810
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1995 $208,670 ($381) ($6,120) $202,278
Issuance of common shares 277 - - 277
Issuance of preferred shares 47,748 - - 47,768
Exercise of stock options (2) - - (2)
Shares issued in exchange for units (4) - - (4)
Amortization of unearned compensation - 121 - 121
Dividends on common stock ($2.04 per share) - - (22,324) (22,324)
Dividends on preferred stock - - (990) (990)
Net income - - 14,260 14,260
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1996 $256,689 ($260) ($15,174) $241,384
Issuance of common shares 163,514 - - 163,573
Issuance of Series B preferred shares 46,633 - - 46,652
Exercise of stock options (31) - - (31)
Notes receivable issued for shares and units (Note - (706) - (706)
Shares issued in exchange for units 973 - - 974
Shares issued in FDC Merger 44,374 - - 44,390
Adjustment for minority interest of Unitholders
resulting from:
Common Stock Offerings (10,008) - - (10,008)
FDC Merger (834) - - (834)
Other (818) - - (818)
Amortization of unearned compensation - 121 - 121
Dividends on common stock ($2.14 per share) - - (29,172) (29,172)
Dividends on preferred stock - - (5,252) (5,252)
Net income - - 11,227 11,227
--------- --------- ---------- ---------
SHAREHOLDERS' EQUITY DECEMBER 31, 1997 $500,492 ($845) ($38,371) $461,500
========= ========= ========== =========
</TABLE>
Mid-America Apartment Communities, Inc.
Consolidated Statements of Cash Flow
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
- ------------------------------------
Net income $11,227 $14,260 $9,810
Adjustments to reconcile net income to
net cash provided by operating activity:
Depreciation and amortization 28,746 22,243 17,291
Minority interest in operating partnership income 2,693 3,213 2,497
Extraordinary item 8,622 - -
Gain on disposition of properties - (2,185) - -
Changes in assets and liabilities, net
of effect from business combination:
Restricted cash (1,214) (1,420) 6,333
Other assets (1,341) (95) (1,154)
Accounts payable 140 6 (77)
Accrued expenses and other liabilities (4,550) 2,036 (358)
Security deposits 474 (40) (53)
------ ------ ------
Net cash provided by operating activities 44,797 38,018 34,289
Cash flows from investing activities:
- ------------------------------------
Purchases of real estate assets (76,287) (66,258) (15,561)
Proceeds from dispositions of real estate assets - 17,096 -
Improvements to properties (20,205) (18,437) (19,233)
Construction of units in progress
and future development (16,093) (2,837) (5,692)
Net cash (paid in) acquired from
business combination (25,678) - 1,319
-------- ------- -------
Net cash used in investing activities (138,263) (70,436) (39,167)
Cash flows from financing activities:
- ------------------------------------
Proceeds from notes payable 187,500 17,049 19,256
Net increase in credit line 14,820 12,358 18,047
Principal payments on notes payable (267,003) (14,427) (10,928)
Deferred financing costs (3,813) (1,256) (484)
Proceeds from issuances of
common shares and units 165,858 271 346
Proceeds from issuances of preferred shares 46,635 47,768 -
Redemption of unitholder interests (8) (36) (43)
Distributions to unitholders (5,347) (4,988) (4,914)
Dividends paid on common shares (29,172) (22,324) (18,336)
Dividends paid on preferred shares (5,252) (990) -
------- ------- -------
Net cash provided by financing activities 104,218 33,425 2,944
------- ------- -------
Net increase(decrease)in cash and cash equivalents 10,752 55,282 1,007 (1,934)
------- ------- -------
Cash and cash equivalents, beginning of period 4,053 3,046 4,980
------- ------- -------
Cash and cash equivalents, end of period $14,805 $4,053 $3,046
======= ======= =======
Supplemental disclosure of cash flow information:
- ------------------------------------------------
Interest paid $27,468 $25,262 $22,362
------- ------- -------
Supplemental disclosure of
noncash investing activities:
- ------------------------------------------------
Increase in basis of properties acquired in
connection with the business combination $ 58,359 $ - $ -
Assumption (transfer) of debt related to
property acquisitions (dispositions) $ 63,690 $(7,680) $ -
Issuance of units related to property acquisitions $ 880 $ - $ -
Conversion of units for common shares $ 973 $ - $ 200
Issuance of note receivable in exchange for
common shares and units $ 706 $ - $ -
</TABLE>
See Accompanying Notes to consolidated financial statements.
Mid-America Apartment Communities, Inc.
Notes to Consolidated Financial Statements
Years ended December 31, 1997, 1996 and 1995
1. Organization and Summary of Significant Accounting Policies
Organization and Formation of the Company
Mid-America Apartment Communities, Inc. (the "Company") is a self-
administrated and self-managed real estate investment trust which owns,
develops, acquires and operates multifamily apartment communities in the
southeastern United States and Texas. The Company owns and operates 115
apartment communities principally through its majority owned subsidiary,
Mid-America Apartments, L.P. (the "Operating Partnership") and its
subsidiary, Mid-America Capital Partners, L.P. ("MACP"). MACP is a
recently formed special purpose entity established to issue first
mortgage bonds. In addition to owning and operating apartment
communities, the Company conducts third party property management and
construction and development activities through its service corporation,
Flournoy Development Corporation.
Basis of Presentation
The accompanying financial statements include the accounts of the
Company, the Operating Partnership, and other subsidiaries. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
Minority Interest
Minority interest in the accompanying consolidated financial statements
relates to the ownership interest in the Operating Partnership by the
holders of Class A Common Units of the Operating Partnership. The
Company is the sole general partner of the Operating Partnership. Net
income is allocated to the Minority Interests based on their respective
ownership percentage of the Operating Partnership as described below.
Issuance of additional Common Shares or Operating Partnership Units
changes the ownership of both the Minority Interests and the Company.
Such transactions and the proceeds therefrom are treated as capital
transactions and result in an allocation between shareholders' equity and
Minority Interests to account for the change in the respective percentage
ownership of the underlying equity of the Operating Partnership.
The Company's Board established economic rights in respect of each unit
of limited partnership interest in the Operating Partnership that were
equivalent to the economic rights in respect of each share of common
stock. Each unit is redeemable at the option of the holder thereof in
exchange for one share of common stock. The Operating Partnership has
followed the policy of paying the same per unit distribution in respect
of the units as the per share distribution in respect of the common
stock. Prior to 1997, the Operating Partnership agreement provided for
the allocation of additional net income to the holders of Class A units
that would otherwise be the net income of the Company or another entity.
Effective January 1, 1997 the Operating Partnership agreement was amended
to eliminate the additional allocation of income to the unitholders.
Operating Partnership net income for 1997 was allocated approximately
17.9% to holders of Class A Common Units and 82.1% to the Company.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Revenue Recognition
The Company leases residential apartments under operating leases with
terms of one year or less. Rental and other revenues are recorded when
earned.
In addition to leasing the owned Communities, the Company provides
property management services for affiliated Section 42 Housing Tax Credit
multifamily properties ("Section 42") and conventional properties.
Property management revenue is recorded on the accrual method of
accounting as earned.
The Company receives development and construction fees related to the
development of the affiliated Section 42 properties. Development and
construction income is recognized as earned as the property is developed
and certain operating and financing performance conditions are met.
Development income is not recognized to the extent that requirements
exist to invest a portion of such development fees in the partnership
entities from which the fees are earned.
Construction contract revenues, which are presented net of construction
contract costs in the accompanying statements of operations, are
recognized using the percentage-of-completion method. Under this method,
the percentage of contract revenue to be recognized currently is computed
based upon that percentage of estimated total revenue that incurred costs
to date bear to total estimated costs, after giving effect to the most
recent estimates of costs to complete. Revisions in cost and revenue
estimates are reflected in the period in which the facts, which require
the revision, become known. When revised cost estimates indicate a loss
on an individual contract, the total estimated loss is provided for
currently in its entirety without regard to the percentage of completion.
Cash and Cash Equivalents
The Company considers cash, investments in money market accounts and
certificates of deposit with original maturities of three months or less
to be cash equivalents.
Restricted Cash
Restricted cash consists of escrow deposits held by lenders for property
taxes, insurance, debt service and replacement reserves.
Real Estate Assets and Depreciation
Real estate assets are carried at the lower of depreciated cost or net
realizable value. Interest, property taxes, and other development costs
incurred during construction is capitalized until completion. Interest of
$388,000 and $91,000 was capitalized in 1997 and 1996, respectively.
Repairs and maintenance costs are expensed as incurred while significant
improvements, renovations, and replacements are capitalized. The cost of
interior painting, vinyl flooring, and blinds are expensed as incurred.
In conjunction with acquisitions of properties, the Company's policy is
to provide in its acquisition budgets adequate funds to complete any
deferred maintenance items to bring the properties to the required
standard, including the cost of replacement appliances, carpet, interior
painting, vinyl flooring, and blinds. These costs are capitalized.
Following a review of its capital expenditure and depreciation policy,
effective January 1, 1996, the Company implemented a new policy of which
the primary changes were (i) to increase minimum dollar amounts to
capitalize from $500 to $1,000; (ii) for stabilized properties
(generally, properties owned and operated by the Company for at least one
year), to capitalize replacement purchases for major appliances and
carpeting of an entire apartment unit which was previously expensed; and
(iii) to reduce the depreciation life of certain assets from 20 years to
10 to 15 years.
The Company believes that the newly adopted accounting policy is
preferable because it is consistent with policies currently being used by
the majority of the largest apartment REITs and provides a better
matching of expenses with the estimated benefit period. The Company's
1995 financial statements were not restated for the effect of the change
in accounting policy. The policy has been implemented prospectively
effective January 1, 1996. The effect of the change in depreciable lives
was not material to consolidated net income of the Company.
Depreciation is computed on a straight line basis over the estimated
useful lives of the related assets which range from 8 to 40 years for
land improvements and buildings and 5 years for furniture, fixtures and
equipment. Depreciation expense includes $195,000, $155,000 and $104,000
in 1997, 1996 and 1995 which relates to computer software, office
furniture and fixtures and other assets found in other industries and
which is required to be recognized, for purposes of funds from operations
computations, as expenses in the calculation of net income.
The Company periodically evaluates its real estate assets for impairment
based upon undiscounted cash flows and measures impairment based on fair
value. This determination is dependent primarily on the Company's
estimates on occupancy, rent and expense increases, which involves
numerous assumptions and judgments as to future events over a period of
many years. At December 31, 1997 the Company does not hold any assets
which meet the impairment criteria.
Real Estate Held for Development or Sale
Real estate held for development or sale, which consists primarily of
sites intended for future multifamily developments, is stated at the
lower of aggregate cost or fair value. The cost includes the purchase
price of the land, construction, and development costs and fees, as well
as capitalized interest and loan fees.
Deferred Costs and Intangibles
Organization costs are amortized using the straight line method over 60
months. Deferred financing costs are amortized over the terms of the
related debt using a method which approximates the interest method.
Unamortized cost in excess of fair value of net assets acquired is
amortized using the straight line method over a range of 8 to 30 years.
Recent Accounting Pronouncements
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued,
effective for years beginning after December 15, 1997. This statement
establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
This new accounting statement is not expected to have a material impact
on the Company's consolidated financial statements. The Company will
adopt this accounting standard in 1998.
Also in June 1997, SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," was issued, effective for years
beginning after December 15, 1997. This statement requires companies to
identify segments consistent with the manner in which management makes
decisions about allocating resources to segments and measuring their
performance. Disclosures for the newly identified segments are similar
to those required under current standards, with the addition of certain
quarterly disclosure requirements. It also establishes standards for
related disclosures about products and services, geographic areas and
major customers. The Company will adopt this accounting standard in
1998.
Reclassification
Certain prior year amounts have been reclassified to conform with 1997
presentation. The reclassifications had no effect on shareholders' equity
or net income available for common shareholders.
2. Business Combinations
On November 25, 1997, the Company completed the merger with Flournoy
Development Company and related entities ("FDC") (the "FDC Merger")
accounted for using the purchase method of accounting. Total
consideration consisted of $88,271,000, including 1,550,311 shares of
common stock and 412,110 Operating Partnership units in Mid-America
Apartments, L.P., valued at $56,213,000 ($28.6875 per share and unit),
$29,608,000 cash and transaction costs of approximately $2,450,000. The
Company may also issue additional shares of Common Stock (the
"Contingent Value Shares") having a value of up to $7,500,000 if certain
agreed upon conditions are satisfied during calendar years 1998, 1999 and
2000. When and if issued, the Contingent Value Shares will be recorded
as additional purchase consideration based upon the fair value of the
Common Stock at the date of issuance. The operating results of FDC are
included in the accompanying statement of operations commencing November
25, 1997.
The assets acquired and liabilities assumed in connection with the merger
were recorded at their respective fair values as follows:
Fair value of assets acquired,
primarily real estate assets $ 411,397,000
Liabilities assumed 335,326,000
---------------
Net assets acquired $ 76,071,000
===============
The following unaudited summarized pro forma consolidated financial
information has been prepared as if the FDC Merger, various other
insignificant acquisitions ( 13 in 1997 and 6 in 1996) and dispositions
(3 in 1996) of properties during the periods presented and various
financing transaction entered into in connection with the acquisitions
had occurred as of the beginning of the periods presented. In
management's opinion, the summarized pro forma consolidated financial
information does not purport to present what actual results would have
been had the above transactions occurred on January 1, 1996, or to
project results for any future period. The amounts presented for the
years ended December 31, 1997 and 1996 are in thousands except for share
amounts (unaudited):
1997 1996
--------- ---------
Total Revenues $ 195,748 $ 188,290
Net income before extraordinary item $ 22,104 $ 23,160
Extraordinary item, net of minority interest (7,866) -
Dividends on preferred shares (9,052) (9,052)
--------- ---------
Net income available for common shareholders $ 5,186 $ 14,108
========= =========
Per common share amounts:
- -------------------------
Basic net income before extraordinary item $ 0.71 $ 0.76
per common share
Basic net income available per common share $ 0.28 $ 0.76
On June 29, 1995, the Company completed the acquisition of America First
REIT, Inc. and America First REIT Advisory Company ("AFR") accounted for
using the purchase method of accounting. The Company exchanged 2,331,000
shares of its common stock, valued at $57,749,000, for all of the
capital stock of AFR. The operating results of AFR are included in the
accompanying statement of operations commencing July 1, 1995.
The fair value of assets acquired and liabilities assumed were as
follows:
Fair value of assets acquired,
primarily real estate assets $ 109,999,000
Liabilities assumed 52,250,000
-------------
Net assets acquired $ 57,749,000
=============
3. Borrowings
During 1997, the Company entered into a new $110 million line of credit
agreement (the "Credit Line") which expires in November 1999. The Credit
Line is secured by certain of the properties, bears interest at LIBOR
plus 1.25% (7.07% at December 31, 1997), and has various restrictive
financial covenants. At December 31, 1997, $45.2 million was outstanding
under the Credit Line. At December 31, 1996, $30.4 million was
outstanding under a $90 million line of credit, which was replaced by the
Credit Line.
At December 31, 1997 MACP had indebtedness of $140 million to Morgan
Stanley Mortgage Capital Inc. pursuant to a short-term promissory note
(the MSMC Loan). The 26 Communities, with a net book value of $213.6
million at December 31, 1997, owned by MACP are pledged to secure the
MSMC Loan. The MSMC Loan has a variable interest rate of LIBOR plus
1.00% (6.72% at December 31, 1997). The MSMC Loan was repaid subsequent
to December 31, 1997. See note 11.
The Company has approximately $447.0 million and $284.8 million at
December 31, 1997 and 1996 under various mortgage notes payable. These
notes are secured by real estate assets and certain restricted cash
accounts.
As of December 31, 1997, the Company estimated that the weighted average
interest rate on the Company's debt was 7.41% with an average maturity of
10.2 years. These estimates consider the effect of the MSMC Loan
repayment discussed in note 11.
During 1997, the Company extinguished a bond note, resulting in an
extraordinary loss of $771,000. At consummation of the merger with FDC,
the Company repaid certain debt primarily attributable to FDC, resulting
in an extraordinary loss of $7,851,000, net of minority interest.
The following tables summarize the Company's indebtedness at December 31,
1997. The tables are prepared as if the issuance of the commercial
mortgage pass-through certificates and repayment of the MSMC Loan which
occurred in 1998 (see note 11) had occurred at December 31, 1997:
<TABLE>
<CAPTION>
At December 31, 1997
-----------------------------------
Actual Average
Interest Interest
Rates Rate Maturity 1997 1996
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Fixed Rate:
Taxable 6.50 - 10.625% 8.06% 1998 - 2037 $ 479.0 $ 212.7
Tax-exempt 5.75 - 8.75% 6.36% 2008 - 2028 90.0 55.3
- ----------------------------------------------------------------------
$ 569.0 $ 268.0
Variable Rate:
Taxable 7.07 - 7.22% 6.88% 1998 - 2009 $ 46.6 $ 30.4
Tax-exempt 5.50 - 5.75% 5.56% 2025 - 2027 16.6 16.8
- ----------------------------------------------------------------------
$ 63.2 $ 47.2
- ----------------------------------------------------------------------
$ 632.2 $ 315.2
======================================================================
</TABLE>
Year Amortization Balloon Payments Total
- --------- ------------ ---------------- -----
(dollars in thousands)
1998 $ 4,146 $ 18,564 $ 22,710
1999 4,299 90,339 94,638
2000 4,088 4,525 8,613
2001 4,191 54,256 58,447
2002 4,373 11,233 15,606
Thereafter 178,147 154,052 332,199
- -------------------------------------------------------------------
$ 199,244 $ 432,969 $ 632,213
- -------------------------------------------------------------------
The Company's indebtedness includes various restrictive financial
covenants. The Company believes that it was in compliance with these
covenants as of December 31, 1997.
4. Fair Value Disclosure of Financial Instruments
Cash and cash equivalents, rental receivable, accounts payable and
accrued expenses and other liabilities and security deposits are carried
at amounts which reasonably approximate their fair value.
Fixed rate notes payable at December 31, 1997 and 1996 total $569.0
million and $268.0 million, respectively, and reasonably approximates the
estimated fair value (excluding prepayment penalties) based upon interest
rates available for the issuance of debt with similar terms and remaining
maturities as of December 31, 1997 and 1996. These notes were subject to
prepayment penalties, in the event of repayment prior to maturity. The
carrying value of variable rate notes payable at December 31, 1997 and
1996 total $63.2 million and $47.2 million, respectively, and reasonably
approximates their fair value. Included in these variable rate notes are
certain Multifamily Housing Renewal bonds with rates which are less than
the prime lending rates at December 31, 1997 and 1996. Approximately
$16.6 million in 1997 and $16.8 million in 1996 of these mortgages are
non-taxable and have lower rates than would be expected for taxable notes
with similar terms.
The fair value estimates presented herein are based on information
available to management as of December 31, 1997 and 1996. Although
management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since
that date, and current estimates of fair value may differ significantly
from the amounts presented herein.
5. Commitments and Contingencies
The Company is not presently subject to any material litigation nor, to
the Company's knowledge, is any material litigation threatened against
the Company, other than routine litigation arising in the ordinary course
of business, some of which is expected to be covered by liability
insurance and none of which is expected to have a material adverse effect
on the consolidated financial statements of the Company.
The Company incurred lease expense relating to a five year aircraft lease
agreement for the years ended December 31, 1997, 1996, and 1995 of
$187,000, $185,400, and $185,400, respectively.
6. Income Taxes
No provision for federal income taxes has been made in the accompanying
consolidated financial statements. The Company has made an election to
be taxed as a Real Estate Investment Trust ("REIT") under Sections 856
through 860 of the Code. As a REIT, the Company generally is not subject
to Federal income tax to the extent it distributes 95% of its REIT
taxable income to its shareholders and meets certain other tests relating
to the number of shareholders, types of assets and allocable income. If
the Company fails to qualify as a REIT in any taxable year, the Company
will be subject to the Federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate
rates. Even though the Company qualifies for taxation as a REIT, the
Company may be subject to certain Federal, state and local taxes on its
income and property and to Federal income and excise tax on its
undistributed income.
Earnings and profits, which determine the taxability of dividends to
shareholders, differ from net income reported for financial reporting
purposes primarily because of differences in depreciable lives, bases of
certain assets and liabilities and in the timing of recognition of
earnings upon disposition of properties. For federal income tax
purposes, the following summarizes the taxability of cash distributions
paid on the common shares in 1996 and 1995 and the estimated taxability
for 1997:
1997 1996 1995
------ ------ ------
Per common share
Ordinary income $ 1.16 $ 1.50 $ 1.45
Capital gains - .02 -
Return of capital 0.98 .52 .55
----------------------------
Total $ 2.14 $ 2.04 $ 2.00
============================
7. Shareholders' Equity
Series A Preferred Stock
Series A Cumulative Preferred Stock ("Series A Preferred Stock") has a
$25.00 per share liquidation preference and a preferential cummulative
annual distribution of $2.375 per share, payable monthly. The Company
issued 2,000,000 Series A Preferred share in October 1996 and received
net proceeds of $47.8 million.
Series B Preferred Stock
Series B Cumulative Preferred Stock ("Series B Preferred Stock") has a
$25.00 per share liquidation preference and a preferential cummulative
annual distribution of $2.21875 per share, payable monthly. In November
1997 the Company issued 1,938,830 Series B shares and received net
proceeds of $46.7 million.
Common Stock Offerings
In March 1997 the Company issued 2,300,000 shares of Common Stock and
received net proceeds of $62.5 million. In October 1997 the Company
issued 3,499,000 shares of Common Stock and received net proceeds of
$98.2 million. The Company contributed the net proceeds of the offerings
to the Operating Partnership in exchange for additional Common Units in
the Operating Partnership.
Dividend Reinvestment and Stock Purchase Plan
In January 1997, the Company adopted a Dividend Reinvestment and Stock
Purchase Plan (the "DRSPP") pursuant to which the Company's shareholders
will be permitted to acquire shares of Common Stock through the
reinvestment of distributions on Common Stock, Series A Preferred Stock,
Series B Preferred Stock and through optional cash payments from
shareholders. The Company has registered with the Securities and Exchange
Commission the offer and sale of up to 750,000 shares of Common Stock
pursuant to the DRSPP. During 1997, 24,785 shares of Common Stock were
acquired by shareholders pursuant to the DRSPP.
Earnings Per Share and Dividend Data
The Company adopted SFAS No. 128, "Earnings per Share", effective for
financial statements for periods ending after December 15, 1997. All
prior period EPS data has been restated to conform with the provisions of
this statement.
The computation of basic earnings per share is based on the weighted
average number of common shares outstanding. The computation of diluted
earnings per share is based on the weighted average number of common
shares outstanding plus the shares resulting from the assumed exercise of
all outstanding options using the treasury stock method. The following
table provides a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the years ended
December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<C> <C> <C> <C>
Basic:
- ------
Net income before preferred dividends
and extraordinary item $ 19,849 $ 14,260 $ 9,810
Dividends on preferred shares (5,252) (990) -
----------------------------
Net income available for common
shareholders before extraordinary item $ 14,597 $ 13,270 $ 9,810
Extraordinary item (8,622) - -
----------------------------
Net income available for common shareholders $ 5,975 $ 13,720 $ 9,810
============================
Average common shares outstanding 13,892 10,938 9,772
Basic earnings per share:
- -------------------------
Net income available per common share
before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
----------------------------
Net income available per common share $ 0.43 $ 1.21 $ 1.00
============================
Diluted:
- --------
Net income before preferred dividends
and extraordinary item $ 19,849 $ 14,260 $ 9,810
Dividends on preferred shares (5,252) (990) -
----------------------------
Net income available for common shareholders
before extraordinary item $ 14,597 $ 13,270 $ 9,810
Extraordinary item (8,622) - -
----------------------------
Net income available for common shareholders $ 5,975 $ 13,270 $ 9,810
============================
Average common shares outstanding 13,892 10,938 9,772
Effect of dilutive stock options 63 45 42
----------------------------
Average dilutive common shares outstanding 13,955 10,983 9,814
============================
Diluted earnings per share:
- ---------------------------
Net income available per common share
before extraordinary item $ 1.05 $ 1.21 $ 1.00
Extraordinary item (0.62) - -
----------------------------
Net income available per common share $ 0.43 $ 1.21 $ 1.00
============================
</TABLE>
[FN]
The computation of earnings per share does not include the Contingent
Value Shares which may be issued in 1998, 1999, and 2000 due to the
conditions for issuance of the shares have not been satisfied.
8. Employee Benefit Plans
401 (k) Savings Plan
The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is a
defined contribution plan that satisfies the requirements of Section
401(a) and 401(k) of the Code. The Company may, but is not obligated to,
make a matching contribution of $.50 for each $1.00 contributed, up to 6%
of the participant's compensation. The Company's contribution to this
plan was $154,300, $118,700 and $81,600 in 1997, 1996 and 1995,
respectively.
Non-qualified Deferred Compensation Plan
The Company has adopted a non-qualified deferred compensation plan for
key employees who are not qualified for participation in the Company's
401 (k) Savings Plan. Under the terms of the plan, employees may elect
to defer a percentage of their compensation and the Company matches a
portion of their salary deferral. The plan is designed so that the
employees' investment earnings under the non-qualified plan should be the
same as the earning assets in the Company's 401 (k) Savings Plan. The
Company's match to this plan in 1997, 1996 and 1995 was $18,600, $23,600
and $8,600, respectively.
Employee Stock Purchase Plan
The Mid-America Apartment Communities, Inc. Employee Stock Purchase Plan
(the "ESPP") provides a means for employees to purchase common stock of
the Company. The board has authorized the issuance of 150,000 shares for
the plan. The ESPP is administered by the Compensation Committee who may
annually grant options to employees to purchase annually up to an
aggregate of 15,000 shares of common stock at a price equal to 85% of the
market price of the common stock. During 1997, 1996 and 1995, the ESPP
purchased 2,758, 3,176 and 2,710 shares, respectively.
Employee Stock Ownership Plan
The Mid-America Apartment Communities, Inc. Employee Stock Ownership Plan
(the "ESOP") which is a non-contributory stock bonus plan that satisfies
the requirements of Section 401 (a) of the Internal Revenue Code. Each
employee of the Company is eligible to participate in the ESOP after
attaining the age of 21 years and completing one year of service with the
Company. Participants' ESOP accounts will be 100% vested after five
years of continuous service, with no vesting prior to that time. The
Company contributed 22,500 shares of Common Stock to the ESOP upon
conclusion of the IPO. During 1997, 1996 and 1995, the Company
contributed $344,000, $276,000 and $186,000, respectively, to the ESOP
which purchased an additional 11,921, 8,208 and 5,148 shares,
respectively.
Stock Option Plan
The Company has adopted the 1994 Restricted Stock and Stock Option Plan
(the "Plan") to provide incentives to attract and retain independent
directors, executive officers and key employees. The Plan provides for
the grant of options to purchase a specified number of shares of common
stock ("Options") or grants of restricted shares of common stock
("Restricted Stock"). The Plan also allows the Company to grant options
to purchase Operating Partnership units at the price of the Common Stock
on the New York Stock Exchange on the day prior to issuance of the units
(the "LESOP Provision"). The Plan authorizes Options to buy a total of
500,000 shares of common stock. The Compensation Committee of the Board
of Directors is responsible for granting Options and shares of Restricted
Stock and for establishing the exercise price of Options and terms and
conditions of Restricted Stock. During the first quarter of 1997, the
Company amended the Plan to increase the shares authorized an increase
from 500,000 to 1,000,000 and to remove the restriction on the number of
options that may be issued, subject to overall plan limits.
In 1997 the Company granted options to certain executives and other
officers to purchase 96,000 shares of Common Stock and 110,000 Operating
Partnership units pursuant to the LESOP Provision. In 1997 options to
purchase 75,000 shares of common stock and 110,000 Operating Partnership
units were exercised and the Company advanced a portion of
the purchase price of these shares and units. The employee
advances mature five years from date of issuance and accrue interest,
payable in arrears, at a rate of 7.0% per annum. At December 31, 1997,
the outstanding principal balance on the employee advances was
approximately $700,000 and is recorded in the Company's statement of
shareholders' equity. The Company entered into supplemental bonus agreements
with the employees which are intended to fund the payment of the advances
over a five year period. Under the terms of the supplemental bonus
agreements, the Company will pay cash bonuses to these employees equal to
20% of the original note balance on each anniversary date of the notes.
The bonuses are limited to 15% of the aggregate purchase price of the
common shares and units.
A summary of changes in Options to acquire shares of Common Stock and
Operating Partnership Units for the three years ended December 31, 1997
follows:
Weighted Average
Options Exercise Price
------- ----------------
Outstanding at December 31, 1994 235,000 20.40
Granted 33,000 25.07
Exercised (12,150) 19.75
Forfeited (8,300) 22.02
--------
Outstanding at December 31, 1995 247,550 21.00
Granted 99,000 26.50
Exercised (1,900) 19.75
Forfeited (6,000) 25.81
--------
Outstanding at December 31, 1996 338,650 22.53
Granted 416,500 29.46
Exercised (218,625) 28.17
Forfeited (13,025) 27.91
--------
Outstanding at December 31, 1997 523,500 25.40
========
Options exercisable:
December 31, 1995 34,850 $ 20.63
December 31, 1996 84,050 20.82
December 31, 1997 140,500 21.71
Exercise prices for options outstanding as of December 31, 1997 ranged
from $19.75 to $29.50. The weighted average remaining contractual life
of those options is 8 years.
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", which requires either the (i) fair value of
employee stock-based compensation plans be recorded as a component of
compensation expense in the statement of operations as of the date of
grant of awards related to such plans, or (ii) impact of such fair value
on net income and earnings per share be disclosed on a pro forma basis in
a footnote to financial statements for awards granted after December 15,
1994, if the accounting for such awards continues to be in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," ("APB 25"). The Company will continue such
accounting under the provisions of APB 25. The pro forma effects in 1997
and 1996 to net income per common share were not considered material.
9. Financial Instruments with Off-Balance Sheet Risk
The Partnership has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Partnership
occasionally utilizes derivative financial instruments as hedges in
anticipation of future debt transactions to manage well-defined interest
rate risk.
In anticipation of the March 6, 1998 financing transaction discussed in
Note 11 "Subsequent Events (Unaudited)", the Partnership entered into
four separate interest rate contracts in 1997 with notional amounts
aggregating $140 million. As of December 31, 1997 the fair value of
these interest rate contracts, based on broker estimates, was an
unrealized loss of approximately $1.1 million ($1.4 million realized loss
as of March 6, 1998). Unrealized changes in the market value of interest
rate contracts are deferred until the hedged transaction is consumated
and realized gains and losses resulting from changes in the market value
of these contacts are deferred and amortized into interest expense over
the life of the related debt issuance.
10. Related Party Transaction
During 1997 the Company acquired its corporate headquarters building for
$2,912,000 from a partnership whose partners included certain executive
officers of the Company. The consideration paid consisted of $862,000
cash, 22,246 Operating Partnership Units valued at $634,000 ($28.50 per
unit) and the assumption of an existing loan. Prior to acquisition the
Company leased the building from the partnership.
11. Subsequent Events (Unaudited)
Declaration of Dividend
The Company declared a fourth quarter common stock dividend of $.55 per
share to be paid January 30, 1998 to holders of record on January 23,
1998.
Completed Acquisitions
Since December 31, 1997, the Company has acquired the following apartment
communities (the "Completed Acquisitions") containing an aggregate of 392
apartment units (dollars in millions):
NUMBER OF ACQUISITION CONTRACT
PROPERTY MARKET UNITS DATE PRICE
-------- ------ -------- ----------- --------
Walden Run McDonough, GA 240 2/5/98 $ 13.4
Van Mark Huntsville, AL 152 2/26/98 5.1
-------- --------
Total 392 $ 18.5
======== ========
The financial statements of the completed acquisitions are not included
in the audited consolidated financial statements included herein.
Financing Transactions
On March 6, 1998, MACP completed the sale of $142,000,000 of first
mortgage bonds (the "MACP Bonds") secured by liens on 26 properties owned
by MACP. The MACP Bonds were issued to Mid-America Finance, Inc., a
wholly owned qualified REIT subsidiary of the Company, which deposited
MACP Bonds into a grantor trust (the "Trust"). The Trust issued
commercial mortgage pass-through certificates representing beneficial
ownership of the MACP Bonds. The five year fixed rate non-amortizing
certificates bear interest at 6.376%. The net proceeds to the Company
were approximately $139.2 million after payment of initial discount,
underwriters' fees, costs of rate lock and other expenses. The Company
used the net proceeds of the MACP Bonds to repay the MSMC Loan.
On March 13, 1998, the Company issued mortgages of $36.2 million,
refinancing $29.04 million of existing loans. These new mortgages are
fixed at 7.00% and will amortize over 25 years and will balloon in 2005.
On March 16, 1998, the Company increased its line of credit from $110
million to $200 million with terms substantially the same as before.
11. Selected Quarterly Financial Information (Unaudited)
Mid-America Apartment Communities, Inc.
Quarterly Financial Data (Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------
First(2) Second(2) Third(2) Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $29,839 $32,720 $34,395 $42,162
Income before minority interest in operating
partnership income and extraordinary item $4,704 $5,461 $5,085 $7,292
Minority interest in operating partnership income $527 $651 $620 $895
Extraordinary item, net of minority interest - - - ($8,622)
Net income (loss) available for common shareholders $2,990 $3,622 $3,278 ($3,915)
Per share:
Basic and diluted per share (1):
Net income available per common shares
Before extraordinary item $0.26 $0.27 $0.24 $0.27
Extraordinary item $0.00 $0.00 $0.00 ($0.50)
---------------------------------------------
Net income available per common share $0.26 $0.27 $0.24 ($0.23)
=============================================
Dividend declared $0.535 $0.535 $0.535 $0.550
Year Ended December 31, 1996
----------------------------
First Second Third Fourth
--------- ------- ------- -------
Total revenues $27,151 $27,361 $28,362 $29,008
Income before minority interest in operating
partnership income and extraordinary item $3,638 $5,595 $3,492 $4,748
Minority interest in operating partnership income $670 $1,027 $644 $872
Net income available for common shareholders $2,968 $4,568 $2,848 $2,886
Per share:
Basic and diluted per share (1):
Net income available per common shares
Before extraordinary item $0.27 $0.42 $0.26 $0.26
Extraordinary item $0.00 $0.00 $0.00 $0.00
----------------------------------------------
Net income available per common share $0.27 $0.42 $0.26 $0.26
==============================================
Dividend declared $0.510 $0.510 $0.510 $0.535
</TABLE>
[FN]
(1) Earnings per share have been restated for the effect of implementing, in
the quarter ended December 31, 1997 SFAS No. 128, "Earnings per Share".
(2) During the quarter ended December 31, 1997, the Operating Partnership
Agreement was amended to eliminate, effective January 1, 1997, the
additional allocation of income to the Class A Common unitholders. The
amounts previously reported for prior quarters during 1997 have been
restated for the effect of this amendment. The effect of this amendment
was to increase net income available for common shareholders
approximately $315, $257 and $200 and to increase net income available
per common share by $ 0.03, $ 0.02, and $ 0.02 for the first, second and
third quarters of 1997.
Independent Auditors' Report
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.:
Under date of March 27, 1998, we reported on the consolidated balance
sheets of Mid-America Apartment Communities, Inc. (the Company) as of
December 31, 1997 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997 as contained in the
annual report to shareholders. Our report refers to the Company's
change in its accounting method to capitalize replacement purchases for
major appliances and carpet in 1996. In connection with our audits of
the aforementioned consolidated financial statements, we also have
audited the financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents, fairly in all material respects, the information set
forth therein.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
March 27, 1998
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost
---------------------
Building
and
Property Name Location Encumbrances Land Fixtures
- --------------- ------------- ------------ ------- ----------
<S> <C> <C> <C> <C>
The Advantages Jackson, MS - (1) $422 $3,727
McKellar Woods Memphis, TN 8,357 737 13,200
Pine Trails Clinton, MS 1,357 178 2,728
Reflection Pointe Jackson, MS 5,882 710 8,770
Riverhills Grenada, MS 851 153 2,092
Woodridge Jackson, MS 4,789 471 5,522
Greenbrook Memphis, TN 15,477 2,100 24,468
Hamilton Pointe Chattanooga, TN - (1) 686 6,281
Hidden Creek Chattanooga, TN - (1) 895 8,098
Steeplechase Hixson, TN -(9) 217 1,957
Cedar Mill (7) Memphis, TN 2,487 475 6,546
Clearbrook Village Memphis, TN 1,162 260 3,658
Crossings Memphis, TN - (1) 554 2,216
Eastview Memphis, TN 3,286 700 9,646
Gleneagles Memphis, TN - (1) 443 3,983
The Park Estate Memphis, TN 1,471 178 1,141
Winchester Square Memphis, TN - (1) 350 7,279
Post House North Jackson, TN 3,680 381 4,299
Post House Jackson Jackson, TN 5,140 443 5,078
The Oaks Jackson, TN - (1) 177 1,594
The Corners Winston-Salem, NC 4,306 685 6,165
Park Haywood Greenville, SC -(9) 325 2,925
Hickory Farm Memphis, TN - (1) 580 5,220
Lakeshore Landing Jackson, MS - (1) 480 4,320
Woodstream Greensboro, NC 5,491 953 8,599
Stonemill Village Louisville, KY - (1) 1,169 10,518
Canyon Creek St. Louis, MO - (1) 880 7,923
Whispering Oaks Little Rock, AR 3,000 506 4,551
Pear Orchard Jackson, MS -(9) 1,352 12,168
Celery Stalk Dallas, TX 8,460 1,463 13,165
Lane at Towne Crossing Mesquite, TX 5,696 1,038 9,338
Hollybrook Dalton, GA 2,520 405 3,646
Green Tree Place Woodlands, TX 3,180 539 4,850
Redford Park Conroe, TX 3,000 509 4,580
MacArthur Ridge Irving, TX 7,524 1,131 10,183
Lincoln on the Green Memphis, TN -(10) 1,498 13,484
Brentwood Downs Nashville, TN 6,678 1,193 10,739
Shenandoah Ridge Augusta, GA -(9) 650 5,850
Westborough Crossing Katy, TX 3,958 677 6,091
Sailwinds at Lake Magdalene Tampa, FL 15,950 2,212 19,909
Woodbridge at the Lake Jacksonville, FL 3,672 645 5,804
Lakepointe Lexington, KY -(9) 411 3,699
The Mansion Lexington, KY 4,140 694 6,242
The Village Lexington, KY -(9) 900 8,097
Cypresswood Court Spring, TX 3,330 577 5,190
The Lodge at Timberglen Dallas, TX 4,740 825 7,422
Calais Forest Little Rock, AR 5,610 1,026 9,244
The Fairways Columbia, SC 7,641 910 8,207
Kirby Station Memphis, TN -(9) 1,148 10,337
Belmere Tampa, FL -(9) 851 7,667
Williamsburg Village Jackson, TN -(9) 523 4,711
Fairways @ Royal Oak Cincinnati, OH -(9) 814 7,335
Tanglewood Anderson, SC 2,576 427 3,853
Woods at Post House Jackson, TN 5,313 240 6,839
Somerset Jackson, MS -(9) 477 4,294
Highland Ridge Greenville, SC -(3) 482 4,337
Spring Creek Greenville, SC -(3) 597 5,374
St. Augustine Jacksonville, FL -(4) 2,858 6,475
Cooper's Hawk Jacksonville, FL -(4) 854 7,500
Marsh Oaks Atlantic Beach, FL -(9) 244 2,829
Park at Hermitage Nashville, TN 8,190 1,524 14,800
Anatole Daytona Beach, FL 7,000 1,227 5,879
The Savannahs Melbourne, FL -(4) 582 7,868
Stassney Woods Austin, TX 4,825 1,621 7,501
Travis Station Austin, TX 4,265 2,282 6,169
Runaway Bay Mt. Pleasant, SC -(3) 1,085 7,269
The Township Hampton, VA -(2) 1,509 8,189
Lakeside Jacksonville, FL -(9) 1,431 12,883
Crosswinds Jackson, MS -(9) 1,535 13,826
Sutton Place HornLake, MS -(9) 894 8,053
Savannah Creek Southaven, MS -(9) 778 7,013
Napa Valley Little Rock, AR -(9) 960 8,642
Tiffany Oaks Altamonte Springs, FL -(9) 1,024 9,219
Lincoln on the Green -II Memphis, TN - - 6,999
Howell Commons Greenville, SC -(9) 1,304 11,740
Balcones Woods Austin, TX 8,986 1,598 14,398
Westside Creek I Little Rock, AR -(9) 616 5,559
Fairways at Hartland Bowling Green, KY 4,697 1,038 9,342
Woodhollow Jacksonville, FL 10,149 1,686 15,179
The Woods Austin, TX -(2) 1,012 9,120
Hunters Ridge at Deerwood Jacksonville, FL -(2) 1,533 13,835
Austin Chase Macon, GA 10,182 1,409 12,687
Westside Creek II Little Rock, AR 4,958 654 5,904
Woodwinds Aiken, SC 3,532 503 4,540
Hermitage at Beechtree Cary, NC -(9) 900 8,099
Sterling Ridge Augusta, GA 4,805 772 6,949
Colony at Southpark Aiken, SC - 757 6,820
Fountain Lake Brunswick, GA 3,005 502 4,551
Hidden Lake I Union City, GA 4,583 675 6,128
Hidden Lake II Union City, GA -(9) 621 5,587
Hidden Oaks I Albany, GA - 364 3,300
Hidden Oaks II Albany, GA 2,470 306 2,774
High Ridge Athens, GA -(9) 884 7,958
Paddock Club Columbia I Columbia, SC -(2) 1,040 9,360
Paddock Club Huntsville Huntsville, AL -(2) 830 7,470
Paddock Club Jacksonville I Jacksonville, FL -(10) 963 8,739
Paddock Club Lakeland I Lakeland, FL -(10) 951 8,630
Paddock Club Lakeland II Lakeland, FL -(10) 1,303 11,822
Paddock Club Tallahassee I Tallahassee, FL -(2) 950 8,550
Paddock Park I Ocala, FL 6,805 901 8,177
Paddock Park II Ocala, FL -(2) 1,383 12,547
Park Place Spartanburg, SC -(9) 723 6,504
Park Walk College Park, GA 3,438 536 4,859
Regency Club Albany, GA - 198 1,795
River Trace I Memphis, TN 5,832 881 7,996
River Trace II Memphis, TN 5,739 741 6,727
Riverwind Columbus, GA - 108 979
Southland Station I Warner Robins, GA -(9) 777 6,992
Southland Station II Warner Robins, GA - 693 6,292
Three Oaks I Valdosta, GA 2,894 462 4,188
Three Oaks II Valdosta, GA 2,978 460 4,170
The Vistas Macon, GA 4,130 595 5,403
Westbury Creek Augusta, GA 3,207 400 3,626
Westbury Springs Lilburn, GA 4,307 665 6,038
Whispering Pines I LaGrange, GA 2,770 454 4,116
Whispering Pines II LaGrange, GA 2,561 370 3,354
Whisperwood Columbus, GA -(2) 2,330 20,970
Whisperwood Spa I Columbus, GA -(2) 1,510 13,590
Wildwood I Thomasville, GA 2,112 438 3,971
Wildwood II Thomasville, GA 2,046 372 3,372
Willow Creek Columbus, GA -(9) 614 5,523
Windridge Chattanooga, TN 5,558 817 7,416
2000 Wynnton Columbus, GA - 192 1,741
Paddock Club Tallahassee II Tallahassee, FL 4,727 530 4,805
Paddock Club Jacksonville II Jacksonville, FL -(10) 689 6,255
Paddock Club Columbia II Columbia, SC -(2) 800 7,200
Paddock Club Florence Florence, KY 9,723 1,209 10,969
Paddock Club Greenville Greenville, SC -(2) 1,200 10,800
Paddock Club Brandon I Brandon, FL -(2) 2,100 18,900
Terraces at Towne Lake I Woodstock, GA 15,246 1,689 15,321
Paddock Club Jacksonville III Jacksonville, FL -(10) 642 5,756
-------- -------- ---------
Total apartments 326,444 109,380 975,666
Other real estate assets:
- ------------------------
Commercial properties, net Various 2,844 682 7,187
Construction in progress Various -(2) 9,259 24,458
Land held for future developments Various - 7,991 858
-------- -------- ---------
Total other 2,844 17,932 32,503
-------- -------- ---------
Total real estate assets $329,288 $127,312 $1,008,169
======== ======== =========
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1997
(Dollars in thousands)
<CAPTION>
Cost capitalized Gross amount
Subsequent to carried at
Acquisition December 31, 1997 (5)
----------------- ---------------------------
Building Building
and and
Property Name Location Land fixtures Land fixtures Total
- --------------------- -------------- ---- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
The Advantages Jackson, MS - $704 $422 $4,431 $4,853
McKellar Woods Memphis, TN - 1,295 737 14,495 15,232
Pine Trails Clinton, MS - 464 178 3,192 3,370
Reflection Pointe Jackson, MS 140 2,129 850 10,899 11,749
Riverhills Grenada, MS - 177 153 2,269 2,422
Woodridge Jackson, MS - 231 471 5,753 6,224
Greenbrook Memphis, TN 25 3,438 2,125 27,906 30,031
Hamilton Pointe Chattanooga, TN - 718 686 6,999 7,685
Hidden Creek Chattanooga, TN - 1,050 895 9,148 10,043
Steeplechase Hixson, TN - 1,087 217 3,044 3,261
Cedar Mill (7) Memphis, TN - 1,101 475 7,647 8,122
Clearbrook Village Memphis, TN - 391 260 4,049 4,309
Crossings Memphis, TN - 443 554 2,659 3,213
Eastview Memphis, TN - 1,084 700 10,730 11,430
Gleneagles Memphis, TN - 1,238 443 5,221 5,664
The Park Estate Memphis, TN - 737 178 1,878 2,056
Winchester Square Memphis, TN - 713 350 7,992 8,342
Post House North Jackson, TN - 560 381 4,859 5,240
Post House Jackson Jackson, TN - 437 443 5,515 5,958
The Oaks Jackson, TN - 531 177 2,125 2,302
The Corners Winston-Salem, NC - 459 685 6,624 7,309
Park Haywood Greenville, SC 35 2,250 360 5,175 5,535
Hickory Farm Memphis, TN - 337 580 5,557 6,137
Lakeshore Landing Jackson, MS - 466 480 4,786 5,266
Woodstream Greensboro, NC - 558 953 9,157 10,110
Stonemill Village Louisville, KY - 945 1,169 11,463 12,632
Canyon Creek St. Louis, MO 220 1,414 1,100 9,337 10,437
Whispering Oaks Little Rock, AR - 1,422 506 5,973 6,479
Pear Orchard Jackson, MS - 982 1,352 13,150 14,502
Celery Stalk Dallas, TX - 1,104 1,463 14,269 15,732
Lane at Towne Crossing Mesquite, TX - 899 1,038 10,237 11,275
Hollybrook Dalton, GA - 767 405 4,413 4,818
Green Tree Place Woodlands, TX - 465 539 5,315 5,854
Redford Park Conroe, TX - 624 509 5,204 5,713
MacArthur Ridge Irving, TX - 473 1,131 10,656 11,787
Lincoln on the Green Memphis, TN - 660 1,498 14,144 15,642
Brentwood Downs Nashville, TN - 563 1,193 11,302 12,495
Shenandoah Ridge Augusta, GA - 1,678 650 7,528 8,178
Westborough Crossing Katy, TX - 491 677 6,582 7,259
Sailwinds at Lake Magdalene Tampa, FL - 6,667 2,212 26,576 28,788
Woodbridge at the Lake Jacksonville, FL - 659 645 6,463 7,108
Lakepointe Lexington, KY - 571 411 4,270 4,681
The Mansion Lexington, KY - 529 694 6,771 7,465
The Village Lexington, KY - 757 900 8,854 9,754
Cypresswood Court Spring, TX - 582 577 5,772 6,349
The Lodge at Timberglen Dallas, TX - 1,309 825 8,731 9,556
Calais Forest Little Rock, AR - 1,042 1,026 10,286 11,312
The Fairways Columbia, SC - 327 910 8,534 9,444
Kirby Station Memphis, TN - 1,753 1,148 12,090 13,238
Belmere Tampa, FL - 808 851 8,475 9,326
Williamsburg Village Jackson, TN - 407 523 5,118 5,641
Fairways @ Royal Oak Cincinnati, OH - 617 814 7,952 8,766
Tanglewood Anderson, SC - 477 427 4,330 4,757
Woods at Post House Jackson, TN - 474 240 7,313 7,553
Somerset Jackson, MS - 523 477 4,817 5,294
Highland Ridge Greenville, SC - 178 482 4,515 4,997
Spring Creek Greenville, SC - 276 597 5,650 6,247
St. Augustine Jacksonville, FL - 1,582 2,858 8,057 10,915
Cooper's Hawk Jacksonville, FL - 479 854 7,979 8,833
Marsh Oaks Atlantic Beach, FL - 459 244 3,288 3,532
Park at Hermitage Nashville, TN - 825 1,524 15,625 17,149
Anatole Daytona Beach, FL - 422 1,227 6,301 7,528
The Savannahs Melbourne, FL - 670 582 8,538 9,120
Stassney Woods Austin, TX - 823 1,621 8,324 9,945
Travis Station Austin, TX - 616 2,282 6,785 9,067
Runaway Bay Mt. Pleasant, SC - 442 1,085 7,711 8,796
The Township Hampton, VA - 125 1,509 8,314 9,823
Lakeside Jacksonville, FL - 2,034 1,431 14,917 16,348
Crosswinds Jackson, MS - 830 1,535 14,656 16,191
Sutton Place HornLake, MS - 537 894 8,590 9,484
Savannah Creek Southaven, MS - 365 778 7,378 8,156
Napa Valley Little Rock, AR - 448 960 9,090 10,050
Tiffany Oaks Altamonte Springs, FL - 500 1,024 9,719 10,743
Lincoln on the Green -II Memphis, TN - 5,827 - 12,826 12,826
Howell Commons Greenville, SC - 316 1,304 12,056 13,360
Balcones Woods Austin, TX - 1,010 1,598 15,408 17,006
Westside Creek I Little Rock, AR - 180 616 5,739 6,355
Fairways at Hartland Bowling Green, KY - 466 1,038 9,808 10,846
Woodhollow Jacksonville, FL - 562 1,686 15,741 17,427
The Woods Austin, TX - 163 1,012 9,283 10,295
Hunters Ridge at Deerwood Jacksonville, FL - 849 1,533 14,684 16,217
Austin Chase Macon, GA - 6 1,409 12,693 14,102
Westside Creek II Little Rock, AR - 13 654 5,917 6,571
Woodwinds Aiken, SC - 31 503 4,571 5,074
Hermitage at Beechtree Cary, NC - 7 900 8,106 9,006
Sterling Ridge Augusta, GA - 24 772 6,973 7,745
Colony at Southpark Aiken, SC - 3 757 6,823 7,580
Fountain Lake Brunswick, GA - 281 502 4,832 5,334
Hidden Lake I Union City, GA - 5 675 6,133 6,808
Hidden Lake II Union City, GA - 3 621 5,590 6,211
Hidden Oaks I Albany, GA - 2 364 3,302 3,666
Hidden Oaks II Albany, GA - 2 306 2,776 3,082
High Ridge Athens, GA - 2 884 7,960 8,844
Paddock Club Columbia I Columbia, SC - 3 1,040 9,363 10,403
Paddock Club Huntsville Huntsville, AL - 3 830 7,473 8,303
Paddock Club Jacksonville I Jacksonville, FL - 1 963 8,740 9,703
Paddock Club Lakeland I Lakeland, FL - 6 951 8,636 9,587
Paddock Club Lakeland II Lakeland, FL - 1,303 11,822 13,125
Paddock Club Tallahassee I Tallahassee, FL - 7 950 8,557 9,507
Paddock Park I Ocala, FL - 9 901 8,186 9,087
Paddock Park II Ocala, FL - 13 1,383 12,560 13,943
Park Place Spartanburg, SC - 2 723 6,506 7,229
Park Walk College Park, GA - 4 536 4,863 5,399
Regency Club Albany, GA - 3 198 1,798 1,996
River Trace I Memphis, TN - 4 881 8,000 8,881
River Trace II Memphis, TN - 3 741 6,730 7,471
Riverwind Columbus, GA - 108 979 1,087
Southland Station I Warner Robins, GA - 14 777 7,006 7,783
Southland Station II Warner Robins, GA - 3 693 6,295 6,988
Three Oaks I Valdosta, GA - 8 462 4,196 4,658
Three Oaks II Valdosta, GA - 4 460 4,174 4,634
The Vistas Macon, GA - 595 5,403 5,998
Westbury Creek Augusta, GA - 400 3,626 4,026
Westbury Springs Lilburn, GA - 1 665 6,039 6,704
Whispering Pines I LaGrange, GA - 1 454 4,117 4,571
Whispering Pines II LaGrange, GA - 370 3,354 3,724
Whisperwood Columbus, GA - 17 2,330 20,987 23,317
Whisperwood Spa I Columbus, GA - 9 1,510 13,599 15,109
Wildwood I Thomasville, GA - 1 438 3,972 4,410
Wildwood II Thomasville, GA - 1 372 3,373 3,745
Willow Creek Columbus, GA - 3 614 5,526 6,140
Windridge Chattanooga, TN - 2 817 7,418 8,235
2000 Wynnton Columbus, GA - 0 192 1,741 1,933
Paddock Club Tallahassee II Tallahassee, FL - 0 530 4,805 5,335
Paddock Club Jacksonville II Jacksonville, FL - - 689 6,255 6,944
Paddock Club Columbia II Columbia, SC - 1 800 7,201 8,001
Paddock Club Florence Florence, KY - - 1,209 10,969 12,178
Paddock Club Greenville Greenville, SC - - 1,200 10,800 12,000
Paddock Club Brandon I Brandon, FL - - 2,100 18,900 21,000
Terraces at Towne Lake I Woodstock, GA - - 1,689 15,321 17,010
Paddock Club Jacksonville III Jacksonville, FL - - 640 5,756 6,396
Total apartments 420 74,073 109,800 1,049,739 1,159,549
----- ------- ------- --------- ---------
Other real estate assets:
- -------------------------
Commercial properties, net Various - 1,719 682 8,906 9,562
Construction in progress Various - 9,259 24,458 33,717
Land held for future developments Various - 7,991 858 8,849
----- ------- ------- --------- ---------
Total other 0 1,719 17,932 34,222 52,128
----- ------- ------- --------- ---------
Total real estate assets $420 $75,792 $127,732 $1,083,961 $1,211,669
===== ======= ======= ========= =========
Mid-America Apartment Communities, Inc.
Schedule III
Real Estate and Accumulated Depreciation at December 31, 1997
(Dollars in thousands)
<CAPTION>
Life used
to compute
depreciation
in latest
Accumulated Date of income
Property Name Location Depreciation Net Construction statement(6)
- ------------------------ ------------- ------------ ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
The Advantages Jackson, MS ($1,118) $3,735 1984 5 - 40
McKellar Woods Memphis, TN (2,105) 13,124 1976 5 - 40
Pine Trails Clinton, MS (1,088) 2,282 1978 5 - 40
Reflection Pointe Jackson, MS (1,265) 10,484 1986 5 - 40
Riverhills Grenada, MS (440) 1,982 1972 5 - 40
Woodridge Jackson, MS (729) 5,495 1987 5 - 40
Greenbrook Memphis, TN (3,885) 26,146 1986 5 - 40
Hamilton Pointe Chattanooga, TN (1,062) 6,623 1989 5 - 40
Hidden Creek Chattanooga, TN (2,447) 7,596 1987 5 - 40
Steeplechase Hixson, TN (576) 2,685 1986 5 - 40
Cedar Mill (7) Memphis, TN (1,257) 6,865 1973/1986 5 - 40
Clearbrook Village Memphis, TN (575) 3,734 1974 5 - 40
Crossings Memphis, TN (643) 2,570 1974 5 - 40
Eastview Memphis, TN (1,709) 9,721 1974 5 - 40
Gleneagles Memphis, TN (1,567) 4,097 1975 5 - 40
The Park Estate Memphis, TN (816) 1,240 1974 5 - 40
Winchester Square Memphis, TN (1,149) 7,193 1973 5 - 40
Post House North Jackson, TN (589) 4,651 1987 5 - 40
Post House Jackson Jackson, TN (680) 5,278 1987 5 - 40
The Oaks Jackson, TN (322) 1,980 1978 5 - 40
The Corners Winston-Salem, NC (900) 6,409 1982 5 - 40
Park Haywood Greenville, SC (583) 4,952 1983 5 - 40
Hickory Farm Memphis, TN (781) 5,356 1985 5 - 40
Lakeshore Landing Jackson, MS (659) 4,607 1974 5 - 40
Woodstream Greensboro, NC (1,210) 8,900 1983 5 - 40
Stonemill Village Louisville, KY (1,562) 11,070 1985 5 - 40
Canyon Creek St. Louis, MO (1,200) 9,237 1987 5 - 40
Whispering Oaks Little Rock, AR (806) 5,673 1978 5 - 40
Pear Orchard Jackson, MS (1,717) 12,785 1985 5 - 40
Celery Stalk Dallas, TX (1,852) 13,880 1978 5 - 40
Lane at Towne Crossing Mesquite, TX (1,345) 9,930 1983 5 - 40
Hollybrook Dalton, GA (501) 4,317 1972 5 - 40
Green Tree Place Woodlands, TX (671) 5,183 1984 5 - 40
Redford Park Conroe, TX (662) 5,051 1984 5 - 40
MacArthur Ridge Irving, TX (1,291) 10,496 1991 5 - 40
Lincoln on the Green Memphis, TN (1,696) 13,946 1988 5 - 40
Brentwood Downs Nashville, TN (1,394) 11,101 1986 5 - 40
Shenandoah Ridge Augusta, GA (930) 7,248 1982 5 - 40
Westborough Crossing Katy, TX (809) 6,450 1984 5 - 40
Sailwinds at Lake Magdalene Tampa, FL (3,377) 25,411 1975 5 - 40
Woodbridge at the Lake Jacksonville, FL (789) 6,319 1985 5 - 40
Lakepointe Lexington, KY (501) 4,180 1986 5 - 40
The Mansion Lexington, KY (797) 6,668 1987 5 - 40
The Village Lexington, KY (1,067) 8,687 1989 5 - 40
Cypresswood Court Spring, TX (682) 5,667 1984 5 - 40
The Lodge at Timberglen Dallas, TX (1,063) 8,493 1984 5 - 40
Calais Forest Little Rock, AR (1,177) 10,135 1987 5 - 40
The Fairways Columbia, SC (960) 8,484 1992 5 - 40
Kirby Station Memphis, TN (1,367) 11,871 1978 5 - 40
Belmere Tampa, FL (960) 8,366 1984 5 - 40
Williamsburg Village Jackson, TN (578) 5,063 1987 5 - 40
Fairways @ Royal Oak Cincinnati, OH (876) 7,890 1988 5 - 40
Tanglewood Anderson, SC (469) 4,288 1980 5 - 40
Woods at Post House Jackson, TN (934) 6,619 1995 5 - 40
Somerset Jackson, MS (540) 4,754 1981 5 - 40
Highland Ridge Greenville, SC (348) 4,649 1984 5 - 40
Spring Creek Greenville, SC (433) 5,814 1984 5 - 40
St. Augustine Jacksonville, FL (869) 10,046 1987 5 - 40
Cooper's Hawk Jacksonville, FL (758) 8,075 1987 5 - 40
Marsh Oaks Atlantic Beach, FL (315) 3,217 1986 5 - 40
Park at Hermitage Nashville, TN (1,449) 15,700 1987 5 - 40
Anatole Daytona Beach, FL (600) 6,928 1986 5 - 40
The Savannahs Melbourne, FL (807) 8,313 1990 5 - 40
Stassney Woods Austin, TX (787) 9,158 1985 5 - 40
Travis Station Austin, TX (624) 8,443 1987 5 - 40
Runaway Bay Mt. Pleasant, SC (710) 8,086 1988 5 - 40
The Township Hampton, VA (729) 9,094 1987 5 - 40
Lakeside Jacksonville, FL (1,026) 15,322 1985 5 - 40
Crosswinds Jackson, MS (738) 15,453 1988/1990 5 - 40
Sutton Place HornLake, MS (436) 9,048 1991 5 - 40
Savannah Creek Southaven, MS (372) 7,784 1989 5 - 40
Napa Valley Little Rock, AR (374) 9,676 1984 5 - 40
Tiffany Oaks Altamonte Springs, FL (332) 10,411 1985 5 - 40
Lincoln on the Green -II Memphis, TN (106) 12,720 1997 5 - 40
Howell Commons Greenville, SC (380) 12,980 1986/1988 5 - 40
Balcones Woods Austin, TX (385) 16,621 1983 5 - 40
Westside Creek I Little Rock, AR (149) 6,206 1984 5 - 40
Fairways at Hartland Bowling Green, KY (247) 10,599 1996 5 - 40
Woodhollow Jacksonville, FL (412) 17,015 1986 5 - 40
The Woods Austin, TX (215) 10,080 1977 5 - 40
Hunters Ridge at Deerwood Jacksonville, FL (308) 15,909 1987 5 - 40
Austin Chase Macon, GA (186) 13,916 1996 5 - 40
Westside Creek II Little Rock, AR (52) 6,519 1986 5 - 40
Woodwinds Aiken, SC (40) 5,034 1988 5 - 40
Hermitage at Beechtree Cary, NC (47) 8,959 1988 5 - 40
Sterling Ridge Augusta, GA (41) 7,704 1986 5 - 40
Colony at Southpark Aiken, SC (20) 7,560 1989/1991 5 - 40
Fountain Lake Brunswick, GA (16) 5,318 1983 5 - 40
Hidden Lake I Union City, GA (21) 6,787 1985 5 - 40
Hidden Lake II Union City, GA (21) 6,190 1987 5 - 40
Hidden Oaks I Albany, GA (11) 3,655 1979 5 - 40
Hidden Oaks II Albany, GA (10) 3,072 1980 5 - 40
High Ridge Athens, GA (29) 8,815 1987 5 - 40
Paddock Club Columbia I Columbia, SC (33) 10,370 1989 5 - 40
Paddock Club Huntsville Huntsville, AL (26) 8,277 1989 5 - 40
Paddock Club Jacksonville I Jacksonville, FL (30) 9,673 1989 5 - 40
Paddock Club Lakeland I Lakeland, FL (30) 9,557 1988 5 - 40
Paddock Club Lakeland II Lakeland, FL (41) 13,084 1990 5 - 40
Paddock Club Tallahassee I Tallahassee, FL (30) 9,477 1990 5 - 40
Paddock Park I Ocala, FL (28) 9,059 1986 5 - 40
Paddock Park II Ocala, FL (44) 13,899 1988 5 - 40
Park Place Spartanburg, SC (22) 7,207 1987 5 - 40
Park Walk College Park, GA (17) 5,382 1985 5 - 40
Regency Club Albany, GA (6) 1,990 1983 5 - 40
River Trace I Memphis, TN (28) 8,853 1981 5 - 40
River Trace II Memphis, TN (23) 7,448 1985 5 - 40
Riverwind Columbus, GA (3) 1,084 1983 5 - 40
Southland Station I Warner Robins, GA (21) 7,762 1987 5 - 40
Southland Station II Warner Robins, GA (22) 6,966 1990 5 - 40
Three Oaks I Valdosta, GA (15) 4,643 1983 5 - 40
Three Oaks II Valdosta, GA (15) 4,619 1984 5 - 40
The Vistas Macon, GA (19) 5,979 1985 5 - 40
Westbury Creek Augusta, GA (13) 4,013 1984 5 - 40
Westbury Springs Lilburn, GA (21) 6,683 1983 5 - 40
Whispering Pines I LaGrange, GA (14) 4,557 1982 5 - 40
Whispering Pines II LaGrange, GA (12) 3,712 1984 5 - 40
Whisperwood Columbus, GA (74) 23,243 1981/1986 5 - 40
Whisperwood Spa I Columbus, GA (48) 15,061 1988 5 - 40
Wildwood I Thomasville, GA (14) 4,396 1980 5 - 40
Wildwood II Thomasville, GA (12) 3,733 1984 5 - 40
Willow Creek Columbus, GA (26) 6,116 1971/1977 5 - 40
Windridge Chattanooga, TN (26) 8,209 1984 5 - 40
2000 Wynnton Columbus, GA (6) 1,927 1983 5 - 40
Paddock Club Tallahassee II Tallahassee, FL (17) 5,318 1995 5 - 40
Paddock Club Jacksonville II Jacksonville, FL (22) 6,922 1996 5 - 40
Paddock Club Columbia II Columbia, SC (25) 7,976 1995 5 - 40
Paddock Club Florence Florence, KY (38) 12,140 1994 5 - 40
Paddock Club Greenville Greenville, SC (38) 11,962 1996 5 - 40
Paddock Club Brandon I Brandon, FL (66) 20,934 1997 5 - 40
Terraces at Towne Lake I Woodstock, GA (53) 16,957 1997 5 - 40
Paddock Club Jacksonville III Jacksonville, FL (20) 6,376 1997 5 - 40
rounding??? (20) (17)
-------- ---------
Total apartments (76,129) 1,083,410
Other real estate assets:
- -------------------------
Commercial properties, net Various (860) 8,728 Various 5 - 40
Construction in progress Various 33,717 N/A N/A
Land held for future developments Various 8,849 N/A N/A
-------- ---------
Total other (860) 51,294
-------- ---------
Total real estate assets ($76,989)$1,134,704
======== =========
</TABLE>
[FN]
(1) These 12 Properties are encumbered by a $43.4 million note payable.
(2) Subject to a negative pledge pursuant to the agreement in respect of the
Credit Line, with an outstanding balance of $45.2 million at December 31,
1997. The line had a variable interest rate at December 31, 1997 of 7.07%.
(3) These three properties are encumbered by a $10.3 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(4) These three properties are encumbered by a $16.5 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(5) The aggregate cost for Federal income tax purposes was approximately
$1,115 million at December 31, 1997. The total gross amount of
real estate assets for GAAP purposes exceeds the aggregate cost for
Federal income tax purposes, principally due to purchase accounting
adjustments recorded under generally accepted accounting principles.
(6) Depreciation is on a straight line basis over the estimated useful
asset life which ranges from 8 to 40 years for land improvements
and buildings and 5 years for furniture, fixtures and equipment.
(7) Includes adjacent 68-unit Mendenhall Townhomes.
(8) Lincoln Phase II is under construction - completed First quarter 1998.
(9) These 26 communities are encumbered by a $140 million MSMC loan
with an average interest rate of 6.62%.
(10) These six communities are encumbered by a $47.5 million note payable.
MID - AMERICA APARTMENT COMMUNITIES, INC.
Schedule III
Real Estate Investments and Accumulated Depreciation
A summary of activity for real estate investments and accumulated depreciation
is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1996 1995
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year $ 641,893 $ 578,788 $ 434,460
Acquisitions 140,858 66,258 15,561
Improvements and development 36,298 20,634 25,590
Assets acquired from business
combination 392,644 - 103,177
Disposition of real estate
assets - (23,787) -
----------- --------- ---------
Balance at end of year $ 1,211,693 $ 641,893 $ 578,788
=========== ========= =========
Accumulated depreciation:
Balance at beginning of year $ 49,558 $ 29,504 $ 13,386
Depreciation 27,431 21,249 16,118
Disposition of real estate
assets - (1,195) -
----------- -------- --------
Balance at end of year $ 76,989 $ 49,558 $ 29,504
=========== ======== ========
</TABLE>
[FN]
The Company's consolidated balance sheet at December 31, 1997
includes accumulated depreciation of $860 thousand in the
caption "Commercial properties, net".
EXHIBIT 3.1
AMENDED AND RESTATED CHARTER
OF
MID-AMERICA APARTMENT COMMUNITIES, INC.
The undersigned corporation hereby amends and restates
its Charter under the Tennessee Business Corporation Act.
A. The name of the corporation is Mid-America
Apartment Communities, Inc. (the "Corporation").
B. The Charter of the Corporation is amended and
restated as follows:
Name. The name of the corporation (which is
hereinafter called the "Corporation") is Mid-America
Apartment Communities, Inc.
For Profit. The Corporation is for profit.
Principal and Registered Office. The address of
the Corporation's initial registered office and its
principal office is 6584 Poplar Avenue, Suite 340, Memphis,
Tennessee 38138.
Initial Registered Agent. The name of the
Corporation's initial registered agent at that office is
George E. Cates.
Incorporator. The name and address of the
incorporator is John A. Good, 6075 Poplar Avenue, Suite 623,
Memphis, Tennessee 38119.
Authorized Capital Stock. The total number of
shares of stock which the Corporation has authority to issue
is twenty million (20,000,000) shares of Common Stock, $.01
par value per share, and five million (5,000,000) shares of
Preferred Stock, $.01 par value per share.
The Preferred Stock may be issued from time to
time by the Board of Directors of the Corporation, in such
series and with such preferences, conversion or other
rights, voting powers, restrictions, limitations as to
dividends, qualifications or other provisions as may be
fixed by the Board of Directors.
Directors. The Corporation shall have a Board of
Directors consisting of not less than three (3) nor more
than nine (9) members unless otherwise determined from time
to time by resolution adopted by the affirmative vote of at
least eighty percent (80%) of the members of the Board of
Directors. However, the number of directors shall never be
less than the minimum number required by the Tennessee
Business Corporation Act. A director need not be a
shareholder. Directors shall be divided into three (3)
classes as nearly equal in number as possible. The initial
term of Class I directors shall expire at the annual
shareholder meeting in 1994. The initial term of Class II
directors shall expire at the annual shareholder meeting in
1995 and the initial term of the Class III director shall
expire at the annual shareholder meeting in 1996. At each
annual shareholder meeting, the shareholders shall elect one
or more directors to serve a three-year term of the class of
directors whose term is expiring at such annual meeting and
until their successors are elected and qualify.
Independent Directors. Notwithstanding
anything herein to the contrary, at all times (except during
a period not to exceed sixty (60) days following the death,
resignation, incapacity or removal from office of a director
prior to expiration of the director's term of office), a
majority of the Board of Directors shall be comprised of
persons who are not officers or employees of the
Corporation, "Affiliates" of the Corporation, or
"Affiliates" of any subsidiary of the Corporation, or any
partnership which is an Affiliate of the Corporation.
Definition of Affiliate. For purposes of the
foregoing subsection, "Affiliate" of a person shall mean
any person that, directly or indirectly, controls or is
controlled by or is under common control with such person,
any other person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding
capital stock, shares or equity interests of such person, or
any officer, director, employee, partner or trustee of such
person or any person controlling, controlled by or under
common control with such person (excluding trustees and
persons serving in similar capacities who are not otherwise
an Affiliate of such person). The term "person" means and
includes individuals, corporations, general and limited
partnerships, stock companies or associations, joint
ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities
and governments and agencies and political subdivisions
thereof. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled
by" and "under common control with"), as used with respect
to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of such person, through the
ownership of voting securities, partnership interests or
other equity interests.
Amendment of this Article. Notwithstanding
any other provision of this Charter or the Bylaws of the
Corporation (and notwithstanding that some lesser percentage
may be specified by law, this Charter or the Bylaws of the
Corporation), the provisions of this Article 7 shall not be
amended, altered, changed or repealed without the
affirmative vote of at least eighty percent (80%) of the
members of the Board of Directors or the affirmative vote of
the holders of not less than a majority of the outstanding
shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting as a single
voting group.
Dividends. All shares of Common Stock will
participate equally in dividends payable to holders of
shares of Common Stock when and as declared by the Board of
Directors and in net assets available for distribution to
holders of shares of Common Stock upon liquidation or
dissolution.
Preemptive Rights. No holder of shares of capital
stock of the Corporation shall have any preemptive or
preferential right to subscribe to or purchase any shares
of any class of the Corporation, whether now or hereafter
authorized; any warrants, rights, or options to purchase
any such shares; or any securities or obligations
convertible into any such shares or into warrants, rights,
or options to purchase any such shares.
Limitation of Director Liability. No director of
the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary
duty as a director; provided, that this provision shall not
eliminate or limit the liability of a director: (A) for any
breach of the director's duty of loyalty to the Corporation
or its shareholders; (B) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing
violation of law; or (C) under Section 48-18-304 of the
Tennessee Business Corporation Act. This provision shall
not eliminate or limit the liability of a director for any
act or omission occurring prior to the date when this
provision became effective. No amendment of this provision
after the time of its effectiveness shall affect in any
manner the elimination or limitation on liability of
directors for acts occurring prior to the time of such
amendment.
Indemnification. Any word or words defined in
Part 5 of Chapter 18 of Title 48 of the Tennessee Code
Annotated, as amended from time to time (the
"Indemnification Article") used in this Article 11, shall
have the same meaning as provided in the Indemnification
Article.
The Corporation shall indemnify and advance
expenses to a director, officer, employee or agent of the
Corporation in connection with a proceeding to the fullest
extent permitted by and in accordance with the
Indemnification Article.
Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or
who, while a director, officer, employee or agent of the
Corporation is or was serving at the request of the
Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against liability asserted
against or incurred by such person in that capacity or
arising from such person's status as a director, officer,
employee or agent, whether or not the Corporation would have
power to indemnify such person against the same liability
under the Indemnification Article.
REIT Status. The Corporation shall seek to elect
and maintain status as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code
of 1986, as amended from time to time (the "Code"). It
shall be the duty of the Board of Directors to ensure that
the Corporation satisfies the requirements for qualification
as a REIT under the Code, including, but not limited to, the
ownership of its outstanding stock, the nature of its
assets, the sources of its income, and the amount and timing
of its distributions to its shareholders. The Board of
Directors shall take no action to disqualify the Corporation
as a REIT or to otherwise revoke the Corporation's election
to be taxed as a REIT without the affirmative vote of two-
thirds (2/3) of the number of shares of Common Stock
entitled to vote on such matter at a special meeting of the
Shareholders.
Restrictions on Transfer.
Affidavits of Transferees. Whenever it
is deemed by the Board of Directors to be prudent in
protecting the tax status of the Corporation as a REIT under
the Code and regulations issued under the Code, the Board of
Directors may require to be filed with the Corporation a
statement or affidavit from each proposed transferee of
shares of capital stock of the Corporation setting forth the
number of such shares already owned by the transferee and
any related person(s) specified in the form prescribed by
the Board of Directors for that purpose. Any contract for
the sale or other transfer of shares of capital stock of the
Corporation shall be subject to this provision.
Affidavits of Shareholders. Prior to any
transfer or transaction which would cause a shareholder to
own, directly or indirectly, shares in excess of the "Limit"
as defined in paragraph (d) of this Article 14, and in any
event upon demand of the Board of Directors, such
shareholder shall file with the Corporation an affidavit
setting forth the number of shares of capital stock of the
Corporation (a) owned directly and (b) owned indirectly by
the person filing the affidavit. For purposes of this
paragraph (b), shares of capital stock not owned directly
shall be deemed to be owned indirectly by a person if that
person would be the beneficial owner of such shares for
purposes of Rule 13d-3, or any successor rule thereto,
promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act") and/or would be considered to own such
shares by reason of the attribution rules in Section 544 (as
modified by Section 856(h)) of the Code or the regulations
issued thereunder.
The affidavit to be filed with the Corporation
shall set forth all information required to be reported in
returns filed by shareholders under Treasury Regulation
Section 1.857-9 issued under the Code or similar provisions
of any successor regulation, and in reports to be filed
under section 13(d), or any successor rule thereto, of the
Exchange Act. The affidavit, or an amendment thereto, shall
be filed with the Corporation within ten (10) days after
demand therefor and at least fifteen (15) days prior to any
transfer or transaction which, if consummated, would cause
the filing person to hold a number of shares of capital
stock of the Corporation in excess of the "Limit" as defined
in paragraph (d) of this Article 14.
Void Transfers. Notwithstanding any other
provision hereof to the contrary except Section 14(e), any
acquisition of shares of capital stock that causes any
person's ownership to exceed the Limit (as defined in
Section 14(d)) or would result in the disqualification of
the Corporation as a REIT under the Code shall be void ab
initio to the fullest extent permitted under applicable law
and the intended transferee of those shares shall be deemed
never to have had an interest therein. If the foregoing
provision is determined to be void or invalid by virtue of
any legal decision, statute, rule or regulation, then those
shares shall be deemed to be Excess Shares (as defined in
Section 14(d)) and subject to Section 14(f) below.
Excess Shares. Except as provided in Section
14(e), no person shall at any time directly or indirectly
own in the aggregate more than 9.9% of the outstanding
shares of capital stock of the Corporation (the "Limit").
Shares which but for this Section 14(d) would be owned by a
person and would, at any time, be in excess of the Limit
shall be deemed "Excess Shares" and shall become subject to
Section 14(f). For the purpose of determining whether
shares are Excess Shares, "ownership" of shares shall be
deemed to include shares constructively owned by a person
under the provisions of Section 544 (as modified by Section
856(h)) of the Code. All shares of capital stock of the
Corporation which any person has the right to acquire upon
exercise of outstanding rights, options and warrants, and
upon conversion of any securities convertible into those
shares, if any, shall be considered outstanding for purposes
of determining the applicable Limit if such inclusion will
cause such person to own more than the Limit.
Exemptions. The ownership limits set forth
in Sections 14(c) and 14(d) shall not apply to the
acquisition of shares of capital stock of the Corporation by
an underwriter in a public offering of those shares or in
any transaction involving the issuance of shares of capital
stock by the Corporation in which the Board of Directors
determines that the underwriter or other person or party
initially acquiring those shares will timely distribute
those shares to or among others so that, following such
distribution, the ownership of those shares will not be in
violation of Section 14(c) or 14(d). The Board of Directors
in its discretion may exempt from the Limit and from the
filing requirements of Section 14(b) ownership or transfers
of certain designated shares of capital stock of the
Corporation while owned by or transferred to a person who
has provided the Board of Directors with evidence and
assurances acceptable to the Board of Directors that the
qualification of the Corporation as a REIT under the Code
and the regulations issued under the Code would not be
jeopardized thereby.
Treatment of Excess Shares.
(i) If the Board of Directors of the
Corporation shall at any time determine that a transaction
has taken place within the scope of Section 14(c) or that
any person intends to acquire Excess Shares, the Board of
Directors shall take such action as it or they deem
advisable to refuse to give effect to or to prevent such
transaction, including but not limited to refusing to give
effect to such transfer on the books of the Corporation.
(ii) If, notwithstanding Sections 14(c) and
(f)(i), a purported transferee ("Record Transferee")
acquires Excess Shares, the Record Transferee shall be
deemed to have received such Excess Shares as agent on
behalf of, and to hold such Excess Shares in trust for the
exclusive benefit of, the person(s) to whom the Excess
Shares may be later transferred pursuant to Section
14(f)(iii). The Record Transferee shall have no right to
receive dividends or other distributions on the Excess
Shares and shall have no right to vote the Excess Shares.
The Record Transferee shall have no claim, cause of action,
or any other recourse whatsoever against the transferor of
the Excess Shares. The Record Transferee's sole right with
respect to the trust shall be to receive, at the
Corporation's sole and absolute discretion, either (i) an
amount upon the resale of the Excess Shares as directed by
the Corporation pursuant to Section 14(f)(iii) or (ii) an
amount upon the redemption of the Excess Shares by the
Corporation pursuant to Section 14(f)(iii).
(iii) The Board of Directors shall,
within six months after receiving notice of a transfer that
causes a Record Transferee to own Excess Shares, either, in
its sole and absolute discretion, (a) direct the Record
Transferee to sell all of the Excess Shares held in trust
pursuant to Section 14(f)(ii) for cash in such manner as the
Board of Directors directs or (b) redeem such Excess Shares
for the price and on the terms set forth in Section
14(f)(iii)(b) on such date within such six month period as
the Board of Directors may determine.
(a) If the Board of Directors directs
the Record Transferee to sell the Excess Shares held in
trust, the Record Transferee shall pay the Corporation out
of the proceeds of such sale all expenses incurred by the
Corporation in connection with such sale plus any remaining
amount of such proceeds that exceeds the amount paid by the
Record Transferee for the Excess Shares, and the Record
Transferee shall be entitled to retain only any proceeds in
excess of such amount required to be paid to the
Corporation.
(b) If the Board of Directors
determines to redeem the Excess Shares, written notice of
redemption (the "Notice") shall be provided to the Record
Transferee of the Excess Shares not less than one week prior
to the redemption date (the "Redemption Date") determined by
the Board of Directors and included in the Notice. The
redemption price per share to be paid for Excess Shares will
be equal to the lesser of (i) the principal price paid by
the Record Transferee from whom Excess Shares are being
redeemed or (ii) (a) the closing price per share of the
shares on the principal national securities exchange on
which the shares are listed or admitted to trading, (b) if
the shares are not so listed or admitted to trading, the
closing bid price on the date of Notice as reported on the
National Association of Securities Dealers, Inc. System, if
quoted thereon (the price per share determined under clause
(a) or (b) being herein defined as the "Market Price"), or
(c) if a Market Price is not determinable in accordance with
either clause (a) or (b) of this sentence, the net asset
value per share on the date of Notice determined in good
faith by the Board of Directors, (iii) the Market Price on
the date on which the person would but for this Article 14
have been deemed to acquire ownership of the Excess Shares,
or (iv) the maximum price allowed under Part 5 of Chapter 35
of Title 48 of the Tennessee Code Annotated. The amount
payable to the Record Transferee for Excess Shares so
redeemed may be paid, at the option of the Corporation, in
the form of the number of "Units" equal to the number of
shares redeemed divided by the "Conversion Factor," as those
terms are defined in the Partnership Agreement of Mid-
America Apartment Communities, Inc. The redemption price
for any shares of capital stock of the Corporation so
redeemed shall be paid on the Redemption Date. From and
after the Redemption Date, the holder of any redeemed shares
of capital stock of the Corporation shall cease to be
entitled to any distributions or other benefits with respect
to redeemed shares, except the right to receive payment of
the redemption price fixed as aforesaid.
Application of Article. Nothing contained in
this Article 14 or in any other provision hereof shall limit
the authority of the Board of Directors to take any and all
other action as it in its sole discretion deems necessary or
advisable to protect the Corporation and the interests of
its shareholders by maintaining the Corporation's
eligibility to be, and preserving the Corporation's status
as, a REIT under the Code.
Definition of "Person". For purposes of this
Article only, the term "person" shall include individuals,
corporations, limited partnerships, general partnerships,
joint stock companies or associations, joint ventures,
associations, consortia, companies, trusts, banks, trust
companies, land trusts, common law trusts, business trusts,
or other entities and governments and agencies and political
subdivisions thereof.
Severability. If any provision of this
Article 14 or any application of any such provision is
determined to be invalid by any federal or state court
having jurisdiction over the issue, the validity of the
remaining provisions shall not be affected and other
applications of such provision shall be affected only to the
extent necessary to comply with the determination of that
court.
Legend. Certificates representing shares of
capital stock of the Corporation shall bear a legend
referencing the restrictions set forth in this Article 14.
NYSE Settlement. Nothing in these Articles
of Incorporation shall preclude any settlement transaction
with respect to the Common Stock of the Company entered into
through the facilities of the New York Exchange.
C. The Amended and Restated Charter was approved by
unanimous written consent of the sole shareholder of the
Corporation on January 10th, 1994.
DATED: January 10th, 1994
Mid-America Apartment
Communities, Inc.
By: /s/ George E. Cates
George E. Cates,
President
EXHIBIT 3.3
ARTICLES OF MERGER OF
THE CATES COMPANY
WITH AND INTO
MID-AMERICA APARTMENT COMMUNITIES, INC.
The under signed corporation, pursuant to 48-21-205 of the
Tennessee Business Corporation Act, hereby submits the
following Articles of Merger to effect the merger of The
Cates Company, a Tennessee corporation, with and into Mid-
America Apartment Communities, Inc., a Tennessee
corporation, and, in that regard, states the following:
1. The Plan of Merger is as follows:
(a) The names of the constituent corporations are
as follows:
The Cates Company, a Tennessee corporation
("Cates") Mid-America Apartment Communities, Inc.,
a Tennessee corporation ("MAC")
(b) The corporation surviving the merger (the
"Surviving Corporation") will be Mid-America
Apartment Communities, Inc., a Tennessee
corporation.
(c) From and after the effective time of the merger,
the following effects of the merger shall be
recognized by operation of law:
Charter and Bylaws. The Charter of MAC as in
effect immediately prior to the effective time
shall be and remain the Charter of the Surviving
Corporation. The Bylaws of MAC as in effect
immediately prior to the effective time shall be
and remain the Bylaws of the Surviving Corporation
until altered, amended, or repealed in accordance
with the Tennessee Business Corporation Act.
Names of Surviving Corporation. As of the
effective time, the name of the Surviving
Corporation shall be Mid-America Apartment
Communities, Inc.
Capitalization. As of the effective time, the
number of authorized shares of the Surviving
Corporation shall be 20,000,000 shares of Common
Stock having $.01 per share par value and
5,000,000 shares of Preferred Stock having $.01
per share per value.
Officers and Directors. As of and after the
effective time, the directors and officers of MAC
shall be the directors and officers of the
Surviving Corporation.
Registered and Principal Office. As of and after
the effective time, the registered and principal
business office of the Surviving Corporation shall
be located at 6584 Poplar Avenue, Suite 340,
Memphis (Shelby County) Tennessee 38138.
Retention of Rights and Properties. As of the
effective time, the separate existence and
corporate organization of Cates shall cease and
Cates shall be merged with and into MAC as the
Surviving Corporation. The Surviving Corporation
shall, from and after the effective time, possess
all the rights, privileges, powers, immunities,
and franchises of both Cates and MAC of whatsoever
nature (public or private) and description. The
Merger shall have the effects set forth in 48-21-
106 of the Tennessee Business Corporation Act.
All assets and property, real, personal, and
mixed, and all debts due on whatever account,
including, without limitation, shares or
subscriptions to shares, all other choses in
action, rights, and credits, and all and every
other interest of or owed by or due or that would
inure to either Cates or MAC shall immediately, by
operation of law, be taken or deemed to be
transferred to and vested in the Surviving
Corporation without any further conveyance,
transfer, act, or deed, and the title to any real
estate or any interest therein vested in either
Cates or Motor Cargo Industries, Inc. shall not
revert or be impaired in any way by reason of the
merger.
Assumption of Liabilities. As of the effective
time, the Surviving Corporation shall be deemed to
be a continuation of the entity of each
constituent corporation, with the effect set forth
in 48-21-106 of the Tennessee Business
Corporation and shall succeed to and shall assume
such rights and obligations and the duties and
liabilities and obligations of both Cates and MAC,
and any claim existing or action or proceeding
pending by or against Cates or MAC may be
prosecuted as if the merger had not taken place.
Neither the rights of creditors nor any liens upon
the property of Cates or MAC shall be impaired by
the merger.
(d) At the effective time, each share of Cates common
stock, without par value, held by non-dissenting
shareholders and not exchanged for cash in the
manner hereinbelow described shall, by virtue of
the merger of Cates with and into MAC and without
any action being taken by the holder thereof, be
exchanged for and converted into two thousand five
hundred (2,500) fully paid and nonassessable
shares of common stock of MAC, having a par value
of $.01 per share (the "MAC Stock")
(e) At the effective time, each share of common stock
of MAC then issued and outstanding shall remain
issued and outstanding as the common stock of the
Surviving Corporation.
2. The foregoing Plan of Merger was duly adopted and
approved by the sole shareholder and the Board of Directors
of MAC by action without a meeting on January 18, 1994. The
Plan of Merger was duly adopted and approved by the Board of
Directors of Cates by action without a meeting on January
26, 1994 and by the Shareholders of Cates at a meeting duly
held on January 26, 1994.
3. The merger of Cates with and into MAC shall be
effective at 8:00 a.m. Central Standard Time on February 4,
1994.
Dated: February 2, 1994
Mid-America Apartment Communities, Inc.
By:
Lynn A. Johnson,
Secretary
EXHIBIT 3.6
MID-AMERICA APARTMENT COMMUNITIES, INC.
ARTICLES OF AMENDMENT TO THE AMENDED AND RESTATED CHARTER
Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Corporation"), certifies to the Tennessee
Secretary of State that:
FIRST: The Corporation's Board of Directors recommended
an amendment (the "Amendment") to the Corporation's Amended
and Restated Charter (the "Charter") to increase the number
of authorized shares of the Corporation's Common Stock,
$.01 par value per share (the "Common Stock") from 20
million shares to 50 million shares, to the Corporation's
shareholders pursuant to a proxy statement dated October 13,
1997;
SECOND: The Corporation's shareholders approved the
Amendment at a special shareholders meeting duly called and
held pursuant to Tennessee law and the Corporation's bylaws
on November 14, 1997;
THIRD: Section 6 is hereby amended by deleting the
first sentence contained in Section 6 and, in its place,
inserting the following:
6. Authorized Capital Stock. The total number of
shares of stock which the Corporation has authority to
issue is fifty million (50,000,000) shares of Common
Stock, $.01 par value per share, and five million
(5,000,000) shares of Preferred Stock, $.01 par value
per share.
FOURTH: This Amendment shall be effective at the time
the Tennessee Secretary of State accepts this Amendment for
filing.
IN WITNESS WHEREOF, MID-AMERICA APARTMENT COMMUNITIES,
INC. has caused these presents to be signed in its name and
on its behalf by its Chief Financial Officer on this the
17th day of November 1997.
MID-AMERICA APARTMENT COMMUNITIES,INC.
By: /s/ Simon R.C. Wadsworth
Title: Chief Financial Officer
EXHIBIT 3.8A
Articles of Merger
of
Flournoy Development Company
(a Georgia corporation)
with and into
Mid-America Apartment Communities, Inc.
(a Tennessee corporation)
Pursuant to the provisions of Section 48-21-105 of the
Tennessee Business Corporation Act, and Section 14-2-1101 of the
Georgia General Corporation Law, the undersigned corporations adopt
the following Articles of Merger for the purpose of merging into a
single corporation:
1. The Agreement and Plan of Merger is attached hereto as Exhibit
"A" and incorporated herein by reference.
2. Flournoy Development Company, a Georgia Corporatio, adopted
the Agreement and Plan of Merger pursuant to an Action by
Written Consent of the Board of Directors of the corporation
on September 15, 1997 and an Action by Written Consent of the
Shareholders of the corporation on September 15, 1997.
3. Mid-America Apartment Communities, a Tennessee Corporation,
adopted the Agreement and the Plan of Merger pursuant to an
Action by Written Consent of the Board of Directors, without
Shareholder approval, on September 15, 1997.
4. The merger shall be effective upon the filing with the office
of the Secretary of State for the State of Tennessee and the
Secretary of State for the State of Georgia.
IN WITNESS WHEREOF, the undersigned have caused this document
to be executed the day of November, 1997.
FLOURNOY DEVELOPMENT COMPANY
By:
Name:
Title:
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:
Name:
Title:
EXHIBIT 3.8
AGREEMENT AND PLAN OF MERGER
OF
FLOURNOY DEVELOPMENT COMPANY
(a Georgia corporation)
WITH AND INTO
MID-AMERICA APARTMENT COMMUNITIES, INC.
(a Tennessee corporation)
AGREEMENT AND PLAN OF MERGER (the "Agreement and Plan
of Merger"), dated as of November ___, 1997, by and between
FLOURNOY DEVELOPMENT COMPANY, a corporation organized and
existing under the laws of the State of Georgia ("FDC") and
MID-AMERICA APARTMENT COMMUNITIES, INC., a corporation
organized and existing under the laws of the State of
Tennessee ("MAAC"), with reference to the following
recitals:
WITNESSETH:
WHEREAS, FDC is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Georgia. The entire authorized capital stock of FDC
consists of Ten Million (10,000,000) shares of common stock,
no par value per share (the "FDC Common Stock"), of which
two million five hundred forty-nine thousand four hundred
ninety-five (2,549,495) shares are issued and outstanding.
WHEREAS, MAAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Tennessee. The entire authorized capital stock of MAAC
consists of fifty million (50,000,000) shares of common
stock, par value $.01 per share (the "MAAC Common Stock"),
and five million (5,000,000) shares of preferred stock, of
which sixteen million eight hundred ninety-four thousand two
hundred thirty-two (16,894,232) shares of MAAC Common Stock
and three million nine hundred thirty-eight thousand eight
hundred thirty (3,938,830) shares of preferred stock are
issued and outstanding; and
WHEREAS, the Board of Directors of each of FDC and MAAC
and the shareholder(s) of FDC have adopted resolutions
approving this Agreement and Plan of Merger in accordance
with the Georgia Business Corporation Code (the "GBCC") and
the Tennessee Business Corporation Act (the "TBCA").
NOW, THEREFORE, the parties hereto, in consideration of
the mutual covenants herein contained and intending to be
legally bound, agree as follows:
I. Parties to Merger. FDC and MAAC (such
corporate parties to the merger being hereinafter sometimes
collectively referred to as the "Constituent Corporations")
shall effect a merger (the "Merger") in accordance with and
subject to the terms and conditions of this Agreement and
Plan of Merger.
II. Merger: Service of Process. At the Effective
Time (as defined in Section 3 hereof), FDC shall be merged
with and into MAAC, which latter corporation shall be, and
is hereinafter sometimes referred to as, the "Surviving
Corporation". The Surviving Corporation, which shall
continue to be governed by the laws of the State of
Tennessee, hereby agrees that it may be served with process
in the State of Georgia in any proceeding for enforcement
of any obligation of FDC, as well as for enforcement of any
obligation of the Surviving Corporation arising from the
Merger, and the Surviving Corporation hereby irrevocably
appoints the Secretary of State of the State of Georgia as
its agent to accept service of process in any such suit or
other proceedings. A copy of such process shall be mailed
by the Secretary of State of the State of Georgia to the
Surviving Corporation at 6584 Poplar Avenue, Suite 340,
Memphis, Tennessee 38138.
III. Filing and Effective Time. Articles of
Merger to be filed with the Secretary of the State of
Tennessee and a Certificate of Merger to be filed with the
Secretary of State of the State of Georgia (the "Merger
Articles") and such other documents and instruments as are
required by, and complying in all respects with, the GBCC
and the TBCA shall be delivered to the appropriate state
officials for filing. The Merger shall become effective
immediately upon filing of the Merger Articles (the
"Effective Time").
IV. Charter. At the Effective Time, the Charter
of MAAC shall be and thereafter remain the Charter of the
Surviving Corporation, until amended in accordance with
applicable law, and the Surviving Corporation shall continue
to be a corporation organized and governed by the laws of
the State of Tennessee.
V. Bylaws. At the Effective Time, the Bylaws of
MAAC shall be and thereafter remain the Bylaws of the
Surviving Corporation until altered, amended or repealed in
the manner therein provided in accordance with the Charter
and Bylaws of the Surviving Corporation and applicable law.
VI. Directors and Officers. At the Effective
Time, the directors and the officers of MAAC shall be the
directors and the officers of the Surviving Corporation;
each such director and officer shall hold office until his
resignation or removal, in accordance with the Charter and
Bylaws of the Surviving Corporation and applicable law.
VII. Effect of Merger. At the Effective Time, the
Merger shall have the effect set forth in the GBCC and the
TBCA.
VIII. Further Assurances. Each of the Constituent
Corporations shall use their best efforts to take action and
to do all things necessary in order to consummate and make
effective the actions contemplated in this Agreement and
Plan of Merger. If at any time the Surviving Corporation,
or its successors or assigns, shall consider to be advised
that any further assignments or assurances in law or any
other acts are necessary or desirable to (a) vest, perfect
or confirm, of record or otherwise, in the Surviving
Corporation its rights, title or interest in, to or under
any of the rights, properties or assets of FDC acquired or
to be acquired by the Surviving Corporation as a result of,
or in connection with, the merger, or (b) otherwise carry
out the purposes of this Agreement and Plan of Merger, FDC
and its proper officers and directors shall be deemed to
have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such proper
deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the
purposes of this Agreement and Plan of Merger, and the
proper officers and directors of the Surviving Corporation
are fully authorized in the name of FDC or otherwise to take
any and all such action.
IX. Capital Stock. At the Effective Time:
(1) Each share of Common Stock of FDC
(other than any dissenting shares), without any action on
the part of the holder thereof, shall be converted into the
right to receive six hundred eight thousand eighty-nine
millionths (.608089) shares of MAAC Common Stock (the
"Conversion Ratio"). MAAC shall deliver the shares of MAAC
Common Stock at, or as soon as practicable after, the
Effective Time. Each dissenting share shall be converted
into the right to receive payment from the Surviving
Corporation with respect thereto in accordance with the
provisions of the GBCC. The Conversion Ratio shall be
subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split, or other change
in number of shares of FDC Common Stock or shares of MAAC
Common Stock outstanding. For all purposes, each share of
MAAC Common Stock is agreed to have a value of Twenty-Eight
Dollars ($28.00) per share.
(2) On and after the Effective Date,
the holders of FDC Common Stock shall cease to have any
rights as shareholders of FDC except for the right to
surrender their stock in exchange for payment of the merger
consideration.
(2) Each share of Common Stock of MAAC issued and
outstanding immediately prior to the Effective Time shall
remain issued and outstanding.
X. No Fractional Shares. No fractional shares
of MAAC Common Stock shall be issued pursuant to the Merger.
In lieu of the issuance of any such fractional share of MAAC
Common Stock, cash adjustments will be paid to holders in
respect of any fractional share of MAAC Common Stock that
would otherwise be issuable. The amount of such adjustment
shall be the product of such fraction of a share of MAAC
Common Stock multiplied by $28.00.
XI. Dissenting Shares. Notwithstanding anything
herein to the contrary, shares of FDC Common Stock that are
outstanding immediately prior to the Effective Date and that
are held by shareholders, if any, who are entitled to assert
a right to dissent from the merger and who demand and
validly perfect their rights to receive the "fair value" of
their shares with respect to the merger under the relevant
provisions of the GBCC (the "Dissenting Shares") shall be
entitled solely to the payment of the "fair value" of such
shares in accordance with the provisions of the GBCC; except
that (i) if such demand to receive "fair value" shall be
withdrawn upon the consent of the Surviving Corporation,
(ii) if this Agreement and Plan of Merger shall be
terminated, or the merger shall not be consummated, (iii) if
no demand or petition for the determination of "fair value"
by a court shall have been made or filed within the time
provided in the provisions of the GBCC or (iv) if a court of
competent jurisdiction shall determine that such holder of
Dissenting Shares is not entitled to the relief provided by
the provisions of the GBCC, then the right of such holder of
Dissenting Shares to be paid the "fair value" of his shares
of FDC Common Stock shall cease and, with respect to clauses
(i), (iii) and (iv) above, such Dissenting Shares shall
thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Date, the right
to receive the merger consideration with respect thereto,
without any interest thereon, and with respect to clause
(ii) above, the status of such shareholder shall be restored
retroactively without prejudice to any corporate proceeding
which may have been taken during the interim.
XII. Amendment or Termination. Notwithstanding
shareholder approval of this Agreement and Plan of Merger,
this Agreement and Plan of Merger may be amended or
terminated at any time on or before the Effective Date by
agreement of the Boards of Directors of the Constituent
Corporations, provided that no amendment may be made which
decreases the Conversion Ratio.
XIII. Counterparts. This Agreement and Plan of
Merger may be executed in counterparts each of which shall
be deemed an original and all of which together shall be
considered one and the same agreement. The parties agree
that a facsimile may be executed as an original.
IN WITNESS WHEREOF, the parties hereto, pursuant to the
approval and authority duly given by resolutions adopted by
their respective Boards of Directors and the FDC
shareholders, have duly executed this Agreement and Plan of
Merger as of the day and year first written above.
FLOURNOY DEVELOPMENT COMPANY
By:
Title:
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:
Title:
EXHIBIT 3.9
MID-AMERICA APARTMENT COMMUNITIES, INC.
ARTICLES OF AMENDMENT TO THE AMENDED AND RESTATED CHARTER
Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Corporation"), certifies to the Tennessee
Secretary of State that:
FIRST: The Corporation's Board of Directors recommended
an amendment (the "Amendment") to the Corporation's Amended
and Restated Charter (the "Charter") to increase the number
of authorized shares of the Corporation's Common Stock,
$.01 par value per share (the "Common Stock") from 20
million shares to 50 million shares, to the Corporation's
shareholders pursuant to a proxy statement dated October 13,
1997;
SECOND: The Corporation's common and preferred
shareholders approved the Amendment at a special
shareholders meeting duly called and held pursuant to
Tennessee law and the Corporation's bylaws on November 14,
1997, as reconvened following adjournment on December 12,
1997;
THIRD: Section 6 is hereby amended by deleting the
first sentence contained in Section 6 and, in its place,
inserting the following:
6. Authorized Capital Stock. The total number of
shares of stock which the Corporation has authority to
issue is fifty million (50,000,000) shares of Common
Stock, $.01 par value per share, and twenty million
(20,000,000) shares of Preferred Stock, $.01 par value
per share.
FOURTH: This Amendment shall be effective at the time
the Tennessee Secretary of State accepts this Amendment for
filing.
IN WITNESS WHEREOF, MID-AMERICA APARTMENT COMMUNITIES,
INC. has caused these presents to be signed in its name and
on its behalf by its Secretary on this the 15th day of
December 1997.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By: /s/ Lynn A. Johnson
Title: Lynn A. Johnson, Secretary
[front of certificate]
COMMON STOCK COMMON STOCK
[ Logo of MAC ]
Number Shares
MA
Incorporated Under the Laws This Certificate is transferrable in
of the State of Tennessee Birmingham, AL or New York,NY
CUSIP 59522J 10 3
See reverse for certain definitions
MID-AMERICA APARTMENT COMMUNITIES, INC.
This certifies that
is the owner of
fully paid and non-assessable shares of the 8 7/8% Series B Cumulative
Preferred Stock Liquidation Preference $25 per share of
MID-AMERICA APARTMENT COMMUNITIES, INC. (the "Corporation")
transferrable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are issued and shall
be held subject to all of the provisions of the Charter of the Corporation,
as amended and restated, and its Bylaws, as amended, to all of which
the holder, by acceptance hereof assents. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal and the facsimile signature
of its duly authorized officers.
Dated:
[Facsimile Signature]
ATTEST: Secretary and Treasurer
[Facsimile Signature]
Chairman and Chief Executive Officer
Countersigned and registered:
AMSOUTH BANK
Transfer Agent and Registrar
By:
Authorized Signature
[reverse of certificate]
MID-AMERICA APARTMENT COMMUNITIES, INC.
To preserve the qualification of the company as a "real estate
investment trust" under the internal revenue code of 1986, as amended,
under the company's charter transfer of the shares represented hereby
is restricted and may be stopped if a person or group of persons directly
or through the operation of certain attribution rules would own in excess
of 9.9% of the outstanding stock of the company after the transfer.
The company may require evidence of a proposed transferee's
status and ownership interest before permitting any transfer and may
redeem any shares held in violation of the preceding paragraph.
The company will furnish to any shareholder without charge a full
statement of the transfer restrictions upon request made to the
secretary of the company at its principal office. The shares represented
hereby are subject to all of the provisions of the charter and bylaws
of the corporation, each as amended from time to time, to all of which the
holder by acceptance hereof assents. The corporation will furnish to
any shareholder, upon request and without charge, a full statement
of the designations, relative rights, preferences and limitations of the
shares of each class authorized to be issued, as well as variations
in the rights, preferences and limitations determined for each series
of a class, so far as the same has been determined by the Board of
Directors under its authority.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws and regulations:
TEN COMM - as tenants in coUNIF GIFT MIN ACT _______Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act _______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
Please print or typewrite name and address including postal
zip code of assignee
shares
represented by this Certificate, and do hereby irrevocably constitute
and appoint ____________________________________________________
attorney to transfer the said shares on the books of the Corporation
before power of substitution and the premises.
Date:__________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature Guaranteed:
The signatures should be guaranteed by an eligible
guarantor institution (Banks,Stockbrokers,Savings
and Loan Associations and Credit Unions with
members; approved signature guarantee medallion
program), pursuant to S.E.C. Rule 17Ad-15.
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
BETWEEN MID-AMERICA APARTMENT COMMUNITIES, INC.
AND GEORGE E. CATES
AGREEMENT effective February 4, 1994, by and between
Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Company"), and George E. Cates (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company is a self-administered and self-
managed equity real estate investment trust which has been
formed to make investments in multifamily residential
properties (the "Properties") and to otherwise carry on the
management, marketing, acquisition and development
activities formerly carried on by The Cates Company; and
WHEREAS, the Company desires to employ the Executive to
devote full time to the business of the Company (including,
without limitation, executive management of the Company and
its Properties) and to serve as the President and Chief
Executive Officer (the "CEO") of the Company; and
WHEREAS, the Executive desires to be so employed on the
terms and subject to the conditions hereinafter stated.
NOW, THEREFORE, in consideration of the premises and
mutual obligations hereinafter set forth the parties agree
as follows:
A. Employment. The Company shall employ the
Executive, and the Executive agrees to be so employed, in
the capacity of the President and CEO of the Company to
serve for the Term hereof, subject to earlier termination as
hereinafter provided.
B. Term. The term of the Executive's employment
hereunder (the "Term") shall be for a period of five years,
commencing on February 4, 1994, and continuing until
February 3, 1999, unless terminated earlier as provided
herein.
C. Services. The Executive shall devote
substantially all of his time and attention and best efforts
during normal business hours to the Company's affairs.
Specifically, the Executive shall have complete senior
management authority and responsibility with respect to the
day to day operations and long term management of the
Company and its Properties, as well as implementation of the
long range growth strategy of the Company, consistent with
directions from the Board of Directors. He shall have full
authority and responsibility, subject to the general
direction, approval and control of the Company's Board of
Directors, for formulating policies and administering the
Company and its Properties in all respects. He shall have
the authority to hire and fire Company personnel, to retain
consultants when he deems necessary to implement the Company
policies, to execute contracts on behalf of the Company in
the ordinary course of business and to negotiate for and
cause the Company to acquire new Properties at the direction
of the Board of Directors.
D. Compensation. During the Term, the Company
shall pay the Executive for his services an annual base
salary of Two Hundred and Twenty-Five Thousand Dollars
($225,000.00), to be paid in semi-monthly payments of Nine
Thousand Three Hundred Seventy-Five Dollars ($9,375.00),
such base salary subject to any increases in base
compensation as approved by the Compensation Committee of
the Company's Board of Directors (the "Compensation
Committee").
In addition, the Company may from time to time pay the
Executive other incentive compensation, including but not
limited to stock options or restricted stock, in accordance
with rules and criteria established by the Compensation
Committee. Such criteria may include, but not be limited
to, the growth in Funds from Operations per Unit and share
of Common Stock and/or performance goals.
E. Benefits. The Company agrees to provide the
Executive with the following benefits:
(1) Insurance. The Company shall provide the
Executive with and pay the cost of Group Life and Health
Insurance in amounts established by the Compensation
Committee.
(2) Vacation. The Executive shall be entitled
each year to a vacation, during which time his compensation
shall be paid in full. The time allotted for such vacation
shall be four (4) weeks.
(3) Employee Benefits. This Agreement shall
not be in lieu of any rights, benefits and privileges to
which the Executive may be entitled as a management level
employee of the Company, including but not limited to any
retirement, pension, profit-sharing, insurance, hospital or
other plans which may now be in effect or which may
hereafter be adopted. The Executive shall have the same
rights and privileges to participate in such plans and
benefits as any other management level employee during the
Term.
F. Expenses. The Company recognizes that the
Executive will have to incur certain out-of-pocket expenses,
including but not limited to travel expenses, related to his
services and the Company's business and the Company agrees
to reimburse the Executive for all reasonable expenses
necessarily incurred by him in the performance of his duties
upon presentation of a voucher or documentation indicating
the amount and business purposes of any such expenses.
G. Termination in Case of Death or Disability.
In case of the Executive's death or permanent disability
(defined hereby as complete physical or mental inability,
confirmed by a licensed physician, to perform the services
described in Section 3 above that continues for a period of
one hundred twenty (120) consecutive days), the Company may
elect to terminate the Executive pursuant to the terms of
Section 10.
H. Definitions. For purposes of this Agreement,
the following terms shall have the following definitions:
(1) "Voluntary Termination" means the
Executive's voluntary termination of his employment
hereunder, which may be affected by the Executive's giving
the Board 90 days written notice of the Executive's desire
to terminate his employment or the Executive's failure to
provide substantially all the services described in Section
3 hereof for a period greater than two (2) consecutive weeks
by reason of the Executive's voluntary refusal to perform
such services. Notwithstanding the foregoing, if the
Executive gives notice of Voluntary Termination and, prior
to the expiration of the 90-day notice period, the Executive
voluntarily refuses or fails to provide substantially all
the services described in Section 3 hereof for a period
greater than two consecutive weeks, the Voluntary
Termination shall be deemed to be effective as of the date
on which the Executive so ceases to carry out his duties.
For purposes of this Section 8, voluntary refusal to perform
services shall not include taking vacation otherwise
permitted in accordance with Section 5(b) hereof, the
Executive's failure to perform services on account of his
illness or the illness of a member of his immediate family,
provided such illness is adequately substantiated at the
reasonable request of the Company or any other absence from
service with the written consent of the Board.
(2) "Termination Without Cause" means the
termination of the Executive's employment by the Company for
any reason other than Voluntary Termination or Termination
With Cause.
(3) "Termination With Cause" means the
termination of the Executive's employment by act of the
Board for any of the following reasons:
(i) the Executive's conviction of a
crime involving some act of dishonesty
or moral turpitude (specifically
excepting simple misdemeanors not
involving acts of dishonesty and all
traffic violations);
(ii) the Executive's theft,
embezzlement, misappropriation of or
intentional and malicious infliction of
damage to the Company property or
business opportunity;
(iii) the Executive's intentional
and material breach of the
noncompetition covenant in Section 11
hereof;
(iv) the Executive's continuous neglect
of his duties hereunder or his
continuous failure or refusal to follow
any reasonable, unambiguous duly adopted
written direction of the Board or any
duly constituted committee thereof that
is not inconsistent with the description
of the Executive's duties set forth in
Section 3 above; and
(v) the Executive's abuse of alcohol,
drugs or other substances, or his
engaging in other deviant personal
activities in a manner that, in the
reasonable judgment of the Board,
adversely affects the reputation,
goodwill or business position of the
Company.
(4) "Involuntary Termination" means conduct on
the part of the Company that constitutes continuous and
material interference by the Company with the Executive's
performance of his duties as set forth in Section 3 hereof
or the intentional or material breach by the Company of this
Agreement.
I. Voluntary Termination; Termination With
Cause. If the Executive shall cease being an employee of
the Company on account of a Voluntary Termination or shall
suffer a Termination With Cause, then the Executive shall
not be entitled to any compensation after the effective date
of such Voluntary Termination or Termination With Cause
(except compensation accrued but unpaid on the date of such
event). In the event of such Voluntary Termination or
Termination With Cause, the Executive shall continue to be
subject to the noncompetition covenant contained in Section
11 hereof for the remainder of the five-year period from the
date of execution of the Agreement.
J. Death or Disability; Termination Without
Cause; or Involuntary Termination. If the Executive shall
suffer a death, disability, Involuntary Termination or a
Termination Without Cause, then the Company shall pay the
Executive cash compensation in a lump sum equal to the
lesser of one year's base salary or the amount which may be
deducted by the Company pursuant to Section 280G of the
Internal Revenue Code.
K. Noncompetition. For five years from the
execution of the Agreement, the Executive shall not, other
than in his capacity as officer and director of the Company,
directly or indirectly, for his own account or for the
account of others, either as an officer, director,
stockholder, owner, partner, promoter, employee, consultant,
advisor, agent, manager or in any other capacity, engage in
the acquisition, development, operation, management, leasing
or landscaping of any multifamily community. Such
prohibition extends to all multifamily communities, wherever
located, during the Term of the Executive's employment and
to multifamily properties within thirty (30) miles of any
one of the Properties after termination of the Agreement.
In the event of Termination for Cause or Voluntary
Termination, the Executive shall continue to be restricted
by this Section 11 for the remainder of the five-year
period.
The Executive agrees that damages at law for violation
of the restrictive covenant contained herein would not be an
adequate or proper remedy to the Company, and that should
the Executive violate or threaten to violate any of the
provisions of such covenant, the Company, its successors or
assigns, shall be entitled to obtain a temporary or
permanent injunction against Executive in any court having
jurisdiction over the person and the subject matter,
prohibiting any further violation of any such covenants.
The injunctive relief provided herein shall be in addition
to any award of damages, compensatory, exemplary or
otherwise, payable by reason of such violation.
Furthermore, the Executive acknowledges that this
Agreement has been negotiated at arms length by the parties,
neither being under any compulsion to enter into this
Agreement, and that the foregoing restrictive covenant does
not in any respect inhibit his ability to earn a livelihood
in his chosen profession without violating the restrictive
covenant contained herein. The Company by these presents
has attempted to limit the Executive's right to compete only
to the extent necessary to protect the Company from unfair
competition. The Company recognizes, however, that
reasonable people may differ in making such a determination.
Consequently, the Company agrees that if the scope or
enforceability of the restrictive covenant contained herein
is in any way disputed at any time, a court or other trier
of fact may modify and enforce the covenant to the extent
that it believes to be reasonable under the circumstances
existing at the time.
L. Notices. All notices or deliveries
authorized or required pursuant to this Agreement shall be
deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified,
return receipt requested, postage prepaid, addressed to the
parties at the following addresses or to such other
addresses as either may designate in writing to the other
party:
To the Company: Mid-America Apartment
Communities, Inc.
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
To the Executive: George E. Cates
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
M. Entire Agreement. This Agreement contains
the entire understanding between the parties hereto with
respect to the subject matter hereof and shall not be
modified in any manner except by instrument in writing
signed, by or on behalf of, the parties hereto; provided,
however, that any amendment or termination of the covenant
of noncompetition in Section 11 must be approved by a
majority of the Independent Directors of the Company (as
defined in the Company's Amended and Restated Charter).
This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties
hereto.
N. Arbitration. Any claim or controversy
arising out of, or relating to, this Agreement or its
breach, shall be settled by arbitration in accordance with
the governing rules of the American Arbitration Association.
Judgment upon the award rendered may be entered in any court
of competent jurisdiction.
O. Applicable Law. This Agreement shall be
governed and construed in accordance with the laws of the
State of Tennessee.
P. Assignment. The Executive acknowledges that
his services are unique and personal. Accordingly, the
Executive may not assign his rights or delegate his duties
or obligations under this Agreement. The Executive's rights
and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Executive's
successors and assigns.
Q. Headings. Headings in this Agreement are for
convenience only and shall not be used to interpret or
construe its provisions.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the 4th day of February, 1994.
Mid-America Apartment
Communities, Inc.
By: _______________________________
____/S/ George E. Cates
George E. Cates
EXHIBIT 10.3
MID-AMERICA APARTMENT COMMUNITIES, INC.
Second Amended and Restated
1994 Restricted Stock and Stock Option Plan
I. Purposes of the Plan
The purposes of the Mid-America Apartment Communities,
Inc. 1994 Restricted Stock and Stock Option Plan (the
"Plan") are to advance the interests of the Company, to
increase stockholder value by providing its executive
officers and other key employees with a proprietary interest
in the growth and performance of the Company and with
incentives for continued service with and rewards for
outstanding service to the Company, its subsidiaries and/or
its affiliates, and to provide the Company and the Operating
Partnership (hereinafter defined) with an additional means
to attract and retain qualified executive officers and other
key employees. The Plan will provide for the issuance of up
to 1,000,000 shares of Common Stock and/or units of limited
partnership interest in the Operating Partnership redeemable
for shares of Common Stock, to the executive officers and
key employees of the Company and its subsidiaries and
affiliates. To this end, the Compensation Committee of the
Company's Board of Directors (the "Committee") may grant
stock options and restricted securities awards to executive
officers and other key employees of the Company, its
subsidiaries and/or its affiliates, on the terms and subject
to the conditions set forth in this Plan.
I. Definitions
As used in the Plan, the following terms shall have the
meanings set forth below:
A. "Award" means any form of Stock Option or
Restricted Securities granted under the Plan, whether
singly, in combination, or in tandem, to a Participant by
the Committee pursuant to such terms, conditions,
restrictions, and/or limitations, if any, as the Committee
may establish.
B. "Award Agreement" means a written agreement
setting forth the terms of an Award.
C. "Board" means the Board of Directors of the
Company.
D. "Class A Common Unit" means a Class A Common
Unit of limited partnership interest in the Operating
Partnership.
E. "Code" means the Internal Revenue Code of
1986, as amended. References to any provision of the Code
shall be deemed to include successor provisions thereto and
rules and regulations thereunder.
F. "Committee" means the Compensation
Committee of the Board, each member of which, for purposes
of this Plan, shall be a disinterested person within the
meaning of Exchange Act Rule 16b-3.
G. "Common Stock" means the Common Stock of the
Company, $.01 par value.
H. "Company" means Mid-America Apartment
Communities, Inc., its subsidiaries and its affiliates.
I. "Disability" means the inability to
substantially perform the usual duties of the person's
occupation by reason of a medically determinable physical or
mental impairment which can be expected to be of long,
continued and indefinite duration as determined by the
Committee.
J. "Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time. References to
any provision of the Exchange Act shall be deemed to include
successor provisions thereto and rules and regulations
thereunder.
K. "Fair Market Value," unless otherwise
required by an applicable provision of the Code, as of any
date, means the reported last sale price of the Common Stock
on such date as reported on the New York Stock Exchange
Consolidated Tape.
L. "Incentive Stock Option" ("ISO") means any
Stock Option intended to be, and designated and qualifying
as, an "incentive stock option" within the meaning of
Section 422 of the Code.
M. "Non-Qualified Stock Option" means any Stock
Option awarded under this Plan that is not intended to be an
Incentive Stock Option or that fails to meet the
requirements applicable to an Incentive Stock Option.
N. "Officer" means a person who is considered
to be an officer of the Company under Securities Exchange
Act Rule 16a-1(f).
O. "Operating Partnership" means Mid-America
Apartments, L.P., a Tennessee limited partnership, of which
the Company is the sole general partner.
P. "Option" or "Stock Option" means a right
granted pursuant to the Plan to purchase shares of Common
Stock, and includes the terms Incentive Stock Option and Non-
Qualified Stock Option.
Q. "Option Price" or "Exercise Price" means
the price per share at which Common Stock may be purchased
upon the exercise of an Option.
R. "Participant" means any individual to whom
an Award has been granted by the Committee under either
Plan.
S. "Restricted Securities" means shares of
Common Stock or Class A Common Units issued pursuant to a
Restricted Securities Award which are subject to such
conditions, including, without limitation, risks of
forfeiture, as may be determined by the Committee and
specified in the Award Agreement.
T. "Retirement" means retirement from active
employment under a retirement plan of the Company, any
subsidiary or affiliate, or pursuant to an employment
agreement with any of the aforementioned, or termination of
employment at or after age 55 under circumstances which the
Committee, in its sole discretion, deems equivalent to
retirement.
U. "Termination of Employment" means the
termination of a Participant's active employment with the
Company which is not deemed to be a Retirement or a
termination due to a Disability.
II. Administration
A. The Plan shall be administered and
interpreted by the Committee.
B. The Committee shall have the authority to
(a) establish such rules and regulations as it deems
necessary for the proper operation and administration of the
Plan; (b) select the persons to receive Awards under the
Plan; (c) determine the form of an Award, or combinations
thereof, and whether such Award is to operate on a tandem
basis and/or in conjunction with or apart from other awards
made by the Company, either within or outside of this Plan;
(d) determine the number of shares of Common Stock or Class
A Common Units to be covered by each such Award granted
hereunder; (e) determine the terms and conditions, not
inconsistent with the terms of this Plan, of any Award
granted hereunder (including, but not limited to, any
restriction or limitation on transfer, any vesting schedule
or acceleration thereof, and any forfeiture provisions or
waiver thereof), regarding any Award and the shares of
Common Stock and/or Class A Common Units relating thereto,
based on such factors as the Committee shall determine, in
its sole discretion; (f) determine whether Common Stock or
Class A Common Units payable with respect to an Award under
this Plan shall be deferred, either automatically or at the
election of the Participant; and (g) make any other
determination or take any action that the Committee deems
necessary or desirable for the administration of the Plan.
C. Unless authority is specifically reserved
to the Board under the terms of the Plan, the Company's
Charter or By-Laws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan.
The Committee may delegate to officers or managers of the
Company or any subsidiary the authority, subject to such
terms as the Committee shall determine, to perform
administrative functions and, with respect to Participants
not subject to Section 16 of the Exchange Act, to perform
such other functions as the Committee may determine, to the
extent permitted under Rule 16b-3 and applicable law. Any
decision, interpretation or other action made or taken in
good faith by or at the direction of the Company, the Board,
or the Committee (or any of its members pursuant to any
authority duly delegated to any such member) arising out of
or in connection with the Plan shall be within the absolute
discretion of all or any of them, as the case may be, and
shall be final, binding and conclusive on the Company and
all employees and Participants and their respective
beneficiaries, heirs, executors, administrators, successors
and assigns.
III. Eligibility
Officers and other key employees (including those who
may also be Directors of the Company) of the Company and its
present and future subsidiaries and affiliates, including
the Operating Partnership, who are not members of the
Committee and who are responsible for or contribute to the
management, growth and profitability of the business of the
Company, are eligible to receive Awards under the Plan.
IV. Shares Available for Awards
A. The maximum number of shares of Common
Stock of the Company that may be used in conjunction with
the grant of Awards under the Plan is 1,000,000. In
determining the number of shares available from time to time
for Awards under the Plan, each Class A Common Unit covered
by any Award shall be considered the equivalent of one share
of Common Stock, and the Company shall not grant awards
involving Class A Common Units in excess of the remaining
number of shares of Common Stock available under the Plan.
B. Shares of stock which are attributable to
Awards which expire or are otherwise terminated, cancelled,
surrendered or forfeited, during a calendar year, are
available for issuance or use in connection with future
Awards, during the calendar year in which they expire or
otherwise become available, provided, however, that, if any
such shares could not again be available for Awards to a
Participant who is subject to Section 16 of the Exchange Act
under applicable share counting requirements of Rule 16b-3,
such shares shall be available exclusively for Awards to
Participants who are not subject to Section 16.
C. Shares of Common Stock to be issued under
the Plan may be authorized and unissued shares of Common
Stock, treasury stock or a combination thereof.
D. In the event of a merger, consolidation,
reorganization, recapitalization, stock split, stock
dividend, other extraordinary dividend or other changes in
corporate structure or capitalization affecting the Common
Stock, the Committee may make appropriate adjustment in the
number of shares or number and kind of other securities
subject to options, rights and other Awards granted under
the Plan, and/or the exercise price and other terms and
conditions of Awards or appropriate adjustment in the
maximum number of shares referred to in Section 5 of the
Plan, as the Committee may determine to be necessary or
appropriate in order to prevent dilution or enlargement of
the rights of Participants.
V. Awards Under the Plan
A. Stock Options. The Committee may grant
Incentive Stock Options ("ISO"), Non-Qualified Stock Options
or both to purchase shares of Common Stock from the Company
to such Officers and other key employees in such amounts and
subject to such terms and conditions, as the Committee shall
determine in its sole discretion, subject to the provisions
of the Plan, provided, however, that in no event may any
Stock Option be granted hereunder after the expiration of 10
years after the date of the Plan. The automatic or
discretionary grant of "reload" Stock Options is
specifically authorized.
In the case of ISO's, the terms and conditions of
such grants, including the exercise price of the purchase of
Common Stock, shall be subject to and comply with the
requirements of Section 422 of the Code, as from time to
time amended, and any implementing regulations.
The exercise price at which shares of Common Stock
may be purchased pursuant to the grant of an Option shall be
fixed by the Committee at the time of grant; however, the
price of an ISO must be equal to or greater than the Fair
Market Value of the shares of Common Stock covered thereby.
The exercise price of an ISO granted to any Participant who
owns shares of Common Stock possessing more than 10% of the
total combined voting power of all outstanding shares of
Common Stock of the Company must be at least equal to 110%
of the fair market value of the shares of Common Stock on
the date of grant. Options granted under the Plan will not
be ISOs to the extent that the Fair Market Value of the
shares of Common Stock with respect to which ISOs first
become exercisable in any year exceeds $100,000.
B. Restricted Securities Awards. The
Committee may grant Restricted Securities Awards ("RSAs") to
such Officers and other key employees in such amounts and
subject to such terms and conditions as the Committee may
determine in its sole discretion, including such
restrictions on transferability and other restrictions,
vesting or other provisions as the Committee may impose,
which restrictions may lapse separately or in combination at
such times, under such circumstances, in such installments,
or otherwise, as the Committee shall determine.
Unless otherwise determined by the Committee at
the time of an Award, the holder of an RSA shall have the
right to vote the restricted securities and to receive
dividends or distributions thereon, unless and until such
restricted securities are forfeited.
In the event all or any of the shares of Common
Stock or Class A Common Units subject to RSA are forfeited
due to failure to meet or comply with restrictions imposed
by the Committee at the time of grant prior to the lapse of
such restrictions, the Company shall repay to the
Participant (or the Participant's estate) any cash amount
paid by the Participant for such forfeited shares.
C. Tandem and Substitute Awards. Awards
granted under the Plan may, in the discretion of the
Committee, be granted either alone or in addition to, in
tandem with, or in substitution for, any other Award granted
under the Plan or any award granted under any other plan of
the Company, any Subsidiary or Affiliate, or any business
entity to be acquired by the Company or a Subsidiary or
Affiliate, or any other right of a Participant to receive
payment from the Company or any Subsidiary or Affiliate. If
an Award is granted in substitution for another Award or
award, the Committee shall require the surrender of such
other Award or award in consideration for the grant of the
new Award. Awards granted in addition to or in tandem with
other Awards or awards may be granted either as of the same
time as or a different time from the grant of such other
Awards or awards.
VI. Award Agreements
Awards under the Plan shall be evidenced by an
agreement approved by the Committee that sets forth the
terms, conditions and limitations of an Award. The
Committee may amend agreements theretofore entered into,
either prospectively or retroactively, including, but not
limited to, the acceleration of vesting of or lapse of
restrictions on an Award and the extension of time to
exercise an Award, except that, no such amendment shall
affect the Award in a materially adverse manner without the
consent of the Participant (except for an amendment made to
cause the Plan to qualify for an exemption provided by Rule
16b-3).
VII. Miscellaneous Provisions Related to Participants
A. The grant of an Award shall not be
construed as giving a Participant the right to be retained
in the employ of the Company. The Company may at any time
dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.
No Participant or other person shall have any claim to be
granted any Award, and there is no obligation for uniformity
of treatment of Participants or holders or beneficiaries of
Awards.
B. Except as may be otherwise provided under
Section 6.2, no Award granted under the Plan, unless
otherwise provided in the Award Agreement, shall entitle the
holder of such Award to any dividend, voting or other right
of a stockholder unless and until the date of issuance
under the Plan of the shares that are subject to such Award.
C. The purchase price of the shares of Common
Stock as to which an Option is exercised shall be paid in
cash or by check, except as otherwise hereinafter provided,
at the time of exercise. In addition, in its sole
discretion, the Committee may determine that it is an
appropriate method of payment for grantees to pay for any
shares subject to an option by (i) delivering certificates
for unrestricted shares of Common Stock having a value equal
to the Exercise Price of the Options being exercised, or
(ii) delivering a properly executed exercise notice together
with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of proceeds for
the sale of shares of Common Stock or margin credit extended
on shares of Common Stock (including the Common Stock to be
acquired pursuant to the exercise of Options) to pay the
purchase price. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with
one or more brokerage firms. The value of Company Common
Stock surrendered in payment of the Exercise Price shall be
its Fair Market Value, determined pursuant to Section 2.10,
on the date of exercise. Upon receipt of a notice of
exercise of a Stock Option and upon payment of the Exercise
Price, the Company shall promptly deliver to the Participant
a certificate or certificates for the shares of Common Stock
purchased, without charge to him or her for issue or
transfer tax. The Committee, in its sole discretion, may
form time to time permit the method of exercising Options
known as pyramiding or "cashless exercise" (that is, the
automatic application of shares received upon the exercise
of a portion of an Option to satisfy the exercise price for
additional portions of the Option).
D. A Participant may be required to pay to the
Company, and the Company shall have the right to deduct from
all amounts paid to a Participant (whether under the Plan or
otherwise), any taxes required by law to be paid or withheld
in respect of Awards hereunder to such Participant. The
Committee may provide for additional cash payments to
holders of Awards to defray or offset any tax arising from
the grant, vesting exercise or payment of any Award or, at
the election of the holder of the Award, the Committee may
withhold shares or accept the transfer of shares to the
Company, in such amounts as are equivalent to the Fair
Market Value of the withholding obligations.
E. If the Committee determines that such
action is advisable, the Company may, or may cause the
Operating Partnership to, assist any Participant in
obtaining financing from the Company or from any bank or
other third party, on such terms as are determined by the
Committee, and in such amount as is required to accomplish
the purposes of the Plan, including, but not limited to,
permitting the exercise of an Award and/or paying any taxes
in respect thereof to the extent permitted by law. Such
assistance may take any form that the Committee deems
appropriate, including, but not limited to, a direct loan
from the Company or the Operating Partnership, a guarantee
of the obligation by the Company or the Operating
Partnership, or the maintenance by the Company or the
Operating Partnership of deposits with such bank or third
party.
F. Awards, and any right that comes within the
general definition of "derivative security" of Rule 16a-1(c)
under the Exchange Act, shall not be assignable or
transferable by a Participant except by will or the laws of
descent and distribution (or pursuant to a beneficiary
designation authorized under Section 8.7), and during the
Award holder's lifetime, such Awards and rights shall be
exercisable only by such holder or such holder's duly
appointed guardian or legal representative.
G. Each Participant may file and maintain with
the Company a written designation of one or more persons as
the beneficiary or beneficiaries who shall be entitled to
receive the Award or related payment payable under the Plan
upon the Participant's death. If no such designation is in
effect at the time of a Participant's death, or if no
designated beneficiary survives the Participant or if such
designation conflicts with the law, the Participant's estate
shall be entitled to receive the Award or related payment,
if any, payable under the Plan upon the Participant's death.
VIII. Governing Law
The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of
the State of Tennessee and applicable federal law.
IX. Severability
If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Participant or Award under any law
deemed applicable by the Committee, such provision or Award
shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed
amended, in the determination of the Committee, without
materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction,
Participant or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
X. Unfunded Plan
The Plan is intended to constitute an "unfunded" plan.
Unless otherwise determined by the Committee, the Plan shall
be unfunded and shall not create (or be construed to create)
a trust or a separate fund or funds. To the extent that any
person acquires a right to receive payments from the Company
pursuant to an Award, such right (unless otherwise
determined by the Committee) shall be no greater than the
right of any unsecured general creditor of the Company.
XI. Rule 16b-3 Compliance
A. Unless a Participant could otherwise
transfer an equity security, derivative security, or shares
issued upon exercise of a derivative security granted under
the Plan without incurring liability under Section 16(b) of
the Exchange Act, (i) an equity security issued under the
Plan, other than an equity security issued pursuant to the
exercise of a derivative security granted under the Plan,
shall be held for at least six months from the date of
acquisition, and (ii) at least six months shall elapse from
the date of acquisition of a derivative security to the date
of disposition of the derivative security (other than upon
exercise or conversion) or disposition of any underlying
equity security issued pursuant to the exercise or
conversion of such derivative security.
B. It is the intent of the Company that this
Plan comply in all respects with applicable provisions of
Rule 16b-3 and Rule 16a-1(c)(3) under the Exchange Act in
connection with any grant of Awards to or other transaction
by a Participant who is subject to Section 16 of the
Exchange Act (except for transactions exempted under
alternative Exchange Act Rules or acknowledged in writing to
be non-exempt by such Participant). Accordingly, if any
provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 or Rule 16a-
1(c)(3) as then applicable to any such transaction, such
provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule
16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b).
XII. Effective Date and Term of Plan
A. The Plan is an amendment and restatement of
the 1994 Restricted Stock and Stock Option Plan of the
Company originally adopted by the Company's shareholder on
January 26, 1994. The Plan became effective on February 4,
1994.
B. The Plan shall remain in effect until
January 31, 2004, unless sooner terminated by the Board.
After this date, no further Awards may be granted but
previously granted Awards shall remain outstanding in
accordance with their applicable terms and conditions, as
stated in the Award Agreement, and conditions of the Plan.
XIII. Amendment and Termination of the Plan
A. The Plan may be amended by the Board in any
respect, without the consent of stockholders or
Participants, except that any such amendment (although
effective when made) shall be subject to the approval of the
Company's stockholders within one year after such Board
action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Common
Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to subject any other
amendment to the Plan to stockholders for approval. In
addition, no amendment may materially impair the rights of a
Participant under any Award previously granted under the
Plan without the consent of such Participant, unless
required by law.
B. The Plan may be terminated at any time by
the Board. No further Awards may be made under the Plan
after termination, but termination shall not affect the
rights of any Participant under, or the authority of the
Committee with respect to, any grants or awards made prior
to termination.
EXHIBIT 10.9
Mid-America Apartment Communities, Inc.
Mid-America Apartments, L.P.
Revolving Credit Agreement
(Amended and Restated)
AmSouth Bank
Administrative Agent
March 16, 1998
Contents
I. LOAN TERMS 1
1.1. The Loans 1
1.2. Borrowings 2
1.3. Commitments 2
1.4. Notes 2
1.5. Maximum amounts of Loans and Borrowings 2
1.6. Minimum Borrowing size 2
1.7. Swing Line Facility 2
1.8. Letters of Credit 4
1.9. Drafts under a Letter of Credit 5
1.10. Maturity of Loans 5
1.11. Fees 5
1.12. Interest Periods 7
1.13. Interest 7
1.14. Maximum Eurodollar Borrowings 8
1.15. Borrowers' termination of Borrowing Rights 8
1.16. Voluntary and Mandatory Prepayments 8
1.17. Payments generally 10
1.18. Funding losses 11
1.19. Pro-rata treatment 11
1.20. Whole dollars 12
II. BORROWINGS AND CONVERSION PROCEDURES 12
2.1. Borrowing Notices 12
2.2. Funding of Loans 12
2.3. Lender's failure to fund 13
2.4. Conversions 13
2.5. Defective notices 14
III. CONDITIONS 15
3.1. Conditions to effectiveness
of this Agreement 15
3.2. Conditions to Borrowings 16
3.3. Conditions to Maintaining Loans 17
3.4. Conditions to Release
of Mortgaged Property 18
3.5. Conditions to Addition of Property 19
IV. Representations and warranties 21
4.1. Corporate existence and power 21
4.2. Corporate, partnership and governmental
authorization; non-contravention 22
4.3. Binding effect 22
4.4. Financial information 22
4.5. No material adverse change 22
4.6. Litigation 22
4.7. Taxes 23
4.8. Compliance with ERISA 23
4.9. Not an investment company
or public utility holding company 23
4.10. Margin Regulations 23
4.11. Title to assets 23
4.12. Contracts or restrictions affecting
Borrowers 24
4.13. No default 24
4.14. Patents and Trademarks 24
4.15. Hazardous Substances 24
4.16. Real Estate Investment Trust 24
4.17. Subsidiaries 24
V. Affirmative Covenants 25
5.1. Financial information 25
5.2. Maintenance of property;insurance 26
5.3. Compliance with laws 27
5.4. Books and records; payment of Taxes 27
5.5. Notice of Defaults 28
5.6. ERISA events 28
5.7. Use of proceeds 28
5.8. Maintenance of existence; merger;
sale of assets 28
5.9. Right of inspection 29
5.10. Environmental laws 29
5.11. Notice of adverse change in assets 29
5.12. Indemnification 29
5.13. Qualification as a Real Estate Investment
Investment Trust 31
5.14. Ownership of Subsidiaries 31
VI. Negative Covenants of Borrowers 31
6.1. Liens 31
6.2. Sale of Assets 32
6.3. Accounts Receivable from Related Persons 32
6.4. Loans to Officers and Employees 32
6.5. Trademarks and Trade Names 32
6.6. Net Operating Loss 33
6.7. Dividend Payout 33
6.8. Other Financial Covenants 33
6.9. Control 34
6.10. Subsidiary Ownership 34
6.11. Subsidiary Debt 34
VII. Default 34
7.1. Events of Default 34
7.2. Action on Default 39
7.3. Notice of Default 39
VIII. The Administrative Agent 40
8.1. Appointment and authorization 40
8.2. Other conduct 40
8.3. Scope of obligations 40
8.4. Consultation with experts 40
8.5. Liability of Administrative Agent 40
8.6. Indemnification 41
8.7. Successor Administrative Agent 41
8.8. Fees 42
IX. Change in circumstances 42
9.1. Eurocurrency Reserve Requirements 42
9.2. Increased cost or reduced return 42
9.3. LIBOR unavailable or inadequate 44
9.4. Illegal Loans 45
9.5. Termination of suspension 45
9.6. Taxes on payments 45
9.7. Change of Office 47
9.8. Replacement of Lender 47
X. Miscellaneous 48
10.1. Notices 48
10.2. No waivers; remedies cumulative;
integration; survival 48
10.3. Expenses; documentary Taxes 49
10.4. Indemnification 49
10.5. Sharing of set-offs 50
10.6. Amendments and waivers 51
10.7. Successors and assigns 51
10.8. Borrowers' liability 54
10.9. No reliance on Margin Stock collateral 54
10.10. Credit decision 54
10.11. Alabama law 54
10.12. Waiver of jury trial 54
10.13. Venue of Actions 55
10.14. Execution 55
10.15. Survival 55
XI. Definitions and usages 55
11.1. Definitions 55
11.2. Accounting terms and determinations 67
11.3. Miscellaneous usages 67
List of Schedules 68
List of Exhibits 69
Revolving Credit Agreement
This Revolving Credit Agreement is dated as of
March 16, 1998 (this "Agreement") among
Mid-America Apartment Communities, Inc. ("MAAC"),
Mid-America Apartments, L.P. ("Mid-America"),
the financial institutions listed on Schedule 1 as
amended or supplemented from time to time (the
"Lenders"), and
AmSouth Bank, an Alabama banking corporation, as
Administrative Agent for the Lenders, its
successors and assigns (in such capacity, the
"Administrative Agent").
This Agreement is executed in amendment and
restatement of that certain Revolving Credit Agreement
among the Borrowers, the Administrative Agent and
certain lenders, dated November 20, 1997.
The parties, intending to be legally bound,
severally agree
as follows:
I. LOAN TERMS
1.1. The Loans
Each Lender shall make loans ("Loans") to MAAC and
Mid-America, jointly and severally (each a
"Borrower" and together the "Borrowers").
The agreements of the Lenders to make Loans, are
several and not joint.
All Loans shall be made on the terms, and
subject to the conditions, of this Agreement. The
Borrowers may borrow, repay, prepay and reborrow
under this Agreement from the Effective Date until
the Termination Date of the Loans, in an
aggregate principal amount not to exceed, at any one
time outstanding, the lesser of:
the sum of Two Hundred
Million Dollars ($200,000,000.00), or
the Borrowing Base reduced by (a) the
amount of all outstanding Letters of Credit
and (b) the amount of outstanding Advances.
1.2. Borrowings
All Loans to the Borrowers that have
Interest Periods that begin on the same day
and end on the same day shall constitute a
single borrowing ("Borrowing").
1.3. Commitments
A Lender's Commitment as of the date of
this Agreement is the amount shown opposite
its name on Schedule 1; a Lender's Commitment
may be subsequently reduced pursuant to this
Agreement or increased pursuant to a
permitted assignment. As of the date of this
Agreement, the Aggregate Commitment is
$200,000,000.00.
1.4. Notes
The Loans shall be evidenced by promissory
notes of the Borrowers, payable to the order
of each Lender, in the principal amount of
their respective Proportionate Share of the
Aggregate Commitment, and in the form
substantially the same as the copy of the Note
attached hereto as Exhibit A (the "Notes").
The Notes, in addition to evidencing new
indebtedness, also amend, restate, renew and
consolidate certain notes related to the
Mortgaged Property, as explained on Exhibit I
attached hereto.
1.5. Maximum amounts of Loans and Borrowings
(a) No Lender shall make Loans in
an aggregate unpaid principal amount
that exceeds the Lender's Commitment.
Each Borrowing shall consist of Loans made
by the Lenders in proportion to their
respective Commitments.
(b) No Loan shall be made to the Borrowers if,
immediately following the making of the Loan, the
aggregate unpaid principal amount of all Loans to the
Borrowers would exceed the lesser of the Aggregate
Commitment or the Borrowing Base.
1.6. Minimum Borrowing size
Each Borrowing shall be in the principal amount of
$2,000,000 or a larger integral multiple of $500,000.
1.7. Swing Line Facility
(a) The "Swing Line Facility" is being extended
under, and as a component of, the Aggregate Commitment,
and shall be advanced and readvanced by the
Administrative Agent to the Borrowers in accordance
with the provisions of this Agreement hereinafter set
forth, and shall be evidenced by, and payable, together
with interest thereon, in accordance with the
provisions of, the Swing Line Facility Note. The
Borrowers expressly acknowledge and agree that:
1. the Administrative Agent directly
assumes the obligation to fund, and shall have the
sole obligation to fund, 100% of each Advance of
the Swing Line Facility which is made, or required
to be made, in accordance with the provisions of
this Agreement, and
2. the Borrowers shall not have the
right under any fact or circumstance to look to
any other party, including, without limitation,
any other Lender, for the funding of all or any
portion of the Swing Line Facility which is
required to be made in accordance with the
provisions of this Agreement if the Administrative
Agent shall default in doing so, all risk of such
default being assumed in all respects by the
Borrowers.
(b) Subject to satisfaction of the applicable
general terms and conditions set forth in this
Agreement, Advances under the Swing Line Facility will
be available on any day the Administrative Agent is
open for business and on the same day notice is given
by the Borrowers to the Administrative Agent, provided
that any such request by the Borrowers for an Advance
under the Swing Line Facility is received by the
Administrative Agent prior to 1:00 P.M., Birmingham
time, on the date such Advance is requested. The
outstanding principal balance under the Swing Line
Facility may be prepaid, in whole or in part and at any
time, without prior notice to the Administrative Agent
and without payment of penalty or premium. Notice of
prepayments under the Swing Line Facility must be
received by the Administrative Agent prior to 1:00
P.M., Birmingham time, and payment received by the
close of business on the day of notice for the
Borrowers to receive credit for such prepayment that
day. With respect to an Advance under the Swing Line
Facility in excess of $750,000, the Borrowers shall
submit to the Administrative Agent a detailed request
for the Advance in the form attached hereto as Exhibit
B. For an Advance of $750,000 or less under the Swing
Line Facility, the Borrowers shall submit to the
Administrative Agent a written memo requesting such
Advance. Notwithstanding anything to the contrary
contained herein, all controlled advances and payments
automatically generated by the Administrative Agent's
cash management system shall not require any of the
above notices from the Borrowers. The Borrowers shall
notify the Administrative Agent in writing of the
responsible officer, who shall be either the chief
financial officer, the chief executive officer, the
chief operating officer, or the treasurer (the
"Responsible Officer") authorized to request Advances
under the Swing Line Facility on behalf of the
Borrowers.
(c) Upon request of the Administrative Agent,
each of the other Lenders shall within 24 hours of such
request fund their Proportionate Share in each Advance
under the Swing Line; however, the failure of any such
Lender to fund their Proportionate Share of each
Advance under the Swing Line Facility shall not relieve
the Administrative Agent from its obligation under
subparagraph 1.7(a) above to fund the entire Advance.
1.8. Letters of Credit
The Letter of Credit Facility is being extended under,
and as a component of, the Aggregate Commitment. The
Borrowers shall have the right, from time to time, to
request the Administrative Agent to issue one or more
unconditional and irrevocable letters of credit for its
account or a Subsidiary's (each a "Letter of Credit"). The
Borrowers, the Lenders and the Administrative Agent
acknowledge and agree that the Existing Letters of Credit
previously issued by the Administrative Agent for the
account of MAAC shall each constitute a Letter of Credit
hereunder for all purposes. Any request by the Borrowers
for a Letter of Credit shall be subject to the terms and
conditions of this paragraph hereinafter set forth:
(a) Each request for the issuance of a Letter of
Credit shall be in writing, shall state the requested
date of issuance of the Letter(s) of Credit (which
shall be at least five (5) Business Days after the
request is received by the Administrative Agent), shall
state the requested amount of the Letter(s) of Credit
and the purposes for which the Letter(s) of Credit are
requested, shall indicate both the account party and
the beneficiary of the Letter(s) of Credit, and shall
specify the terms of the Letter(s) of Credit (which
terms shall be reasonably satisfactory to the
Administrative Agent).
(b) The aggregate amount of Letters of Credit
outstanding at any one time shall not exceed
$60,000,000.
(c) At no time during the term of the Loans shall
there be more than twenty (20) Letters of Credit in the
aggregate outstanding, unless otherwise agreed to by
Administrative Agent in its sole discretion.
(d) No Letter of Credit shall have an expiration
date beyond the Maturity Date.
(e) The purpose of each Letter of Credit shall be
to provide credit enhancement for tax exempt bond
financing of the Borrowers or a Subsidiary or for such
other purposes as may be acceptable to the
Administrative Agent, which approval shall not be
unreasonably withheld or delayed.
(f) The Administrative Agent shall have the sole
obligation to issue Letter(s) of Credit under this
Agreement, and Borrower shall not have the right under
any fact or circumstance to look to any other party,
including, without limitation, any other Lender, for
the issuance of the Letter(s) of Credit if the
Administrative Agent defaults in doing so, all such
risk of default being assumed by the Borrowers.
(g) Upon written request of a Lender, the
Administrative Agent shall provide a copy of the
Letter(s) of Credit to such Lender.
1.9. Drafts under a Letter of Credit
Any draw honored by the Administrative Agent under a
Letter of Credit shall constitute an automatic Advance at
the Base Rate and shall be evidenced by and payable,
together with interest thereon, in accordance with the
provisions of the Notes. Upon request of the Administrative
Agent, each of the other Lenders shall, not later than 24
hours after such request, fund their respective
Proportionate Share in each such Advance which is made as a
result of a draw under a Letter of Credit.
1.10. Maturity of Loans
Subject to Section 7.2, (Action on Default), and
Section 1.15 (Borrowers' termination of Borrowing Rights),
the unpaid principal amount of each Loan shall be due and
payable on the Maturity Date.
The Borrowing Rights of the Borrowers and the
obligation of the Lenders to extend Loans shall permanently
terminate on the Termination Date.
1.11. Fees
(a) Letter of Credit Fees
The annual fee for the issuance of a Letter
of Credit shall be equal to one and one-quarter percent
(1.25%) per annum multiplied by the face amount of such
Letter of Credit; and any such fee shall be paid
annually in advance for the entire period of time that
such Letter of Credit is outstanding (the "Letter of
Credit Fee"). One-eighth of one percent (.125%) of
each Letter of Credit Fee shall be retained by the
Administrative Agent for its sole account, and the
remaining one and one-eighth percent (1.125%) shall be
shared with the Lenders in accordance with their
respective Proportionate Share. The Borrowers shall
also pay to the Administrative Agent an administrative
fee at the customary rate charged by the Administrative
Agent for the issuance of letters of credit generally.
(b) Commitment Fee
The Borrowers have agreed to pay to the
Lenders a commitment fee (the "Commitment Fee")
pursuant to a separate letter agreement among the
Administrative Agent and the Borrowers. Such payment
is being made in consideration of the agreement of the
Lenders to make funds available to the Borrowers under
the terms and provisions hereof from the Effective Date
until the Termination Date. The Borrowers agree that
this commitment fee is fair and reasonable, considering
the condition of the money market, the creditworthiness
of the Borrowers and the interest rate to be paid for
the Loan.
(c) Facility Fee
The Borrowers shall pay an annual fee, due on
the closing of the Loans and on November 24, 1998 (the
"Facility Fee"). Such payment shall be made in
consideration of the Lenders' agreement to make funds
available to the Borrowers under the terms and
provisions hereof. The Facility Fee due on closing
shall be payable pursuant to a separate letter
agreement between the Administrative Agent and each
Lender. The Facility Fee due on November 24, 1998,
shall be payable to the Lenders in accordance with
their respective Proportionate Share.
(d) Collateral Fee
The Borrowers shall pay to the Administrative
Agent, for the sole benefit of the Administrative
Agent, a fee of $3,500 for each Apartment Community
submitted to the Administrative Agent for inclusion as
a Mortgaged Property throughout the term of the Loans.
(e) Other Fees
The Borrowers shall pay the Administrative
Agent such other fees as required by the Administrative
Agent in a separate letter agreement between the
Administrative Agent and the Borrowers.
1.12. Interest Periods
Each Eurodollar Loan shall have an Interest Period of
thirty (30) or sixty (60) days (the "Interest Period") as
the Borrowers specify in the applicable Borrowing or
Conversion Notice, except that:
an Interest Period that would otherwise end
on a day that is not a Business Day shall end on the
following Business Day unless the following Business
Day falls in another calendar month, in which case the
Interest Period shall end on the preceding Business
Day, and
an Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the
calendar month at the end of the Interest Period) shall
end on the last Business Day of a calendar month.
1.13. Interest
For each Loan, the Borrowers may elect that such Loan
accrue interest at either the Base Rate or the Eurodollar
Rate.
(a) Each Eurodollar Loan shall bear interest at
the Eurodollar Rate on its unpaid principal amount from
the first to the last day in its applicable Interest
Period. Accrued interest shall be payable on
Eurodollar Loans on the last day of the applicable
Interest Period.
(b) Each Base Rate Loan and each Loan evidenced
by the Swing Line Facility Note shall bear interest at
the Base Rate on its unpaid principal amount from the
date such Loan is made until repaid. Accrued interest
shall be payable on Base Rate Loans and Loans evidenced
by the Swing Line Facility Note on the first day of
each month.
(c) The Borrowers shall pay on the Conversion
Date accrued interest on any Loan converted prior to
the last day of its Interest Period.
(d) Overdue principal of or interest on a Loan
shall bear interest, payable on demand, from the first
day the principal or interest is overdue until paid
(after as well as before judgment) at a rate per annum
equal to the sum of 2% plus the applicable interest
rate on the particular Loan for each day.
(e) Upon the successful completion, reasonably
satisfactory to all of the Lenders, of MAAC's issuance
or sale of common or preferred stock that produces net
proceeds of no less than $90,000,000, the interest
rates available hereunder shall be modified as follows:
1. the Margin utilized in calculating
the Eurodollar Rate shall equal one and one
quarter percent (1.25%); and
2. the Base Rate shall equal the Prime
Rate minus .75%. The Borrowers may submit to the
Lenders a written request for such continuation
of, or reduction in, the Margin and the Base Rate,
and shall deliver to the Lenders such information,
reports and opinions with such request that the
Lenders deem desirable or necessary.
(f) The Administrative Agent shall determine the
interest rates for all Loans and shall promptly notify
the Borrowers and the Lenders of such interest rates.
Such determinations shall be conclusive in the absence
of manifest error.
1.14. Maximum Eurodollar Borrowings
Notwithstanding anything to the contrary contained
herein, there shall not be more than nine (9) Eurodollar
Borrowings outstanding at any given time.
1.15. Borrowers' termination of Borrowing Rights
The Borrowers may, upon at least three Business Days'
notice to the Administrative Agent, permanently terminate
their Borrowing Rights. If the Borrowers so terminate their
Borrowing Rights, the unpaid principal amount of all Loans
to the Borrowers with all accrued interest, and all fees,
and funding losses, and other amounts owing by the Borrowers
under this Agreement, shall be payable on the effective date
of the termination. Additionally, the Borrowers shall cause
all outstanding Letters of Credit to be surrendered to the
Administrative Agent on such date of termination. The
Administrative Agent shall promptly notify the Lenders of
such termination of the Borrowers' Borrowing Rights.
1.16. Voluntary and Mandatory Prepayments
(a) The Borrowers may prepay on any Business Day
the unpaid principal amount of the Loans in a Borrowing
in whole or in a part that is $2,000,000 or a larger
integral multiple of $500,000.
(b) In the event the aggregate outstanding
balance of the Loans shall at any time exceed the
Borrowing Base, the Borrowers shall immediately make a
principal payment which will reduce the outstanding
aggregate principal balance of the Loans to an amount
not exceeding the Borrowing Base.
(c) (i) If a Development Project for which
Advances have been made in accordance with the
Borrowing Base has not become a Stabilized Property
within one (1) year from the date Certificates of
Occupancy have been issued for all buildings within the
Development Project, the Advance Rate of such
Development Project shall be reduced from 50% to 25%;
(ii) if such Development Project has not become a
Stabilized Property within 18 months of the date
Certificates of Occupancy have been issued for all
buildings within the Development Project, the Advance
Rate shall be reduced to $0.00; and (iii) if
Certificates of Occupancy for all buildings within the
Development Project have not been issued within 24
months from the commencement of construction of such
Development Project, the Advance Rate shall be reduced
to $0.00; and then, in all such instances, a payment of
principal shall immediately be due and payable in an
amount sufficient to reduce the outstanding principal
balance of the Loans to an amount not exceeding the
Borrowing Base. Nothing in this subsection shall
preclude the Borrowers from subsequently resubmitting a
Development Project described in this subsection in
accordance with Section 3.5 hereof.
(d) A prepayment of principal must be accompanied
by payment of accrued interest on the principal amount
prepaid. Prepayments of Loans accruing interest at the
Eurodollar Rate shall be subject to Section 1.18
(Funding losses).
(e) In the event a Curative Measure is not
substantially completed within ninety (90) days of the
date the subject Mortgaged Property was added to the
Borrowing Base, the Borrowers shall, within ten (10)
days after notice from the Administrative Agent to
Borrowers, make a prepayment of principal equal to the
cost of such Curative Measure as set forth in the
applicable Inspection Report, unless such Curative
Measure is completed within such ten (10) day period.
(f) If a Stabilized Property has been injured or
damaged by fire or other casualty to the extent that
twenty-five percent (25%) of the apartment units
included in such Stabilized Property has been rendered
uninhabitable, the Borrowing Base shall be immediately
reduced, and the Loans repaid by the corresponding
amount, in an amount equal to 60% of the Fair Market
Value of such Stabilized Property immediately prior to
such damage or injury; provided, however, that if the
damaged Stabilized Property is insured in an amount
sufficient to rebuild or restore such damage and if
rental insurance is payable for the repair and
reconstruction period, no reduction in the Borrowing
Base will result hereunder. It is agreed that after
such damaged Stabilized Property has been repaired to
the Administrative Agent's satisfaction, the Borrowing
Base shall be recalculated as of the date the
Administrative Agent approved such repair, based on the
then Fair Market Value.
Prepayment Notices
The Borrowers shall notify the Administrative Agent of
a prepayment, specifying the date of the prepayment and the
amount of the Borrowings to be prepaid, at least two (2)
Business Days before the date of prepayment.
Upon receipt of a notice of prepayment, the
Administrative Agent shall promptly notify each Lender of
its contents and of the Lender's Proportionate Share of the
prepayment.
1.17. Payments generally
(a) The Borrowers shall make each payment of
principal of and interest on its Borrowings and of fees
hereunder by 11:00 a.m. on the date due, in immediately
available funds in Birmingham, Alabama, to the
Administrative Agent at its Notice Address. The
Administrative Agent shall promptly distribute to each
Lender its Proportionate Share of each such payment.
(b) If a payment of principal, interest or fees
is due on a day that is not a Business Day, the date
for the payment shall be extended to the following
Business Day, except that if the following Business Day
falls in another calendar month, the date for the
payment of a Loan shall be the preceding Business Day.
If the date for a payment of principal is so extended,
or is extended by operation of law or otherwise,
interest on the payment shall be payable for the
extended time.
(c) All interest and fees shall be computed on
the basis of a year of 360 days and paid for the actual
number of days elapsed.
(d) Entries in records maintained by a Lender in
accordance with its usual practice evidencing the
Borrowers' indebtedness to the Lender under this
Agreement and under the Notes, including the amounts of
Loans, applicable Interest Periods and payments of
principal and interest, shall be prima facie evidence
of the existence and amounts of the obligations of the
Borrowers to which the entries relate. A Lender's
failure to maintain such records, or any error therein,
shall not affect the Borrowers' obligations to repay
the Loans in accordance with this Agreement.
1.18. Funding losses
If
- the Borrowers make a payment of principal of
a Loan before the last day of the Interest Period for
such Loan (including prepayment of Loans pursuant to
Section 9.4 (Illegal Loans), or
- the Borrowers fail to borrow or prepay or to
convert a Loan after the Administrative Agent has
notified any other Lender of the Borrowing, prepayment
or Conversion, then the Borrowers shall reimburse each
Lender on demand for any resulting loss or expense
incurred by it, including any loss incurred in
obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period
after such payment or Conversion or failure to borrow,
prepay or convert, provided that the Lender has
delivered to the Borrowers a certificate reasonably
detailing the amount of the loss or expense, which
certificate shall be conclusive in the absence of
manifest error.
1.19. Pro-rata treatment
Except as otherwise expressly provided in this
Agreement, or to the extent otherwise required due
to a Lender's failure to fund,
- each payment of a fee shall be allocated among the
Lenders in their Proportionate Share for the relevant period,
- each payment of principal of a Borrowing shall
be allocated among the Lenders in their
respective Proportionate Share of the unpaid principal
amounts of their Loans included in the Borrowing, and
- each payment of interest on a Borrowing shall
be allocated among the Lenders in their respective
Proportionate Share of the amounts of accrued and
unpaid interest on their Loans included in the
Borrowing.
1.20. Whole dollars
In computing the amounts of the Lenders' Loans to be
included in a Borrowing, the Administrative Agent may round
each Lender's Loan to the next higher or lower whole dollar
amount.
II. BORROWINGS AND CONVERSION PROCEDURES
2.1. Borrowing Notices
(a) The Borrowers shall notify the Administrative
Agent (a "Borrowing Notice") by 1:00 p.m., Birmingham
time, on the third Business Day immediately preceding a
Eurodollar Borrowing and by 1:00 p.m., Birmingham time,
on the Business Day immediately preceding a Base Rate
Borrowing.
(b) A Borrowing Notice shall be in substantially
the form of Exhibit C and shall specify:
1. the aggregate principal amount of
the Borrowing,
2. whether the Borrowing is a
Eurodollar Loan or a Base Rate Loan,
3. the Interest Period for a
Eurodollar Borrowing (which shall not extend
beyond the Maturity Date),
4. the Borrowers' account at the
Administrative Agent to which the proceeds of the
Borrowing are to be deposited, and
5. whether the Borrowing is to be
utilized for a particular Development Project
subject to a Mortgage.
2.2. Funding of Loans
The Administrative Agent shall promptly notify each
Lender of the contents of each Borrowing Notice and of the
principal amount of the Lender's Loan to be included in the
Borrowing.
Not later than 12 p.m. on the day of a Borrowing, each
Lender shall make available the full amount of its Loan to
be included in the Borrowing, in immediately available funds
in Birmingham, to the Administrative Agent at its Notice
Address.
Unless the Administrative Agent determines that an
applicable condition specified in Section 3 has not been
satisfied, the Administrative Agent shall make the funds
received from the Lenders pursuant to this Section 2.2
available to the Borrowers at the Administrative Agent's
Notice Address by 2 p.m. on such day for a Borrowing.
2.3. Lender's failure to fund
Unless a Lender notifies the Administrative Agent
before the date of a Borrowing (whether for a Eurodollar
Borrowing, a draw under a Letter of Credit or any other
Borrowing available hereunder) that the Lender will not make
available to the Administrative Agent the full amount of its
Loan to be included in the Borrowing, the Administrative
Agent may assume that the Lender's Loan will be made
available to the Administrative Agent on the day of the
Borrowing and may, in reliance on that assumption, make the
full amount of the Loan available to the Borrowers.
If the Administrative Agent makes the full amount of a
Lender's Loan available to the Borrowers, and the Lender
does not make available to the Administrative Agent some or
all of the Loan (the "Unfunded Amount") by the date of the
Borrowing, then the Lender shall pay the Administrative
Agent on demand interest at the Federal Funds Rate on the
Unfunded Amount from the date of the Borrowing until the
Lender makes the Unfunded Amount available to the
Administrative Agent or the Borrowers repay the Loan.
If a Lender does not make the full amount of its Loan
included in a Borrowing available to the Administrative
Agent by the third Business Day after the date of the
Borrowing, the Borrowers shall, promptly on the
Administrative Agent's demand, repay the full amount of such
Loan to the Administrative Agent, together with accrued
interest at the interest rate for the Loans comprising the
Borrowing.
Nothing in this Section 2.3 shall relieve a Lender of
the obligation to make the full amount of its Loans
available to the Administrative Agent.
2.4. Conversions
The Borrowers may at any time at the end of an Interest
Period, if they are not in Default, convert the Loans
bearing interest at the Eurodollar Rate into new Loans for
an additional Interest Period (a "Conversion"). A
Conversion shall convert each Loan in a Borrowing in the
same proportion. Since each Loan in a Borrowing shall be
converted in the same proportions, Conversion shall refer
equally to Conversion of Loans and Conversion of Borrowings.
A Borrower may initiate a Conversion by notifying the
Administrative Agent (a "Conversion Notice") not later than
1:00 p.m. on the third Business Day before the Conversion
Date.
The Administrative Agent shall promptly notify each
Lender of the contents of each Conversion Notice and of the
Lender's Loans that will result from the Conversion.
A Conversion Notice shall be in substantially the form
of Exhibit D and shall:
- state the Conversion Date,
- identify each then outstanding Borrowing that
is to be converted,
- state the aggregate unpaid principal amount
of the Loans in such outstanding Borrowings, and
- state the principal amount and Interest
Period (which shall not extend beyond the Maturity
Date) of each Borrowing into which such outstanding
Borrowings are to be converted.
Each Borrowing resulting from a Conversion must, as to
amount and Interest Period, conform to the requirements for
a Borrowing comprised of Loans made on such date (as if the
Loans to be converted had been prepaid, and the new Loans
made, on the Conversion Date), and a Conversion Notice shall
be effective solely as to the resulting Borrowings that do
so conform. If a Conversion Notice purports to or is
effective to convert only part of the Borrowings specified
in the Conversion Notice, the remaining parts of such
Borrowings shall on the Conversion date automatically be
converted into a single Base Rate Borrowing. The Borrowers
shall be liable to the Lenders for any funding losses in
accordance with Section 1.18 on any portion of a Borrowing
not converted.
A Conversion of a Loan must satisfy the conditions in
Section 3.2 for the making of a Loan.
If part or all of a Loan is not otherwise converted by
the last day of its Interest Period, it shall automatically
be converted on the last day of its Interest Period into a
Base Rate Loan.
2.5. Defective notices
The Administrative Agent shall promptly notify a Lender
or the Borrowers if the Administrative Agent believes that a
notice or other document given to the Administrative Agent
by a party under Section 1 or this Section 2 fails to
conform to the requirements of such Section.
III. CONDITIONS
3.1. Conditions to effectiveness of this Agreement
This Agreement shall become effective when the
Administrative Agent has received the following documents:
-for each party to the Agreement, an original
or telecopied counterpart of this Agreement signed by
all parties;
-an original Note executed to the order of
each Lender, in the principal amount of such Lender's
Commitment and evidencing such Lender's Loans;
- the original Mortgages upon the Initial
Properties identified in Schedule 2;
- a Subsidiary Guaranty executed by each
Subsidiary executing a Mortgage on the Initial
Properties;
- title insurance policies, appraisals,
evidence of appropriate zoning, environmental reports,
surveys, evidence of insurance and such other
information as the Administrative Agent may request for
each and all of the Initial Properties;
- opinions of counsel satisfactory to the
Administrative Agent to each of the Borrowers,
substantially in the form of Exhibit E;
- a certificate of a senior officer of each
Borrower that (i) no Default has occurred and is
continuing and (ii) the representations and warranties
of the Borrowers contained in this Agreement are true
on the date of this Agreement, substantially in the
form of Exhibit J; and
- such other documents as the Administrative
Agent reasonably requests and deems satisfactory
relating to each Borrower's and Subsidiary's existence,
the corporate authority for and validity of this
Agreement, the Mortgages, each Subsidiary Guaranty and
any other relevant matter.
The Administrative Agent shall promptly notify the
Borrowers and the Lenders when this Agreement becomes
effective, and such notice shall be conclusive and binding
on all parties.
3.2. Conditions to Borrowings
The obligation of a Lender to make a Loan to the
Borrowers as part of a Borrowing is subject to the
satisfaction of the following conditions:
- this Agreement is effective;
- the Administrative Agent receives a Borrowing
Notice conforming to the requirements of this
Agreement;
- immediately after the Borrowing, the
aggregate unpaid principal amount of the Loans will not
exceed the lesser of the Aggregate Commitment or the
Borrowing Base;
- each Borrower represents that no material
adverse change in its financial condition or results of
operations has occurred;
- immediately before and after the Borrowing,
no Default will have occurred and be continuing;
- the representations and warranties of the
Borrowers contained in this Agreement are true on and
as of the date of the Borrowing with the same effect as
if made on and as of such date (except to the extent
such representations and warranties expressly relate to
an earlier date);
- the Administrative Agent receives, with the
Borrowing Notice, an update to the title policy for
each Borrowing on a Development Project;
- no mechanic's lien claim shall have been
filed or asserted against any Mortgaged Property, which
has not been "bonded off" such Mortgaged Property in
accordance with applicable law;
- all licenses, permits and approvals of
governmental authorities required for the operation of
the respective Mortgaged Properties shall have been
obtained and are in full force and effect;
- each request for a Borrowing for a
Development Project shall be subject to the approval of
the Administrative Agent and the Administrative Agent's
construction consultant, which approval shall not be
unreasonably withheld or delayed;
- there shall have occurred no material
violation of any applicable laws, ordinances, rules or
regulations; it being understood that a single
violation shall be deemed material if it involves by
way of fees, fines, costs, expenses, curative work or
other potential loss or expense to the Borrowers
exceeding the sum of $100,000.00 or $500,000 in the
aggregate for multiple violations;
- there shall be no action, suits or
proceedings pending, or to the Borrowers' knowledge,
threatened against or affecting either Borrower, any
Subsidiary or any Mortgaged Property, at law or in
equity, or before any governmental agencies, which, if
adversely determined, would substantially impair the
ability of the Borrowers to pay their obligations as
set forth herein or adversely affect the priority or
security of a Mortgage; and
- there shall have occurred no material adverse
change in the financial condition of either Borrower or
any Mortgaged Property.
Each Borrowing shall constitute a representation and
warranty by the Borrowers that, on the date of the
Borrowing, the conditions set forth in this Section 3.2 are
satisfied.
3.3. Conditions to Maintaining Loans
(a) The Administrative Agent shall have the
right, at any time and from time to time, to require
the Borrowers to furnish to the Administrative Agent
current financial information, Inspection Reports,
and/or environmental studies of any one or more of the
Mortgaged Properties if, in the unrestricted discretion
of the Administrative Agent, such Mortgaged Properties
shall have declined in value in any material amount or
may be in violation of any applicable Environmental
Laws. The Borrowers shall have the right to require
the Administrative Agent to commission updated
appraisals, and the Administrative Agent shall also
have the right to require updated appraisals if
required by law or banking regulations. Any such
appraisals and environmental studies must be in form,
content and conclusion satisfactory to the
Administrative Agent, subject to the Administrative
Agent's approval in all respects, and must be made by a
qualified, licensed professional selected and
commissioned by the Administrative Agent. If any such
current financial information, updated appraisal or
environmental study should reflect a decline in value,
the Borrowing Base shall be reduced accordingly; and,
if the then outstanding Loans should exceed the reduced
Borrowing Base, the Borrowers shall be obligated
immediately to reduce the Loans to an amount not
exceeding the applicable reduced Borrowing Base. If
any such appraisal or current financial information
should reflect an increase in value, the applicable
Borrowing Base shall be increased accordingly to the
extent appropriate.
(b) For each Development Project, the Borrower
shall provide to the Administrative Agent a quarterly
statement of occupancy, no later than the 15th day
after the end of each quarter for the immediately
preceding calendar quarter.
(c) If any environmental study should reflect the
necessity or desirability for action to be taken to
prevent or cure the violation or prospective violation
of applicable Environmental Laws, the Borrowers shall,
at their sole cost and expense, immediately undertake
such action and diligently prosecute same to
conclusion.
(d) Although the Administrative Agent shall have
the right to require as many appraisals and
environmental surveys as it shall elect with respect to
each Mortgaged Property, the Borrowers shall be
obligated to pay for only one (1) appraisal and one (1)
environmental survey, with respect to each Mortgaged
Property during any one (1) consecutive twelve (12)
month period. Any appraisals requested by the
Borrowers pursuant to Section 3.3(a) shall be at
Borrowers' sole expense and shall be excluded from
consideration in determining whether the Borrowers are
obligated to pay the costs of additional appraisals
required by the Administrative Agent. Any initial
appraisals and environmental studies furnished to the
Administrative Agent in connection with each Mortgaged
Property shall also be excluded from consideration in
determining whether Borrowers are obligated to pay the
cost of additional appraisals or environmental studies
for any such Property.
3.4. Conditions to Release of Mortgaged Property
(a) The privilege is given and reserved so that
the Borrowers may obtain the release of a Mortgaged
Property from the lien of a Mortgage upon payment to
the Administrative Agent, for application upon the
Loan, a principal amount equal to the amount of the
applicable Advance Rate for such Mortgaged Property,
together with all interest accrued upon such amount,
and all out-of-pocket expenses and advances then due
and owing to the Administrative Agent in connection
with the Loans.
(b) The release privilege herein granted is
conditioned upon (1) there being no Default existing
(a) at the time any such release is requested, or (b)
on the date the release is to be delivered, (2) the
release not causing a Default, and (3) continued
compliance with the Borrowing Base upon the release of
the subject Mortgaged Property.
(c) Any Apartment Community remaining subject to
a Mortgage shall not be dependent on the Mortgaged
Property being released for access, utilities,
amenities or any other matter.
(d) Any such requested release shall be made at
the sole cost and expense of the Borrowers.
3.5. Conditions to Addition of Property
The Borrowers shall be entitled to offer Apartment
Communities which, if approved by Two-Thirds of the Lenders,
shall, upon satisfaction of the following conditions, then
be deemed to constitute Mortgaged Properties and available
for use in determining the Borrowing Base:
(a) For Apartment Communities to be added to the
Borrowing Base as either a Stabilized Property or a
Development Project, the Borrower shall deliver to the
Administrative Agent the following, all in form and
content satisfactory to the Administrative Agent:
1. Evidence that the entity holding
title to the Apartment Community is either a
Borrower or a Subsidiary;
2. an environmental report or reports
evidencing that the Apartment Community is in
material compliance with all Environmental Laws,
using the standard generally applied by
sophisticated commercial lenders experienced in
real estate financing;
3. evidence of hazard and liability
insurance as required herein;
4. evidence of compliance with current
zoning regulations;
5. a current appraisal meeting the
guidelines of the Federal Institutions Reform,
Recovery and Enforcement Act;
6. a Mortgage granting to the
Administrative Agent, for the benefit of the
Lenders, a first lien on the subject Apartment
Community or Development Project, together with a
Subsidiary Guaranty if the owner of the applicable
Apartment Community or Development Project is not
a Borrower;
7. an opinion of local counsel,
opining that the owner of the Apartment Community
or Development Project is qualified to do business
in the state where the Apartment Community or
Development Project is located and that the
Mortgage is a valid and binding obligation of the
owner, enforceable in accordance with its terms;
8. a title insurance policy in the
amount of the Advance Rate of a Stabilized
Property and in the amount of sixty percent (60%)
of the Project Budget for a Development Project,
issued by a title insurance company acceptable to
the Administrative Agent, insuring the priority
lien of the Mortgage, subject only to exceptions
approved by Two-Thirds of the Lenders;
9. a current survey, certified to the
Administrative Agent, which requirement shall be
waived if the insuring title insurance company
deletes the standard survey exception;
10. an Inspection Report;
11. for Florida Apartment Communities
only, evidence that the Fair Market Value of the
proposed Apartment Community, when added to the
Fair Market Value of all the Florida Mortgaged
Properties, does not exceed $110,000,000 in the
aggregate; and
12. additionally, for Development
Projects only:
i) the Project Budget;
ii) plans and specifications;
iii) copies of all design and construction contracts;
iv) copies of all building permits;
v) a written statement from the Borrower that
construction has either commenced or will
commence within thirty (30) days;
vi) if construction has
commenced, evidence satisfactory to the
Administrative Agent of the Work Completed;
and
vii) evidence of availability
of all necessary utilities.
(b) For a Development Project to be converted to
a Stabilized Property, the Borrower shall deliver to
the Administrative Agent:
1. All of the items described in (a)
above to the extent not already submitted, and, if
previously submitted, up-dated if deemed necessary
by the Administrative Agent;
2. A copy of the Certificate of
Occupancy for all buildings included in the
Development Project;
3. Evidence that the Development
Project has achieved and maintained an occupancy
rate of at least 80% for at least the two
immediately preceding calendar months;
4. A current, as-built survey, showing
all improvements, and such other detail as shall
be required by the Administrative Agent; and
5. A certificate of the architect,
certifying that the Development Project has been
completed in substantial accordance with the plans
and specifications which had previously been
delivered to, and approved by, the Administrative
Agent.
IV. Representations and warranties
Each Borrower represents and warrants that:
4.1. Corporate existence and power
Mid-America is a limited partnership duly organized,
validly existing and in good standing under the laws of the
State of Tennessee; it has the power and authority to own
its properties and assets and is in good standing and duly
qualified to carry on its business in every jurisdiction
wherein such qualification is necessary, including, without
limitation, every jurisdiction in which an Apartment
Community is offered to the Lenders as a Mortgaged Property.
MAAC is a corporation duly organized, validly existing,
and in good standing under the laws of the State of
Tennessee; it has the power and authority to own its
properties and assets and is in good standing and duly
qualified to carry on its business in every jurisdiction
wherein such qualification is necessary, including, without
limitation, every jurisdiction in which an Apartment
Community is offered to the Lenders as a Mortgaged Property.
4.2. Corporate, partnership and governmental authorization; non
contravention
The execution, delivery and performance by the Borrower
of this Agreement are within the Borrower's corporate or
partnership, as the case may be, powers, have been duly
authorized by all necessary corporate or partnership, as the
case may be, action, require no action by or in respect of,
or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the articles
of incorporation or by-laws or partnership agreement of the
Borrower or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Borrower
or result in the creation or imposition of any Lien on any
asset of the Borrower.
4.3. Binding effect
This Agreement is a valid and binding agreement of the
Borrower, enforceable in accordance with its terms, except
as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
4.4. Financial information
The consolidated balance sheet of MAAC prepared as of
the 30th day of September, 1997, together with any
explanatory notes therein referred to and attached thereto,
is correct and complete and fairly presents the financial
condition of the Borrowers as of the date of said balance
sheet. A copy of such balance sheet has been delivered to
each Lender.
4.5. No material adverse change
Since September 30, 1997, there has been no material
adverse change in the financial position or results of
operations of the Borrowers, considered as a whole.
4.6. Litigation
There is no action, suit or proceeding pending against,
or, to the knowledge of the Borrower, threatened against or
affecting, the Borrower before any court or arbitrator or
any governmental body, agency or official in which there is
a reasonable probability of an adverse decision that would
materially adversely affect the business, financial position
or results of operations of the Borrower or that in any
manner draws into question the validity or enforceability of
this Agreement.
4.7. Taxes
The Borrower has filed all United States federal income
tax returns and all other material tax returns that are
required to be filed by it and has paid all Taxes then due
pursuant to such returns or pursuant to any assessment
received by the Borrower, except for Taxes contested in good
faith by appropriate proceedings and as to which appropriate
reserves in accordance with generally accepted accounting
principles have been established. The charges, accruals and
reserves on the books of the Borrower for Taxes are, in the
Borrower's opinion, adequate.
4.8. Compliance with ERISA
Each member of the Controlled Group has fulfilled its
obligations under the minimum funding standards of ERISA and
the Code for each Pension Plan and is in compliance in all
material respects with ERISA and the Code, and has not
incurred any liability to the PBGC or a Pension Plan under
Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
4.9. Not an investment company or public utility holding company
The Borrower is not an 'investment company' within the
meaning of the Investment Company Act of 1940 or a 'holding
company' within the meaning of the Public Utility Holding
Company Act of 1935.
4.10. Margin regulations
At no time will Margin Stock comprise more than 5% of
the value of the assets of a Borrower.
4.11. Title to assets
Each Borrower has good and marketable title to all its
properties and assets reflected on the consolidated balance
sheet referred to herein, except for (a) such assets shown
on said balance sheet that have been disposed of since said
date as no longer used or useful in the conduct of business,
(b) inventory sold in the ordinary course of business and
thereafter accounted for as accounts receivable or cash, (c)
accounts receivable collected and property accounted for,
and (d) items which have been amortized in accordance with
GAAP applied on a consistent basis; and all such properties
and assets are free and clear of Liens except as otherwise
expressly permitted by the provisions hereof.
4.12. Contracts or restrictions affecting Borrowers
Neither Borrower is a party to, nor subject to, any
agreement or instrument, including, without limitation, any
partnership agreement, partnership restrictions, voting
trust or shareholders' agreement, materially and adversely
affecting its business, Apartment Communities, or other
assets, operations or condition (financial or otherwise).
4.13. No default
Neither Borrower is in default in the performance,
observance or fulfillment of any of the obligations,
covenants, or conditions contained in any agreement or
instrument to which it is a party, which default (if not
cured) would materially and adversely and substantially
affect the financial condition, property or operations of
such Borrower.
4.14. Patents and Trademarks
Each Borrower possesses all necessary patents, service
marks, trademarks, trade names, copyrights, and licenses
necessary to the conduct of its business.
4.15. Hazardous Substances
To the best of the Borrower's knowledge, (a) except
strictly in compliance with all applicable Environmental
Laws, no Hazardous Substances are located upon or have been
stored, processed or disposed of on or released or
discharged (including ground water contamination) from any
Apartment Community owned or leased by either Borrower, and
(b) no aboveground or underground storage tanks exist on any
of the Apartment Communities. No private or governmental
lien or judicial or administrative notice or action related
to Hazardous Substances or other environmental matters has
been filed against any Apartment Community.
4.16. Real Estate Investment Trust
MAAC is qualified under the Code as a real estate
investment trust.
4.17. Subsidiaries
The Subsidiaries granting Mortgages on the Initial
Properties are correctly identified on Schedule 4 attached
hereto, and all are 100% owned, directly or indirectly, by
either or both of the Borrowers.
V. Affirmative Covenants
Each Borrower agrees that:
5.1. Financial information
(a) The Borrower shall deliver to the
Administrative Agent for distribution to each Lender:
As soon as available, and in any event within
one hundred five (105) days after the end of each
fiscal year of MAAC, a consolidated unqualified audit
as of the close of such fiscal year of MAAC, together
with a consolidated unqualified audit report and
opinion of an independent certified public accountant
acceptable to the Administrative Agent, prepared in
accordance with GAAP, showing the financial condition
of MAAC as of the close of such year, which audit shall
include, inter alia, consolidated financial results of
both Borrowers and all Subsidiaries of each of them;
and the results of operations during such year; and
within fifty (50) days after the end of each fiscal
quarter, consolidated financial statements similar to
those mentioned above, not audited but certified by the
Certifying Officer, such balance sheets to be as of the
end of such fiscal quarter, and such statements of
income and surplus to be for the period from the
beginning of the fiscal year to the end of such fiscal
quarter, in each case subject only to audit and year
end adjustment. The certificate of the Certifying
Officer shall state that:
1. the attached financial statement,
together with any explanatory notes referred to
and attached thereto, is correct and complete and
fairly represents the financial condition of MAAC
as of the date of the financial statement, and the
results of its operations for the period ending on
the date reflected in said financial statement,
2. that such financial statement has
been prepared in accordance with GAAP applied on a
consistent basis maintained throughout the period
involved, and
3. to the best of such Certifying
Officer's knowledge, the Borrowers are not in
Default under any of the terms and provisions of
this Agreement, or, if the Borrowers are in
Default, identifying with particularity each such
Default;
(b) Contemporaneously with the distribution
thereof to the Borrower's shareholders or the filing
thereof with the Securities and Exchange Commission,
copies of all statements, notices and reports,
specifically including reports on SEC Forms 10-K and 10Q;
(c) In no event later than the 22nd day of each
calendar quarter, but as of the last day of the
immediately preceding calendar quarter, a Borrowing
Base Certificate in the form attached hereto as Exhibit F
together with a compliance certificate in
substantially the form attached hereto as Exhibit J;
and
(d) promptly, such other financial information as
may be reasonably requested by the Administrative Agent
or a Lender.
5.2. Maintenance of property; insurance
(a) The Borrower shall keep all its
property useful and necessary in its business and
all the Mortgaged Property, whether owned by a
Borrower or a Subsidiary, in good working order
and condition, ordinary wear and tear excepted.
(b) The Borrower at all times shall
maintain (or cause to be maintained) with respect
to each Mortgaged Property in some company or
companies (having a Best's rating of A:VIII or
better, except for liability insurance maintained
with respect to Properties located in Texas, which
shall be maintained with a company or companies
having a Best's rating of at least A-:VII)
approved by the Administrative Agent:
- Comprehensive public liability
insurance covering claims for bodily injury,
death, and property damage, with minimum limits
satisfactory to the Administrative Agent, but in
any event not less than those amounts customarily
maintained by companies in the same or
substantially similar business;
- Business interruption insurance
and/or loss of rents insurance in a minimum amount
specified by the Administrative Agent for each
Mortgaged Property, and in any such event covering
loss of rents for a minimum period of one (1)
year;
- Hazard insurance insuring each
Mortgaged Property against loss by fire (with
extended coverage) and against such other hazards
and perils (including but not limited to loss by
earthquake, windstorm, hail, flood, explosion,
riot, aircraft, smoke, vandalism, malicious
mischief and vehicle damage) as the Administrative
Agent, in its sole discretion, shall from time to
time require, all such insurance to be issued in
such form, with such deductible provision, and for
such amount as shall be satisfactory to the
Administrative Agent; and
- Such other insurance as the
Administrative Agent may, from time to time,
reasonably require by notice in writing to the
Borrowers.
(c) The Borrower shall not, nor permit
any other Person to, cancel, terminate, or
materially amend any of the insurance policies
required by this Section 5 without giving at least
thirty (30) days' prior written notice to the
Administrative Agent. The Borrower will deliver
(or cause to be delivered) to the Administrative
Agent original or certified copies of the
insurance policies, or satisfactory certificates
of insurance, and, as often as the Administrative
Agent may reasonably request, a report of a
reputable insurance broker with respect to such
insurance. At the option of the Borrower, the
Borrower may maintain the insurance coverages
required by this Section 5, pursuant to so-called
"blanket insurance policies", in which event the
Borrower shall, from time to time, upon the
Administrative Agent's request, furnish to the
Administrative Agent certificates from the
respective insurance companies (or their
authorized agents) setting forth the types and
amounts of insurance being maintained, any
applicable deductible provisions, and such other
information as the Administrative Agent may
require (including, without limitation, the
effective dates of any such insurance), together
with copies of all such blanket insurance
policies.
5.3. Compliance with laws
The Borrower shall, and shall cause each Subsidiary to,
comply in all material respects with all applicable laws,
ordinances, rules, regulations and requirements of
governmental authorities, except where the necessity of
compliance is contested in good faith by appropriate
proceedings.
5.4. Books and records; payment of Taxes
The Borrower shall keep proper books and records in
which full and correct entries are made of all dealings and
transactions in relation to its business and activities.
While a Default is continuing, representatives of any Lender
may inspect the Borrower's relevant books and records at any
reasonable time.
The Borrower shall pay and discharge, at or before
maturity, all their respective material Tax liabilities,
except for liabilities contested in good faith by
appropriate proceedings and as to which appropriate reserves
in accordance with generally accepted accounting principles
have been established.
5.5. Notice of Defaults
The Borrower shall, within five Business Days of a
senior officer of the Borrower obtaining knowledge of a
continuing Default, deliver to the Administrative Agent a
certificate of the Certifying Officer setting forth the
details of the Default and the action the Borrower is taking
or proposes to take with respect to the Default.
5.6. ERISA events
If a member of the Controlled Group
- gives or is required to give notice to the
PBGC of a 'reportable event' or knows that the plan
administrator of a Pension Plan has given or is
required to give notice of such reportable event,
- receives notice of complete or partial
Withdrawal Liability under Title IV of ERISA,
- receives notice from the PBGC under Title IV
of ERISA of an intent to terminate or appoint a trustee
to administer a Pension Plan, or
- knows that a Pension Plan is terminated or in
reorganization, then the Borrower shall within five
Business Days deliver a copy of the notice to the
Administrative Agent.
5.7. Use of proceeds
The Borrower shall use Loan proceeds only for its
general corporate purposes. The Borrower shall not use any
Loan proceeds for any purpose that violates Regulations G,
T, U or X of the Federal Reserve Board.
5.8. Maintenance of existence; merger; sale of assets
The Borrower shall keep in full force and effect its
corporate or partnership existence, as the case may be, and
its rights, privileges and franchises necessary or desirable
in the normal conduct of business, provided that a
Subsidiary of a Borrower may merge or consolidate with or
into the Borrower (but only if the Borrower is the surviving
entity) or a Subsidiary of the Borrower. A Borrower shall
not (i) consolidate or merge with or into another Person
unless the Borrower is the surviving entity and no Default
by the Borrower exists immediately thereafter, or (ii) sell,
lease or otherwise transfer all or substantially all of its
assets to any other Person, except for the distribution of
ordinary dividends to shareholders and distributions to
partners. As used herein "substantially all" shall mean
more than thirty percent (30%) of the total assets.
5.9. Right of inspection
The Borrower shall permit any Person designated by the
Administrative Agent to visit and inspect any of the
properties, corporate books and financial reports of each
Borrower and all Subsidiaries and to discuss its affairs,
finances and accounts with its principal officers, at all
such reasonable times during normal business hours and as
often as the Administrative Agent may reasonably request.
5.10. Environmental laws
The Borrower shall maintain at all times all Apartment
Communities in compliance with all Environmental Laws, and
immediately notify the Administrative Agent of any notice,
action, lien or similar action alleging either the location
of any Hazardous Substances or the violation of any
Environmental Laws or any release of Hazardous Substances
with respect to any Apartment Communities or operations.
5.11. Notice of adverse change in assets
At the time of either Borrower's first knowledge or
notice, such Borrower shall immediately notify the
Administrative Agent of any information that may adversely
affect in any material manner the assets of either Borrower,
including, but not limited to, the value or marketability of
any Mortgaged Properties.
5.12. Indemnification
(a) General. The Borrower shall defend, indemnify and
hold the Administrative Agent and the other Lenders harmless
from and against any and all loss, costs, damage or expense,
of every kind and nature, including, without limitation,
reasonable attorneys' fees and costs, which the
Administrative Agent and the other Lenders could or might
incur by reason of any violation of any Environmental Laws
by either Borrower, any Subsidiary or by any predecessors or
successors to title to any Mortgaged Property. The
indemnification granted herein shall run only to the benefit
of the Administrative Agent and the Lenders and shall not
give any rights of indemnification to any successors in
title. Notwithstanding the foregoing, the Borrowers shall
have no obligation to indemnify the Administrative Agent and
the other Lenders for liability resulting solely from the
gross negligence or willful misconduct of the Administrative
Agent, or any of the other Lenders, as determined in a final
non-appealable order by a court of competent jurisdiction.
(b) Letter of Credit. The Borrowers hereby agree to
protect, indemnify, pay and save the Administrative Agent
and the Lenders harmless from and against any and all
claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees
and disbursements) which the Administrative Agent and/or the
Lenders may incur or be subject to as a result of (i) the
issuance of the Letters of Credit, other than to the extent
of the bad faith, gross negligence or wilful misconduct of
the Administrative Agent and/or the Lenders or (ii) the
failure of the Administrative Agent to honor a drawing under
any Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority
(collectively, "Governmental Acts"), other than to the
extent of the bad faith, gross negligence or wilful
misconduct of the Administrative Agent. As between the
Borrowers and the Administrative Agent and the Lenders, the
Borrowers assume all risks of the acts and omissions of any
beneficiary with respect to its use, or misuse of, the
Letters of Credit issued by the Administrative Agent. In
furtherance and not in limitation of the foregoing, the
Administrative Agent and the Lenders shall not be
responsible (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application
for and issuance of such Letters of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or insufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such
Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of
the beneficiary of any such Letter of Credit to comply fully
with conditions required in order to draw upon such Letter
of Credit, other than as a result of the bad faith, gross
negligence or wilful misconduct of the Administrative Agent;
(iv) for errors, omissions, interruptions or delays in
transmission or delivery of any message, by mail, cable,
telegraph, telex, facsimile transmission, or otherwise,
unless the result of the bad faith, gross negligence or
wilful misconduct of the Administrative Agent; (v) for
errors in interpretation of any technical terms, unless the
result of the bad faith, gross negligence or wilful
misconduct of the Administrative Agent; (vi) for any loss or
delay in the transmission or otherwise of any documents
required in order to make a drawing under any such Letter of
Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of
Credit of the proceeds of such Letter of Credit; and (viii)
for any consequence arising from causes beyond the control
of the Administrative Agent, including any Government Acts,
in each case other than to the extent of the bad faith,
gross negligence or wilful misconduct of the Administrative
Agent. None of the above shall affect, impair or prevent
the vesting of the Administrative Agent's rights and powers
hereunder. In furtherance and not in limitation of the
specific provisions hereinabove set forth, any action taken
or omitted by the Administrative Agent under or in
connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith,
shall not put the Administrative Agent under any resulting
liability to the Borrowers provided that, notwithstanding
anything in the foregoing to the contrary, the
Administrative Agent will be liable to the Borrowers for any
damages suffered by the Borrowers as a result of the
Administrative Agent's grossly negligent or wilful failure
to pay under any Letter of Credit after the presentation to
it of a sight draft and certificates strictly in compliance
with the terms and conditions of the Letter of Credit.
5.13. Qualification as a Real Estate Investment Trust
MAAC shall at all times remain (a) qualified under the
Code as a real estate investment trust and (b) the general
partner of Mid-America.
5.14. Ownership of Subsidiaries
MAAC or Mid-America shall at all times remain a direct
or indirect owner of 100% of the ownership interest of each
Subsidiary that is the owner of a Mortgaged Property.
VI. Negative Covenants of Borrowers
Each Borrower covenants and agrees that, at all times
from and after the Effective Date, unless Two-Thirds of
Lenders shall otherwise consent in writing, it will not, nor
shall it permit a Subsidiary that is the owner of a
Mortgaged Property to, either directly or indirectly:
6.1. Liens
Incur, create, assume or suffer to exist any mortgage,
pledge, lien, charge or other encumbrance of any nature
whatsoever on any of the Mortgaged Properties other than:
(a) Deposits under workmen's compensation,
unemployment insurance and Social Security laws, or to
secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or
leases or to secure statutory obligations or surety or
appeal bonds, or to secure indemnity, performance or
other similar bonds in the ordinary course of business;
(b) Liens imposed by law (other than tax liens),
such as carriers', warehousemen's or mechanics' liens,
incurred in good faith in the ordinary course of
business and in an amount of less than $100,000;
(c) Liens in favor of the Lenders;
(d) Purchase money security interests arising in
the ordinary course of the apartment leasing business; and
(e) Liens for real property and personal property
taxes, but not yet delinquent.
6.2. Sale of Assets
Sell, lease, transfer or dispose (other than in the
normal course of business) of all or a substantial part of
its assets.
6.3. Accounts Receivable from Related Persons
Permit or allow the aggregate of accounts receivable
and other loans and indebtedness owed by Related Persons to
the Borrowers to exceed the sum of Five Hundred Thousand
Dollars ($500,000.00) in the aggregate as to both Borrowers.
6.4. Loans to Officers and Employees
Permit or allow loans to directors, officers, partners,
shareholders and employees of both Borrowers to exceed, in
the aggregate, the sum of One Million Dollars
($1,000,000.00).
6.5. Trademarks and Trade Names
Sell, transfer, convey, grant any security interest in,
or otherwise encumber any existing or hereafter acquired
trademarks, service marks or trade names owned by the
Borrower.
6.6. Net Operating Loss
Permit or allow a Net Operating Loss of more than One
Million Dollars ($1,000,000.00) in any quarterly period or
in any amount for any two (2) consecutive quarterly periods
in any one (1) fiscal year.
6.7. Dividend Payout
Make a dividend payment (including both common stock
dividends and preferred stock dividends) which is greater
than ninety percent (90%) of Funds from Operations or that
would otherwise violate the United States federal tax laws
governing the qualifications of real estate investment
trusts. As used herein, "Funds from Operations" shall mean
consolidated net income of MAAC (computed in accordance with
GAAP), excluding gains (or losses) from debt restructuring
or sales of property, plus depreciation of real property.
Upon written pre-approval of the Administrative Agent,
exceptions may be made where the Board of Directors of MAAC
determines, in good faith, that a special dividend must be
paid to avoid taxes due to excess gains from the sale of
Property.
6.8. Other Financial Covenants
(a) Permit Total Liabilities to exceed sixty
percent (60%) of the Total Market Value of Assets.
(b) Permit Total Development and Joint Venture
Investment to exceed (i) eleven percent (11%) of the
Total Market Value of Assets from the date hereof
through December 31, 1998, and (ii) ten percent (10%)
of the Total Market Value of Assets, commencing on
January 1, 1999, until the termination of this
Agreement.
(c) Fail to maintain as of the end of each fiscal
quarter a ratio of Annualized EBITDA for trailing six
(6) months to Total Annualized Fixed Charges for the
same period of at least 1.75 to 1.0.
(d) Fail to maintain as of the end of each fiscal
quarter a ratio of Annualized EBITDA for trailing six
(6) months to Total Annualized Debt Service on
Indebtedness for the same period of at least 2.0 to
1.0.
(e) Fail to maintain at all times beginning on
the Effective Date a consolidated Tangible Net Worth
which is not less than Four Hundred Seventy Million
Dollars ($470,000,000) plus seventy percent (70%) of
net proceeds of new equity offerings.
(f) Permit the ratio of Adjusted NOI for all
Mortgaged Properties (based on the prior three (3)
months, annualized) to Assumed Debt Service to be less
than 1.0 to 1.0.
6.9. Control
Permit any Person, or group of Persons, acting in
concert for the purpose of influencing the affairs of MAAC
to control more than twenty percent (20%) of the outstanding
voting shares of MAAC.
6.10. Subsidiary Ownership
Sell, transfer or otherwise dispose of any shares of
stock or partnership interests or other ownership interest
in any Subsidiary that is the owner of a Mortgaged Property,
or permit any such shares of stock or partnership interests
or other ownership interest to be disposed of, sold, or
otherwise transferred.
6.11. Subsidiary Debt
Permit any Subsidiary that is the owner of a Mortgaged
Property to incur, create, or permit to exist any
indebtedness to any Person other than the Lenders with the
exception of purchase money security interests and
contractual obligations, incurred in the ordinary course of
the apartment leasing business.
VII. Default
7.1. Events of Default
Each of the following events shall be a Default by the
Borrowers:
(a) the Borrowers fail to pay
- any principal of a Loan when due,
- any interest on a Loan within five
(5) Business Days after the Administrative Agent
provides the Borrower with written notice of such
failure (except interest due and payable on the
Termination Date which must be paid on the
Termination Date), or
- a fee or other amount payable under
this Agreement within five (5) Business Days after
the Administrative Agent provides the Borrower
with written notice of such failure; or
(b) a representation, warranty, certification or
statement made by either Borrower in this Agreement or
in a certificate, financial statement or other document
delivered pursuant to this Agreement is materially
incorrect when made (or deemed made); or
(c) either Borrower fails to observe or perform
- a covenant applicable to it
regarding use of Loan proceeds, notice of Defaults
or maintenance of existence, merger, or sales of
assets; or
- a financial covenant applicable to
it contained in Section 5 or Section 6; or
(d) either Borrower fails to observe or perform a
covenant or agreement made by it in this Agreement
(other than those referred to in Section 7.1(a), 7.1(b)
or 7.1(c) above) for 30 days after the Administrative
Agent notifies the Borrower of such failure; or
(e) either Borrower defaults with respect to any
other agreement to which either Borrower is a party or
with respect to any other indebtedness when due or the
performance of any other obligation incurred in
connection with any indebtedness for borrowed money, if
the Borrower's obligations or exposure exceeds
$500,000, and if the effect of such default is to
accelerate the maturity of such indebtedness, or if the
effect of such default is to permit the holder thereof
to cause such indebtedness to become due prior to its
stated maturity; provided, however, if the amount in
default is less than $1,000,000 and no other default
exists under any other agreement described in this
subparagraph, and the Borrower is diligently and in
good faith contesting any default under this paragraph
to the reasonable satisfaction of the Administrative
Agent, it shall not be a Default hereunder; or
(f) either Borrower or any Subsidiary that is at
the time the owner of a Mortgaged Property
- commences a voluntary case or other
proceeding seeking liquidation, reorganization or
other relief for itself or its debts under a
bankruptcy, insolvency, receivership or similar
law or seeking the appointment of a trustee,
receiver, liquidator, custodian or similar
official of it or a substantial part of its
property,
- consents to any such relief or to
the appointment of or taking possession by any
such official in an involuntary case or other
proceeding commenced against it,
- makes a general assignment for the
benefit of creditors,
- fails generally to pay its debts as
they become due, or
- takes the appropriate action to
authorize any of the foregoing; or
(g) an involuntary case or other proceeding is
commenced against either Borrower or any Subsidiary
that is at the time the owner of a Mortgaged Property
seeking liquidation, reorganization or other relief
with respect to it or its debts under a bankruptcy,
insolvency, receivership or other similar law or
seeking the appointment of a trustee, receiver,
liquidator, custodian or similar official of the
Borrower or such Subsidiary or a substantial part of
its property, and such case or proceeding (i) results
in an order for relief or such adjudication or
appointment, or (ii) remains undismissed and unstayed
for 60 days; or
(h)
- a member of the Controlled Group
fails to pay when due an aggregate amount in
excess of $5,000,000 that it is liable to pay to
the PBGC or to a Pension Plan under Title IV of
ERISA,
- a member of the Controlled Group
and/or a plan administrator files a notice of
intent under Title IV of ERISA to terminate a
Pension Plan or Pension Plans having aggregate
Unfunded Vested Liabilities in excess of
$35,000,000 (collectively, a Material Pension
Plan),
- the PBGC institutes proceedings
under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer a Material
Pension Plan,
- a fiduciary of a Material Pension
Plan institutes a proceeding against a member of
the Controlled Group to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding is not
dismissed within 60 days thereafter,
- a condition exists that entitles
the PBGC to obtain a decree adjudicating that a
Material Pension Plan must be terminated, or
- either Borrower is notified by the
plan administrator of a Pension Plan that the
Pension Plan is in reorganization or is being
terminated, within the meaning of Title IV of
ERISA, and solely as a result of such
reorganization or termination the aggregate annual
contributions of the Borrower to all Pension Plans
that are then in reorganization or have been or
are being terminated is increased over the amounts
required to be contributed to such Pensions Plans
for their most recently completed plan years by an
amount exceeding $15,000,000; or
(i) a judgment or order against either Borrower
or any Subsidiary that is at the time the owner of a
Mortgaged Property for the payment of more than
$1,000,000 continues unsatisfied and unstayed for 60
days or a judgment creditor takes legal action to levy
on such judgment; or
(j) either Borrower or any Subsidiary that is at
the time an owner of a Mortgaged Property shall have
concealed, removed, or permitted to be concealed or
removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them,
or made or suffered a transfer of any of its property
which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or shall have
made any transfer of its property to or for the benefit
of a creditor at a time when other creditors similarly
situated have not been paid; or shall have suffered or
permitted, while insolvent, any creditor to obtain a
lien upon any of its property through legal proceedings
or distraint which is not vacated within thirty (30)
days from the date thereof; or
(k) there shall occur, whether in a single
transaction or successive transactions, a change or
changes in the ownership of more than five percent (5%)
of the partnership interests of Mid-America, or Mid
America shall grant or convey or permit to be granted
or conveyed, voluntarily or involuntarily, directly or
indirectly, any security interest in, pledge of or
other lien or encumbrance upon any owner's partnership
interests in Mid-America; or MAAC shall cease to be the
sole general partner of Mid-America; or any single
Person or related group of Persons shall control more
than twenty percent (20%) of MAAC's voting shares.
Exchanges by existing limited partners of Mid-America
of their respective limited partnership interests for
capital stock of MAAC, not exceeding, in the aggregate,
as to all such exchanges, transfers of not more than
thirty-five percent (35%) of the partnership interests
of Mid-America, shall not constitute an Event of
Default; or
(l) any officer of MAAC who, in the reasonable
judgment of the Administrative Agent, occupies a
position of substantial and material management,
responsibility ("Material Officer"), shall, by reason
of death, permanent disability, or departure from the
employ of MAAC, cease to be active in the management of
MAAC, and MAAC does not, within a period of five (5)
Business Days from such permanent disability, death or
departure, deliver written notice of such event to the
Administrative Agent and, within a period of thirty
(30) days from such permanent disability, death or
departure, secure a replacement for such officer, such
replacement to be, by reason of his or her experience
and credentials, reasonably satisfactory to and
approved by the Administrative Agent. For the purposes
of this Section (l), permanent disability means any
disability that prevents such Material Officer from
rendering, in any one calendar year, full-time services
for a period of thirty (30) consecutive days, or in the
aggregate, for forty-five (45) days, and (ii) at the
present time, the Persons whom the Administrative Agent
deems to be Material Officers are George E. Cates,
Simon R.C. Wadsworth, and H. Eric Bolton, Jr. Further,
the Administrative Agent shall have the right to review
and approve the credentials of any individual proposed
for the office of President or Executive Vice President
of MAAC; or
(m) Except as expressly permitted in Section 3.4,
or except with the consent of Two-Thirds of the
Lenders, which consent shall not be unreasonably
withheld, Mid-America or any Subsidiary granting to the
Administrative Agent a Mortgage shall sell, assign,
transfer, convey, lease with an option to purchase,
enter into a contract of sale, grant an option to
purchase, or encumber all or any part of its interest
in any Mortgaged Property or any portion thereof, or
permit the same to be sold, assigned, transferred,
conveyed, contracted for or encumbered; provided,
however, the entering of either a contract of sale or
option to purchase shall not be a default hereunder so
long as such contract of sale or option to purchase
requires the fulfillment of the conditions set forth in
Section 3.4 above; and provided further, however, that
the encumbrance of any Mortgaged Property by any
mechanic's lien claim shall not be deemed to constitute
an Event of Default so long as a Borrower shall
promptly notify the Administrative Agent of such
mechanic's lien claim, and shall diligently and in good
faith contest (or cause to be contested) the same by
appropriate proceedings and shall establish such
reserves with respect thereto as the Administrative
Agent shall specify; or
(n) MAAC fails to maintain its qualification as a
real estate investment trust under the Code.
7.2. Action on Default
During the continuance of a Default, the Administrative
Agent shall, if requested by Two-Thirds of the Lenders,
notify the Borrowers that
- the Borrowers' Rights are terminated,
whereupon such Borrowing Rights shall terminate, or
- all the Borrowers' Loans, with accrued
interest, and all other amounts payable by the
Borrowers under this Agreement, are immediately due and
payable, whereupon all such Loans, accrued interest and
other amounts payable under this Agreement shall be
immediately due and payable by the Borrowers without
presentment, demand, protest or other notice of any
kind, all of which the Borrowers waive, provided that
if the Default is one described in Section 7.1(f) or
7.1(g), then without notice to the Borrowers or other
act by the Administrative Agent or Two-Thirds of the
Lenders, the Borrowers' Borrowing Rights shall
immediately terminate, and the Loans, with accrued
interest, and other amounts payable under this
Agreement, shall become immediately due and payable by
the Borrowers without presentment, demand, protest or
other notice of any kind, all of which the Borrowers
waive, and the Administrative Agent may and shall, at
the request of Two-Thirds of the Lenders, exercise all
rights and remedies available to it hereunder and under
applicable law or in equity.
7.3. Notice of Default
On the request of a Lender, the Administrative Agent
shall promptly give the notice referred to in Section 7.1(d)
and shall promptly notify all the Lenders that such notice
has been given.
VIII. The Administrative Agent
8.1. Appointment and authorization
Each Lender irrevocably authorizes the Administrative
Agent to take such action as agent on the Lender's behalf
and to exercise such powers as are given to the
Administrative Agent under this Agreement, together with all
powers reasonably incidental thereto.
8.2. Other conduct
The Administrative Agent and its Affiliates
- shall have the same rights and powers under
this Agreement as any other Lender and may exercise or
refrain from exercising such rights and powers as
though it were not the Administrative Agent and
- may accept deposits from, lend money to and
generally engage in any kind of business with the
Borrowers or their Affiliates as if it were not the
Administrative Agent.
8.3. Scope of obligations
The obligations of the Administrative Agent under this
Agreement are only those expressly set forth herein.
Without limiting the generality of the foregoing, the
Administrative Agent shall not be required to take any
action with respect to a Default except as expressly
provided in Section 7. The Administrative Agent shall
administer the Loans and perform its duties hereunder using
the same degree of care it uses in the administration of its
own loans of similar amount and structure.
8.4. Consultation with experts
The Administrative Agent may consult with legal
counsel, independent public accountants and other experts
selected by the Administrative Agent and shall not be liable
for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel,
accountants or experts.
8.5. Liability of Administrative Agent
Neither the Administrative Agent nor any of its
directors, officers, agents, or employees shall be
- liable for any action it takes or does not
take in connection with this Agreement (i) with the
consent or at the request of Two-Thirds of the Lenders,
unless the consent or request of all of the Lenders is
expressly required by this Agreement, or (ii) in the
absence of its own gross negligence or willful
misconduct, or
- responsible for or have a duty to ascertain,
inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement
or a Borrowing, (ii) a Borrower's performance or
observance of any covenant or agreement, (iii) the
satisfaction of any condition in Section 3 (except for
the receipt of items required to be delivered to the
Administrative Agent), or (iv) the validity,
effectiveness or genuineness of this Agreement or any
other instrument or writing furnished in connection
herewith.
The Administrative Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate,
statement or other writing (which may be a bank wire, telex,
telecopy or similar writing) it believes is genuine or
signed by the proper parties.
8.6. Indemnification
Each Lender shall, ratably in accordance with its
Commitment, indemnify the Administrative Agent (to the
extent not reimbursed by the Borrowers) against any cost,
expense, claim, demand, action, loss or liability (except
such as result from the Administrative Agent's gross
negligence or willful misconduct) that the Administrative
Agent may suffer or incur in connection with this Agreement
or any action the Administrative Agent takes or omits
hereunder.
8.7. Successor Administrative Agent
The Administrative Agent may resign by giving notice
thereof to the Lenders and the Borrowers. So long as no
Default exists, the Administrative Agent may be removed upon
the request of the Borrowers. Upon such resignation or
removal, the Borrowers may appoint a successor
Administrative Agent with the consent of Two-Thirds of the
Lenders. If the Borrowers are in Default, Two-Thirds of the
Lenders may appoint a successor Administrative Agent. If
the Administrative Agent resigns or is removed and no
successor Administrative Agent is so appointed and accepts
such appointment within 30 days after the resigning
Administrative Agent's notice of resignation or its removal,
then the resigning or removed Administrative Agent may, on
behalf of the Lenders, shall appoint a successor
Administrative Agent that is a commercial bank organized or
licensed under the laws of the United States of America or
of any State thereof and having a combined capital and
surplus of at least $100,000,000. Upon a successor
Administrative Agent's written acceptance of its appointment
as Administrative Agent, the successor Administrative Agent
shall succeed to and become vested with all the rights and
duties of the resigning or removed Administrative Agent, and
the resigning or removed Administrative Agent shall be
discharged from its duties and obligations as Administrative
Agent. After the Administrative Agent's resignation or
removal, the provisions of this Section 8 shall continue to
inure to its benefit as to any action it took or omitted to
take while it was Administrative Agent.
8.8. Fees
The Borrowers shall pay the Administrative Agent for
its account such fees for its services under this Agreement
as the Borrowers and the Administrative Agent may agree.
IX. Change in circumstances
9.1. Eurocurrency Reserve Requirements
If a Lender notifies the Administrative Agent and the
Borrowers that the Lender is or will be generally subject to
Eurocurrency Reserve Requirements as a result of which the
Lender will incur additional costs on its Loans, then the
Lender shall, to the extent such costs are actually
incurred, for each day from the later of the date of such
notice and the date on which the Lender becomes subject to
the Eurocurrency Reserve Requirements, be entitled to
additional interest on each Loan made by the Lender at a
rate per annum (rounded upward to the nearest .01%) equal to
the remainder obtained by subtracting (i) LIBOR for the
Eurodollar Loan from (ii) the rate obtained by dividing such
LIBOR by the excess of 100% over the Eurocurrency Reserve
Requirements.
Such additional interest shall be payable in arrears to
the Administrative Agent, for the account of the Lender, on
each date interest is payable on the Loan.
A Lender that gives a notice under this Section 9.1
shall promptly withdraw such notice by notifying the
Administrative Agent and the Borrowers if Eurocurrency
Reserve Requirements cease to apply to it or the
circumstances giving rise to such notice otherwise cease to
exist.
9.2. Increased cost or reduced return
If any Regulatory Action (other than the imposition of
Eurocurrency Reserve Requirement) taken after the date
hereof
- imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against
assets of, deposits with or for the account of or
credit extended by a Lender or its Office,
- imposes on a Lender or its Office or the
London interbank market any other condition affecting
the Lender's Eurodollar Loans, or
- imposes, modifies or deems applicable any
standards of capital adequacy, and such Regulatory
Action will, in the Lender's judgment,
- increase the cost to the Lender or Office of
making or maintaining any Eurodollar Loan,
- reduce the amount receivable by the Lender or
Office under this Agreement with respect to any such
Eurodollar Loan, or
- reduce the rate of return on the Lender's
capital as a consequence of its obligations under this
Agreement (taking into consideration the Lender's
policies on capital adequacy) by an amount the Lender
deems material, then the Lender shall promptly notify
the Borrowers and the Administrative Agent thereof,
enclosing (i) a certificate of an officer of the Lender
describing the Regulatory Action leading to the
increased costs or reduction with, if possible, a copy
of the relevant law, regulation, interpretation or
guideline and (ii) the Lender's calculation setting
forth in reasonable detail the dollar amount of the
increased costs or reduction.
determination of amount
In calculating any amount payable under this Section
9.2, a Lender may use reasonable averaging and attribution
methods. A Lender's determination of the amount shall be
conclusive in the absence of manifest error.
payment of compensation
Subject to the following sentence, the Borrowers shall
pay a Lender within 30 days after receipt of a notice from
the Lender under this Section 9.2 such amounts as will
compensate the Lender for the increased costs or reduction.
The Borrowers will not, however, be required to pay the
Lender any amount set forth in the notice that relates to
any period prior to the 30th day before the date the Lender
gives the notice. Each Lender agrees that it shall notify
the Borrowers immediately upon becoming aware of such
increased costs.
Base Rate election by Borrower
If a Lender demands compensation under this Section 9.2
with respect to a Eurodollar Loan, then the Borrowers may,
on at least five Business Days' prior notice to the Lender
and the Administrative Agent, elect that, until the Lender
or the Administrative Agent notifies the Borrowers that the
circumstances giving rise to the demand for compensation no
longer apply, all Loans to the Borrowers that would
otherwise be made by the Lender as Eurodollar Loans, shall
be made instead as Loans at the Base Rate (on which interest
and principal shall be payable contemporaneously with the
related Loans of the other Lenders).
9.3. LIBOR unavailable or inadequate
If on or before the second Business Day before an
Interest Period for a Borrowing
- dollar deposits in the applicable amounts are
not being offered to the Administrative Agent in the
relevant market for the Interest Period, or
suspension of obligation to make Loans
- Two-Thirds of the Lenders advise the
Administrative Agent that the LIBOR will not adequately
and fairly reflect the cost to such Lenders of funding
their Loans for the Interest Period, then the
Administrative Agent shall promptly notify the
Borrowers and the Lenders thereof, whereupon the
obligations of the Lenders to make, or permit
Conversion of Loans into, Eurodollar Loans shall be
suspended, and any subsequent request by the Borrowers
for a Eurodollar Loan or for Conversion into a
Eurodollar Loan shall be deemed to be a request for, or
for Conversion into, a Loan bearing interest at the
Base Rate.
suspension after Borrowing Notice given
If the Lenders' obligations to make Loans is
suspended pursuant to this Section 9.3 after the
Borrowers give the Borrowing Notice for the Borrowing
that includes such Loans, then unless the Borrowers
notify the Administrative Agent at least one Business
Day before the date of such Borrowing that the
Borrowers elect not to borrow on such date, the
Borrowing shall instead accrue interest at the Base
Rate.
9.4. Illegal Loans
If, after the date of this Agreement, any Regulatory
Action makes it unlawful or impossible for a Lender or its
Office to make, maintain or fund its Eurodollar Loans, and
the Lender so notifies the Administrative Agent, then the
Administrative Agent shall promptly notify the other Lenders
and the Borrowers, whereupon the obligation of the Lender to
make or permit Conversions into Eurodollar Loans shall be
suspended.
prepayment of illegal Loans
If a Lender determines that it may not lawfully
continue to maintain an outstanding Eurodollar Loan to the
Borrowers to the end of the Eurodollar Loan's applicable
Interest Period and so specifies in the notice it gives
pursuant to this Section 9.4, the Administrative Agent shall
so notify the Borrowers, and the Borrowers shall immediately
prepay in full the unpaid principal amount of the Eurodollar
Loan with accrued interest. As each such Loan is prepaid,
the Lender shall make a Loan bearing interest at the Base
Rate to the Borrower in an equal principal amount with
interest and principal payable contemporaneously with the
related Loans of the other Lenders.
new Loans made as Base Rate Loans
If the obligation of a Lender to make Eurodollar Loans
is suspended pursuant to this Section 9.4, then until the
Lender or the Administrative Agent notifies the Borrowers
that the circumstances giving rise to the suspension no
longer apply, all Loans that would otherwise be made by the
Lender as Eurodollar Loans shall be made instead as Loans
accruing interest at the Base Rate (on which interest and
principal shall be payable contemporaneously with the
related Loans of the other Lenders).
9.5. Termination of suspension
When the circumstances giving rise to a suspension of
the obligation to make Eurodollar Loans under Section 9.3 or
Section 9.4 no longer exist, the Administrative Agent shall
so notify the Borrowers and the Lenders, whereupon the
suspension shall terminate.
9.6. Taxes on payments
(a) Each Lender shall deliver to each of the
Borrowers and to the Administrative Agent:
- no more than 30 days after the date it
becomes a Lender, either a statement that it is
incorporated in the United States of America or, if it
is not so incorporated, two duly completed copies of,
as applicable, a United States Internal Revenue Service
Form 1001 or Form 4224 (including a Form W-9 or
equivalent) promulgated under the Internal Revenue Code
(each, as applicable to any Person and together with
any successor form, a "Tax Form") indicating that the
Lender is entitled to receive payments under this
Agreement without deduction or withholding of United
States federal income Taxes as permitted by the
Internal Revenue Code,
- such extensions or renewals of the Tax Form
as applicable because of expiration of the Tax Form or
as the Borrowers reasonably request (but only to the
extent the Lender determines that it may properly
effect such extensions or renewals under applicable Tax
treaties, laws, regulations and directives), and
- if a Loan is transferred to an Affiliate of
the Lender, a new Tax Form for the Affiliate.
The Borrowers and the Administrative Agent may each
rely on a Tax Form in its possession until the
earlier of the expiration date of the Tax Form or
receipt of any revised or successor form pursuant to
this Section 9.6.
(b) If a Tax imposed by the United States of
America, or any political subdivision or taxing
authority thereof, subjects a Lender or its Office to
any deduction or withholding on a payment (including
fees) on its Loans to the Borrowers, the Lender shall
promptly notify the Borrowers of the Tax, enclosing a
copy of the relevant statute, regulation or
interpretation requiring the deduction or withholding
and setting forth in reasonable detail the Lender's
calculation of the dollar amount of the Tax. Within 30
days after it receives the notice (or a longer period
that complies with the law relating to the Tax without
subjecting the Lender to additional payments with
respect to the Tax), the Borrowers shall, as requested
by the Lender in the notice,
- increase the amount of the payment so that
the Lender will receive a net amount (after deduction
of the Tax) equal to the amount due hereunder,
- pay the Tax to the appropriate taxing
authority for the Lender's account, and
- as promptly as possible, send the Lender
evidence showing payment of the Tax, together with any
additional documentary evidence the Lender reasonably
requests.
The Borrowers shall indemnify a Lender for any
incremental Taxes, interest or penalties that may become
payable as a result of the Borrowers' failure to comply with
this Section 9.6.
(c) Notwithstanding anything to the contrary in
this Section 9.6, the Borrowers shall not be required
to make any payment to a Lender or taxing authority
under this Section 9.6 as a result of any deduction or
withholding or incremental Tax, interest or penalty
- that is caused by the Lender's failure or
inability to furnish the Borrowers with a Tax Form, or
an extension or renewal thereof, pursuant to this
Section 9.6 unless such failure or inability is the
result of a change in an applicable law, regulation or
Tax treaty or in the interpretation thereof by a
regulatory authority that becomes effective after the
date of this Agreement, or
- for any period for which the Lender or its
applicable Office has furnished a Tax Form to the
Borrowers that incorrectly indicates that the Lender or
its applicable Office is not subject to such deduction
or withholding.
9.7. Change of Office
A Lender shall designate a different Office for its
Loans if such designation will avoid the need for giving a
notice pursuant to Section 9.4 with respect to suspension of
Loans, or reduce the amount of compensation under Section
9.2 (Increased cost or reduced return), or Section 9.6,
(Taxes on payments), and will not, in the Lender's judgment,
be disadvantageous to the Lender.
9.8. Replacement of Lender
If
- the obligation of a Lender to make Eurodollar
Loans is suspended under Section 9.4 (Illegal Loans),
- a Lender demands compensation or payment
under Section 9.2 (Increased cost or reduced return),
or Section 9.6 (Taxes on payments), or
- a Lender's senior unsecured debt is rated
lower than BBB- by S&P, then the Borrowers may, on five
Business Days' notice to the Administrative Agent and
the Lender, select a replacement bank or banks (which
may be one or more of the other Lenders) to purchase
the Lender's Loans and assume its Commitment. The
purchase price for the Lender's Loans shall be the sum
of the unpaid principal amount of the Loans, with
accrued interest, the Lender's share of accrued but
unpaid Fees and other amounts due to the Lender under
this Agreement (including any amounts due under Section
1.20 (Funding losses) for each Loan so purchased on a
date other than the last day of the Interest Period for
the Loan) less the prorated portion of the Fees
previously received by such Lender, from the date of
such purchase through the last day of the applicable
period for which the Fees had been paid. Upon the
execution and delivery of an assignment and assumption
agreement substantially in the form of Exhibit G by
such Lender and each replacement bank (and, if the
replacement bank is not a Lender, with the subscribed
consent of the Borrowers and the Administrative Agent),
each such replacement bank shall be deemed to be, a
'Lender' for all purposes of this Agreement, and the
Administrative Agent shall notify the other Lenders
accordingly.
X. Miscellaneous
10.1. Notices
Except as otherwise stated, all notices, requests,
consents and other communications to any party to this
Agreement shall be in writing. For purposes of this Section
10.1 (writing) shall include writings in any form that
provides the recipient, using the systems routinely used by
the recipient for communication, with a permanent record and
a human-readable text. All notices to a party shall be
given at the addresses, telecopy number or other electronic
addresses or by other methods set forth on Schedule 3 or at
such other addresses, numbers or by such other reasonable
methods as such party may specify for the purpose by notice
to the Administrative Agent and the Borrowers (each a
"Notice Address").
Each notice, request, consent or other communication
given under this Agreement shall be effective when received
at the number or address or by the method specified pursuant
to this Section 10.1. Any requirement in this Agreement
that a notice or other communication be 'prompt' or be given
'promptly' shall mean that such notice or other
communication shall promptly be transmitted by telephone (if
oral notice is permitted), bank wire, telex, telecopy,
computer link or other means that normally provides nearly
instantaneous transmission.
10.2. No waivers; remedies cumulative; integration; survival
No failure or delay by the Administrative Agent or a
Lender in exercising a right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies provided in
this Agreement shall be cumulative and not exclusive of
other rights or remedies provided by law. This Agreement
constitutes the entire agreement and understanding among the
parties and supersedes all prior agreements and
understandings, oral or written, relating to its subject
matter.
All covenants, agreements, representations and
warranties of the Borrowers in this Agreement or in
certificates or other documents delivered pursuant to this
Agreement shall be considered to have been relied on by the
Lenders and shall survive the making of any Loans,
regardless of any investigation made by or on behalf of the
Lenders, and shall continue in full force and effect as long
as any obligation of the Borrowers under this Agreement is
unpaid or the Borrowers' Borrowing Rights have not
terminated.
10.3. Expenses; documentary Taxes
The Borrowers shall pay, and shall be jointly and
severally liable for, the reasonable Expenses of the
Administrative Agent in connection with (i) its drafting and
negotiation of this Agreement, any waiver or consent
hereunder or any amendment hereof (all of which documents
shall be prepared by counsel for the Administrative Agent)
and (ii) the effectiveness of this Agreement under Section
3.1.
If a Default by the Borrowers occurs, the Borrowers
shall pay the reasonable Expenses incurred by the
Administrative Agent in connection with such Default. In
addition, if there is a Default by the Borrowers, the
Borrowers shall pay the reasonable Expenses incurred by any
Lender, including collection and other enforcement
proceedings, resulting therefrom.
The Borrowers shall, jointly and severally, indemnify
the Administrative Agent and the Lenders against all
transfer, documentary or similar Taxes payable by reason of
the execution and delivery of the Notes and this Agreement,
and the execution, delivery and recordation of the
Mortgages.
10.4. Indemnification
Each Borrower shall indemnify the Administrative Agent
and each Lender and shall hold the Administrative Agent and
each Lender jointly and severally harmless from and against
any and all liabilities, damages, costs and Expenses of any
kind in connection with an actual or threatened
investigative, administrative or judicial proceeding
(whether or not the Administrative Agent or Lender is a
party thereto) (collectively, "Claims") incurred by the
Administrative Agent or Lender to the extent arising out of
- a Borrower's breach of, or any Default under,
this Agreement,
- any claim by a Person not a party to this
Agreement that either Borrower's, the Administrative
Agent's or a Lender's conduct in connection with this
Agreement is unlawful by a court of competent
jurisdiction or has or will violate such Person's legal
rights, but only to the extent that the Lender's or
Administrative Agent's conduct is deemed unlawful or
violative due to some action or inaction of the
Borrowers or either of them,
- an actual or proposed use of Loan proceeds by
the Borrowers, or
- an action initiated by either or both
Borrowers against the Administrative Agent or a Lender
relating to this Agreement, unless a court of competent
jurisdiction enters a final non-appealable order on the
entire merits of the controversy in such action in
favor of the Borrowers.
Notwithstanding anything to the contrary in this
Section 10.4, neither the Administrative Agent nor a Lender
shall be indemnified for any Claim to the extent such Claim
- is caused by the Administrative Agent's or
Lender's gross negligence or willful misconduct, as
determined in a final non-appealable order by a court
of competent jurisdiction, or
- results from a Lender's claims against other
Lenders not attributable to a Borrower's actions and
for which the Borrowers otherwise have no liability.
10.5. Sharing of set-offs
If a Lender exercises a right of set-off or
counterclaim or otherwise receives payment of a portion of
the aggregate amount of principal and interest due on its
Loans to the Borrowers, and such payment is greater than the
proportion received by any other Lender of the aggregate
amount of principal and interest due on such other Lender's
Loans to the Borrowers, the Lender receiving the
proportionately greater payment shall purchase
participations in the Loans made to the Borrowers by the
other Lenders, and other adjustments shall be made as
required so that all payments of principal and interest on
the Loans to the Borrowers shall be shared by the Lenders
pro-rata, provided that this Section 10.5 shall not impair a
Lender's right to exercise, to the extent permitted by
applicable law, a right of set-off or counterclaim and to
apply the amount subject to such exercise to the payment of
indebtedness of the Borrowers other than indebtedness on
Loans. A Participant in a Loan, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights
of set-off or counterclaim and other rights with respect to
its participation as fully as if the Participant were a
direct creditor of the Borrowers in the amount of such
participation.
10.6. Amendments and waivers
An amendment to or waiver of a provision of this
Agreement must be in writing and signed by the Borrowers and
Two-Thirds of the Lenders (and, if the rights or duties of
the Administrative Agent are affected thereby, by the
Administrative Agent), provided that each affected Lender
must sign an amendment, waiver or consent that
(a) increases or decreases the Commitment of such
Lender or subjects such Lender to additional
obligations, except as contemplated in Section 9.8
(Replacement of Lender),
(b) reduces the principal of or rate of interest
on any Loan or any fees hereunder,
(c) postpones the Maturity Date or other date
fixed for payment of principal or interest on a Loan or
of any fees hereunder or for the termination of the
Borrowers' Borrowing Rights,
(d) changes the percentage of the Commitments or
of the aggregate unpaid principal amount of the Loans,
or the Borrowing Base, or the number of Lenders
required for the Lenders to take any action under this
Agreement,
(e) amends Section 1.19 (Pro-rata treatment),
(f) amends this Section 10.6, or
(g) releases substantially all of the Mortgaged
Property.
10.7. Successors and assigns
(a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties
and their respective successors and assigns, except
that neither Borrower may assign, delegate or otherwise
transfer any of its rights or obligations under this
Agreement.
(b) A Lender may grant a bank or other
institution (a "Participant") a participating interest
in its Commitment or some or all of its Loans. If a
Lender grants a participating interest to a
Participant, the Lender shall remain responsible for
the performance of its obligations under this
Agreement, and the Borrowers and the Administrative
Agent shall continue to deal solely with the Lender in
connection with this Agreement, regardless of whether
the Lender has notified the Borrowers and the
Administrative Agent of the grant. An agreement
granting such a participating interest shall provide
that the Lender shall retain the sole right and
responsibility to enforce the obligations of the
Borrowers under this Agreement, including the right to
approve any amendment, modification or waiver of any
provision of this Agreement. Subject to Section
10.7(e) (funding losses and changed circumstances), a
Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of
Section 9 (Change in circumstances), with respect to
its participating interest. An assignment or other
transfer that is not permitted by Section 10.7(c)
(assignments), or 10.7(d) (assignment to Federal
Reserve Bank), shall be given effect only to the extent
that it is a participating interest granted in
accordance with this Section 10.7(b).
(c) A Lender may assign to one or more banks or
other institutions (each an "Assignee") all or a
proportionate part of its rights and obligations under
this Agreement, and each Assignee shall assume such
rights and obligations, pursuant to an assignment and
assumption agreement in substantially the form of
Exhibit G. The assignment and assumption agreement
shall be signed by the Assignee and the transferor
Lender, with (and subject to) the subscribed
acknowledgment and consent of the Administrative Agent
and the subscribed consent, which shall not be
unreasonably withheld, of the Borrowers, provided that
such consents shall not be required if the Assignee is
a Lender or a Federal Reserve Bank, and provided
further that the consent of the Borrowers shall not be
required after and during the continuance of a Default.
(d) Upon the later of (i) the effective date
stated in the assignment and assumption agreement
(which shall not be earlier than the fifth Business Day
after execution of such agreement) or (ii) payment by
the Assignee to the transferor Lender of the purchase
price agreed between them, and payment by the
transferor Lender or the Assignee to the Administrative
Agent of a registration and processing fee of $2,500,
(i) the Assignee shall be a Lender
party to this Agreement and shall have all the
rights and obligations of a Lender with the
Commitment set forth in the assignment and
assumption agreement,
(ii) the transferor Lender shall be
released from its obligations under this Agreement
to a corresponding extent so long as the Assignee
at the time of transfer has a net worth at least
equal to the net worth of the transferor Lender,
(iii) The Borrower shall
execute and deliver replacement
Notes to the order of the Assignee
and, if necessary, the assigning
Lender; and
(iv) no further consent or action by any
party shall be required.
(e) A Lender may assign all or a proportionate
part of its rights under this Agreement to a Federal
Reserve Bank, and the Borrowers, if requested by the
Lender, shall issue a promissory note to be pledged to
the Federal Reserve Bank evidencing the Borrowers'
obligations on the Lender's Loans to the Borrowers.
Such assignment shall not release the transferor Lender
from its obligations under this Agreement.
(f) No Assignee, Participant or other transferee
of any Lender's rights may receive any greater payment
under Section 1.20 (Funding losses), and Section 9.2
(Increased cost and reduced return), than the
transferor Lender would have received with respect to
the rights transferred, unless such transfer was made
with the Borrowers' prior consent.
(g) The Administrative Agent shall maintain at
one of its offices in Birmingham, Alabama, a copy of
each assignment and assumption agreement delivered to
it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and
principal amount of the Loans owing to, each Lender
(the "Register"). The entries in the Register shall be
conclusive in the absence of manifest error, and the
Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the
Register as a Lender for all purposes of this
Agreement. The Register shall be available for
inspection by the Borrowers or Lender at any reasonable
time upon reasonable notice.
(h) If an Assignee is not already a Lender, it
shall deliver to the Administrative Agent a completed
administrative questionnaire in the form required by
the Administrative Agent. Upon its receipt of (i) an
assignment and assumption agreement executed by an
assigning Lender and an Assignee (and, if required, by
the Borrowers), (ii) the completed administrative
questionnaire (unless the Assignee is already a Lender)
and (iii) the registration and processing fee referred
to in Section 10.7(c), the Administrative Agent shall
record the information contained in the assignment and
assumption agreement in the Register and give prompt
notice thereof to the Lenders.
10.8. Borrowers' liability
The parties acknowledge that the rights and obligations
(including the representations, warranties, agreements,
breaches, liabilities, indemnities and Defaults) of the
Borrowers under this Agreement are joint and several.
10.9. No reliance on Margin Stock collateral
Each Lender represents to the Administrative Agent and
the other Lenders that it is not relying upon any Margin
Stock as collateral in the extension or maintenance of the
credit provided for in this Agreement.
10.10. Credit decision
Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it
deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender,
and based on such documents and information as it deems
appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this
Agreement.
10.11. Alabama law
This Agreement shall be governed by and construed in
accordance with the laws of the State of Alabama.
10.12. Waiver of jury trial
The Borrowers, the Lenders and the Administrative Agent
hereby irrevocably and unconditionally waive trial by jury
in any legal action or proceeding relating to this Agreement
and for any counterclaim therein.
10.13. Venue of Actions
As an integral part of the consideration for making of
the Loans, it is expressly understood and agreed that no
suit or action shall be commenced by either Borrower, or by
any successor, personal representative or assignee thereof,
with respect to the Loans contemplated hereby, or with
respect to this Agreement or any other document or
instrument which now or hereafter evidences or secures all
or any part of the Loans, other than in a state court of
competent jurisdiction in and for the County of the State in
which the principal place of business of the Administrative
Agent is situated, or in the United States District Court
for the District in which the principal place of business of
the Administrative Agent is situated, and not elsewhere.
Nothing in this paragraph contained shall prohibit the
Administrative Agent from instituting suit in any court of
competent jurisdiction for the enforcement of its rights
hereunder or in any other document or instrument which
evidences or secures the loan indebtedness.
10.14. Execution
This Agreement may be executed in counterparts.
Delivery of an executed counterpart signature page to this
Agreement, including delivery by telecopier, shall be
effective as delivery of a manually executed counterpart of
this Agreement.
10.15. Survival
Section 9 (Change in circumstances), Section 10.3
(Expenses), and Section 10.4 (Indemnification) shall survive
termination of this Agreement or the Borrowers' Borrowing
Rights.
XI. Definitions and usages
11.1. Definitions
In this Agreement, the following terms shall have the
following meanings:
Adjusted NOI shall mean, as to any Mortgaged Property,
for any period, the actual Net Operating Income of such
Mortgaged Property for such period; provided that (i) all
annual expenses, including, but not limited to, taxes and
insurance, shall be accounted for on an accrual basis; and
(ii) expenses shall include an assumed management fee of
five percent (5%) and capital expenditures of Two Hundred
Dollars ($200.00) per rental unit on average per year.
Administrative Agent shall mean AmSouth Bank, its
successors or assigns.
Advance Rate shall mean for Mortgaged Properties: (a)
the amount shown as the Advance Rate on Schedule 2 for the
Initial Properties from the date hereof until the first
quarterly determination of Fair Market Value, which shall
occur on March 22, 1998, except for Paddock Park Ocala II,
which shall occur on June 22, 1998; (b) subject to
subclauses (d) and (e) herein, 60% of Fair Market Value for
a Stabilized Property (including the Initial Properties
after the first quarterly determination of Fair Market
Value); (c) subject to adjustment as provided in Section
1.16(c), 50% of the Project Budget to the extent of Work
Completed for a Development Project; (d) for the period
commencing on the date a Development Project is converted to
a Stabilized Property in accordance with Section 3.5(b),
until the next succeeding quarterly determination of Fair
Market Value, 60% of the appraised value of the subject
Development Project, as reflected in the appraisal ordered
and approved by the Administrative Agent; and (e) for the
period commencing on the date a Stabilized Property is added
to the Borrowing Base and continuing thereafter through a
full calendar quarter, 60% of the appraised value of the
subject Stabilized Property, as reflected in the appraisal
ordered and approved by the Administrative Agent.
Advances or Loan Advances shall mean advances of
principal upon the Loans by the Lenders to either or both of
the Borrowers under the terms of this Agreement,
specifically including, without limitation, advances under
the Swing Line Facility, the Notes and draws under the
Letters of Credit.
Affiliate of a specified Person means another Person
that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under
common control with the specified Person. In the foregoing
definition, control of a Person means possession, directly
or indirectly, of the power to direct or cause the direction
of the management or policies of a Person, whether through
the ownership of voting securities, by contract or
otherwise.
Aggregate Commitment means the sum of the Commitments
of the Lenders at any time available to the Borrower under
the Loans.
Annualized Adjusted NOI shall mean, for the most recent
two calendar quarters, the Adjusted NOI for such calendar
quarters, multiplied by the integer two (2).
Annualized EBITDA shall mean EBITDA for the most recent
two calendar quarters, multiplied by the integer two (2).
Apartment Community shall mean an apartment community
owned by either Borrower or Subsidiary, whether or not it is
subject to a Mortgage.
Assignee shall have the meaning assigned to such term
in Section 10.7(c).
Assumed Debt Service shall mean the assumed
amortization of the outstanding Loans, calculated on the
basis of a 25-year amortization and an 8.5% interest rate.
Base Rate shall mean (a) from the date hereof through
June 30, 1998, a rate per annum equal to the Prime Rate
minus .75%, and (b) commencing July 1, 1998, but subject to
Section 1.13(e), continuing thereafter until the Loans are
paid in full, a rate equal to the Prime Rate. Any change in
the Base Rate due to a change in the Prime Rate shall be
effective on the effective date of such change in the Prime
Rate.
Base Rate Loan means a Loan bearing interest at the
Base Rate.
Borrowers mean MAAC and Mid-America, jointly, and,
individually, a "Borrower".
Borrowing shall have the meaning assigned to that term
in Section 1.2.
Borrowing Base is the limitation on the amount of the
Loan which may be outstanding at any time and from time to
time during the term of this Agreement. The Borrowing Base
shall equal (a) the Advance Rate for Stabilized Properties
which at the time of determination are subject to the
Mortgages plus (b) the Advance Rate for Development Projects
which at the time of determination are subject to Mortgages;
provided, however, the amount available under (b) above
shall in no event exceed $50,000,000 in the aggregate at any
one time outstanding.
Borrowing Base Certificate shall mean a certificate
substantially in the form of Exhibit F, duly executed by the
Certifying Officer, setting forth in reasonable detail the
calculations for each component of the Borrowing Base.
Borrowing Notice shall have the meaning assigned to
that such term in Section 2.1.
Borrowing Rights of the Borrowers means the rights of
the Borrowers under this Agreement to require the Lenders to
make Loans.
Business Day means a day other than a Saturday, Sunday
or other day on which commercial banks in Birmingham,
Alabama and New York, New York are authorized or required by
law to close.
Certificate of Occupancy shall mean a certificate of
occupancy issued by the governmental authority in whose
jurisdiction the subject Mortgaged Property lies, or such
other comparable governmental approval if a certificate of
occupancy is not utilized by the applicable governmental
authority.
Certifying Officer shall mean MAAC's chief financial
officer.
Claims shall have the meaning assigned to that term in
Section 10.4.
Code shall mean the Internal Revenue Code of 1986, as
amended, or any successor Federal tax code.
Commitment shall mean the portion of the Loans to be
made available by a Lender.
Controlled Group means, for a Borrower, all members of
a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common
control that, together with the Borrower, are treated as a
single employer under Section 414 of the Internal Revenue
Code.
Conversion means shall have the meaning assigned to
that term in Section 2.4.
Conversion Date shall mean the date on which a
Conversion occurs.
Conversion Notice shall have the meaning assigned to
that term in Section 2.4.
Curative Measure shall mean the repairs, renovations
and replacements recommended for immediate action for an
Apartment Community in an Inspection Report.
Debt of a Person at a date means, without duplication,
- all obligations of the Person for borrowed
money, including all obligations of the Person
evidenced by bonds, debentures, notes or other similar
instruments,
- all obligations of the Person to pay the
deferred purchase price of property or services, except
trade accounts payable and deferred compensation
arising in the ordinary course of business,
- all obligations of the Person as lessee under
capital leases,
- all Debt of others secured by a Lien on
assets of the Person, whether or not the Debt is
assumed by the Person,
- all Debt of others Guaranteed by the Person,
- all letters of credit, banker's acceptances,
swap transactions and similar hedge agreements, and
- all Debt of any partnership for which such
Person is a general partner.
Default means a condition or event that constitutes an
event of default hereunder or that with the giving of notice
or lapse of time or both would, unless cured or waived,
become a Default, as more specifically set forth in Section 7.
Development Project is a real property which is being
developed into, or upon which improvements are being
constructed to enable it to become, an Apartment Community.
EBITDA shall mean, on a consolidated basis, earnings
before interest, taxes, depreciation and amortization,
calculated in accordance with GAAP.
Environmental Laws means all applicable local, state or
federal laws, rules or regulations pertaining to
environmental regulation, contamination or cleanup,
including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976 or
any state lien or superlien or environmental cleanup
statutes.
ERISA means the Employee Retirement Income Security Act
of 1974.
Eurocurrency Reserve Requirements for any day means the
aggregate of the maximum reserve percentage (including any
marginal, special, emergency or supplemental reserves)
established by the Federal Reserve Board and any other
banking authority to which a Lender is subject and
applicable to 'eurocurrency liabilities', as such term is
defined in Regulation D of the Federal Reserve Board, or any
similar category of assets of liabilities relating to
eurocurrency fundings. Eurocurrency Reserve Requirements
shall be adjusted automatically on and as of the effective
date of any change in such reserve percentage.
Eurodollar Borrowing means a Borrowing bearing interest
at the Eurodollar Rate.
Eurodollar Loan means a Loan bearing interest at the
Eurodollar Rate.
Eurodollar Rate shall mean the LIBOR Rate, plus the
applicable Margin.
Existing Letters of Credit means (a) that certain
letter of credit issued by AmSouth Bank, dated July 7, 1997,
in an amount not to exceed in the aggregate $7,230,903.00,
bearing Letter of Credit No. S314065; (b) that certain
letter of credit issued by AmSouth Bank, dated May 6, 1996,
in an amount not to exceed in the aggregate $168,000,
bearing Letter of Credit No. S312398; (c) that certain
letter of credit issued by AmSouth Bank, dated January 29,
1997, in an amount not to exceed in the aggregate
$455,778.21, bearing Letter of Credit No. S312294; (d) that
certain letter of credit issued by AmSouth Bank, dated
December 19, 1997, in an amount not to exceed in the
aggregate $6,057,206, bearing Letter of Credit No. S314660;
(e) that certain letter of credit issued by AmSouth Bank,
dated January 15, 1998, in an amount not to exceed in the
aggregate $11,005,940, bearing Letter of Credit No. S314760;
and (f) any and all replacements and substitutions of any of
the letters of credit discussed in (a), (b), (c), (d) and
(e).
Expenses of a Person means the Person's reasonable out
of pocket expenses (including reasonable fees and expenses
of the Person's outside counsel) and reasonably allocable
expenses of counsel who are employees of the Person.
Fair Market Value shall be determined quarterly, on a
"Net Operating Income" basis, not later than the twenty
second (22nd) day of each calendar quarter, but as of the
last day of the immediately preceding calendar quarter, from
the Effective Date until the Termination Date of the Loans,
by dividing the prior calendar quarter's annualized Adjusted
NOI of Stabilized Properties subject to Mortgages by 9.5%.
Federal Funds Rate for a day means the rate per annum
(rounded upwards, if necessary, to the nearest 0.01%) equal
to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve
System arranged by federal funds brokers on the day, as
published by the Federal Reserve Bank of New York on the
Business Day following that day, provided that:
- if the day is not a Business Day, the Federal
Funds Rate for the day shall be the rate on such
transactions on the preceding Business Day as so
published on the following Business Day, and
- if no such rate is so published on the
following Business Day, the Federal Funds Rate for the
day shall be the average rate on such transaction
quoted to the Administrative Agent on the day by three
federal funds brokers of recognized standing selected
by the Administrative Agent.
Federal Reserve Board means the Board of Governors of
the Federal Reserve System.
Fees shall mean, collectively, the fees described in
Section 1.11(a) through (e), both inclusive.
Funds from Operations has the meaning assigned in
Section 6.7.
GAAP means generally accepted accounting principles in
the United States of America in effect from time to time,
consistently applied.
Hazardous Substances shall mean and include all
hazardous and toxic substances, wastes or materials, any
pollutants or contaminants (including, without limitation,
asbestos and raw materials which include hazardous
constituents), or any other similar substances or materials
which are included under or regulated by any applicable
Environmental Laws.
Initial Properties shall mean the Properties listed on
Schedule 2.
Inspection Report shall mean the written report
commissioned by the Administrative Agent as part of the due
diligence process for determining whether an Apartment
Complex may become a Mortgaged Property.
Interest Period shall have the meaning assigned to that
term in Section 1.12.
Lenders shall have the meaning assigned to such term in
the introductory paragraph of this Agreement.
Letter(s) of Credit shall have the meaning assigned to
that term in Section 1.8.
Letter of Credit Facility shall mean the portion of the
Aggregate Commitment that may be utilized for the issuance
of Letters of Credit, not to exceed $60,000,000 at any one
time.
LIBOR for an Interest Period means
- the interest rate per annum for deposits in
U.S. dollars for a maturity most nearly comparable to
the Interest Period that appears on page 3750 (or a
successor page) of the Dow Jones Telerate Screen as of
11 a.m., London time, on the second Business Day before
the first day of the Interest Period, or
- if such rate does not so appear on the Dow
Jones Telerate Screen, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the rate at which U.S. dollar deposits
approximately equal in principal amount to the
Administrative Agent's portion of such Borrowing and
for a maturity comparable to the Interest Period, are
offered to the principal London office of the
Administrative Agent in immediately available funds in
the London interbank market at approximately 11 a.m.,
London time, on the second Business Day before the
first day of the Interest Period.
Lien means, for an asset, a mortgage, lien (including
without limitation statutory liens), pledge, charge,
security interest or encumbrance of any kind in respect of
the asset, including the interest of a vendor or lessor
under a conditional sales agreement, capital lease or other
title retention agreement, or any preferential arrangement
of any kind.
Loan Documents shall mean this Agreement, the Notes,
the Mortgages, any other instrument or document at any time
evidencing or securing the Loans, and any other instrument
or document executed by the Borrowers or any Subsidiary with
or in favor of the Administrative Agent or the Lenders in
connection with the Loans.
Loans shall have the meaning assigned to such term in
Section 1.1, and, individually, a Loan.
MAAC shall have the meaning given to such term in the
introductory paragraph of this Agreement.
Management Fees means, with respect to each Apartment
Community for any period, an amount equal to five percent
(5%) of the aggregate rent due and payable for such period
under leases with tenants at such Apartment Community.
Margin shall mean (a) from the date hereof through June
30, 1998, one and one-quarter percent (1.25%) and (b)
commencing July 1, 1998, but, subject to Section 1.13(e),
continuing thereafter until the Loans are paid in full, two
percent (2%).
Margin Stock means 'margin stock' as defined in
Regulation U of the Federal Reserve Board.
Material Officer shall have the meaning assigned to
such term in Section 7.1(l).
Maturity Date means November 24, 1999.
Mid-America shall have the meaning given to such term
in the introductory paragraph of this Agreement.
Moody's shall mean Moody's Investors Service, Inc.
Mortgage shall mean any deed of trust, mortgage, deed
to secure debt, or other similar lien instrument, executed
by the Borrowers or a Subsidiary for the purpose of securing
the Loans, and constituting a valid first lien upon or
security title in an Apartment Community.
Mortgaged Property shall mean the Stabilized Properties
and Development Projects subject to the lien of a Mortgage.
Net Operating Income or NOI means, with respect to any
Apartment Community for the most recent two calendar
quarters, "actual property rental and other income" (as
determined by GAAP) attributable to such Apartment Community
accruing for such period, minus the amount of all expenses
(as determined in accordance with GAAP) incurred in
connection with and directly attributable to the ownership
and operations of such Apartment Community for such period,
including, without limitation, Management Fees and amounts
accrued for the payment of real estate taxes and insurance
premiums, but excluding interest expense or other debt
service charges and any non-cash charges such as
depreciation or amortization of financing costs. In
calculating NOI attributable to any Apartment Community
first acquired or opened by either Borrower during a
quarter, "actual property rental and other income" and
expenses shall be adjusted for the purposes of this
definition to reflect the full amount of "actual property
rental and other income" and expenses that would have been
attributable to such Apartment Community if it had been
owned or opened for the full quarter.
Net Operating Loss for any period shall mean the amount
by which expenses exceed income, all determined in
accordance with GAAP.
Net Worth or Tangible Net Worth means the sum of
consolidated shareholders' equity and minority interests in
MAAC, determined in accordance with GAAP, reduced by the
amount of any intangible assets of MAAC, determined in
accordance with GAAP.
Notes shall have the meaning assigned to such term in
Section 1.4.
Notice Addresses shall have the meaning assigned in
Section 10.1.
Obligor shall mean either Borrower or any Subsidiary
granting a Mortgage to secure the Loans.
Office of a Lender means the Lender's office designated
as its office and located at the address set forth on
Schedule 3, or such other office as the Lender designates as
its office by notice to the Borrowers and the Administrative
Agent.
Participant shall have the meaning assigned to such
term in Section 10.7(b).
PBGC means the Pension Benefit Guaranty Corporation.
Pension Plan at a time means an employee pension
benefit plan that is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the
Internal Revenue Code and is either (a) maintained by a
member of the Controlled Group for employees of a member of
the Controlled Group or (b) maintained pursuant to a
collective bargaining agreement or other arrangement under
which more than one employer makes contributions and to
which a member of the Controlled Group is then making or
accruing an obligation to make contributions or has within
the preceding five plan years made contributions.
Person means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
Prime Rate means the per annum rate of interest
publicly announced by the Administrative Agent as its Prime
Rate at its principal office in Birmingham, Alabama. Each
change in the Prime Rate shall be effective on the date such
change is publicly announced as effective.
Project Budget means the total cost of a particular
phase of a Development Project, not to exceed $20,000,000
for any one such phase of a Development Project.
Proportionate Share means the respective pro rata
interests of the Lenders in the Aggregate Commitment and in
the Loans.
Register shall have the meaning assigned to such term
in Section 10.7(f).
Regulatory Action means the adoption of an applicable
law, rule or regulation, or a change therein, or a change in
the interpretation or administration thereof by a
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof,
or compliance by a Lender (or its Office) with a request or
directive (whether or not having the force of law) of the
authority, central bank or comparable agency.
Related Person shall mean any Person (i) which now or
hereafter directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with either Borrower, or (ii) which now or
hereafter beneficially owns or holds ten percent (10%) or
more of the partnership interests of Mid-America, or ten
percent (10%) or more of the capital stock of MAAC, or (iii)
ten percent (10%) or more of the capital stock, partnership
interest or other form of ownership interest of which is
beneficially owned or held by either Borrower. For the
purposes hereof, "control" shall mean possession, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through
the ownership of voting stock or interests, by contract or
otherwise.
Responsible Officer shall have the meaning ascribed to
that term in Section 1.7 hereof.
S&P means Standard & Poor's Corporation or a successor.
Stabilized Property shall mean an Apartment Community
(a) for which a Certificate of Occupancy has been issued for
the entire Apartment Community, or the Borrowers shall
furnish satisfactory proof to the effect that the
improvements for the entire Apartment Community have been
completed and that the local government having jurisdiction
does not issue a Certificate of Occupancy; and (b) which has
achieved an occupancy rate of at least eighty percent (80%)
for at least the immediately preceding two (2) consecutive
months.
Subsidiary means a corporation, partnership or other
legal entity, the voting interest of which is one hundred
percent (100%) directly or indirectly owned by either MAAC
and/or Mid-America.
Subsidiary Guaranty means the guaranty agreement
executed or to be executed by each Subsidiary executing a
Mortgage, in the form attached hereto as Exhibit H.
Swing Line Facility shall have the meaning assigned to
such term in Section 1.7.
Swing Line Facility Note shall mean that certain
promissory note executed by the Borrowers in the principal
amount of $6,000,000, evidencing the Swing Line Facility.
Tax includes any present or future tax, assessment or
governmental charge or levy.
Tax Form shall have the meaning assigned to that term
in Section 9.6.
Termination Date shall mean the earlier of (a) the
Maturity Date or (b) the date as of which the Borrowers
shall have terminated the Lenders' commitment under the
provisions of Section 1.15 hereof, or (c) the Lenders have
terminated this Agreement under the provisions of Section 7
hereof.
Total Annualized Debt Service on Indebtedness shall
mean for any period the aggregate amount of principal and
interest payments including capitalized interest for
construction purposes due for such period upon Debt, but
excluding balloon payments.
Total Annualized Fixed Charges shall mean for any
period the aggregate amount of preferred stock
distributions, principal, and interest (including
capitalized interest for Development Projects) due for such
period upon Debt, but excluding balloon payments.
Total Development and Joint Venture Investment shall
mean the aggregate from time to time of (i) a Borrower's
expenditures with respect to any Apartment Community for
land acquisition, development and construction costs until a
Certificate of Occupancy is received for such entire
Apartment Community (or, if no Certificate of Occupancy is
available from the local governmental authority having
jurisdiction until all construction of the entire Apartment
Community has been completed), plus (ii) the amount of funds
or other assets invested by a Borrower in any joint venture
arrangement with any Person, whether or not a Related
Person.
Total Liabilities shall mean the aggregate amount of
all liabilities of both Borrowers, from time to time
outstanding, calculated on a consolidated basis, in
accordance with GAAP, applied on a consistent basis. (For
the purposes hereof, with respect to indebtednesses of any
joint venture in which a Borrower is a party, such
Borrower's pro rata share of the joint venture's liabilities
shall be considered a liability of such Borrower, if such
joint venture liability is non-recourse; but if such joint
venture liability is a recourse obligation, the total amount
of such joint venture liability shall be considered a
liability of the Borrower.)
Total Market Value of Assets shall mean, for any
calendar quarter, the EBITDA for the most recent two (2)
calendar quarters, multiplied by the integer two (2)
(thereby converting the calendar quarter's EBITDA to an
annualized amount), and then multiplying the result so
obtained by the integer ten (10).
Two-Thirds of the Lenders means Lenders having
Commitments aggregating at least two-thirds of the Aggregate
Commitment except that if the Borrowers' Borrowing Rights
have terminated or for purposes of Section 7.2 (Action on
Event of Default),
Two-Thirds of the Lenders means Lenders having two
thirds of the aggregate unpaid principal amount of all Loans
to the Borrowers.
Unfunded Amount shall have the meaning assigned to such
term in Section 2.3.
Unfunded Vested Liabilities for a Pension Plan at a
time means the amount (if any) by which (i) the present
value of all vested nonforfeitable benefits under the
Pension Plan exceeds (ii) the fair market value of all
Pension Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for the
Pension Plan, but only to the extent that such excess
represents a potential liability of a member of the
Controlled Group to the PBGC or the Pension Plan under Title
IV of ERISA.
Withdrawal Liability means liability to a multiemployer
plan as a result of a complete or partial withdrawal from
the multiemployer plan, as such terms are defined in Part I
of Subtitle E of ERISA.
Work Completed means the extent to which construction
has been completed on a Development Project at the point of
determination.
11.2. Accounting terms and determinations
Unless otherwise stated, all accounting terms used in
this Agreement shall be interpreted, all accounting
determinations under this Agreement shall be made and all
financial statements of a Borrower required to be delivered
under this Agreement shall be prepared in accordance with
GAAP.
11.3. Miscellaneous usages
In this Agreement, unless otherwise stated or the
context otherwise clearly requires, the following usages
apply:
time periods
In computing periods from a specified date to a later
specified date, the words 'from' and 'commencing on' (and
the like) mean 'from and including,' and the words 'to,'
'until' and 'ending on'( and the like) mean 'to but
excluding.'
when action may be taken
Any action permitted to be taken under this Agreement
may be taken at any time and from time to time.
Birmingham, Alabama time
All indications of time of day shall mean the time then
in effect in Birmingham, Alabama.
'including'; 'or'
'Including' means 'including, but not limited to.' 'A
or B' means 'A or B or both.'
statutes and regulations
References to a statute include all regulations
promulgated under or implementing the statute, as in effect
at the relevant time.
agreements
References to an agreement (including this Agreement)
shall refer to the agreement as amended at the relevant
time.
governmental agencies
References to any governmental or quasi-governmental
agency or authority shall include any successor agency or
authority.
section references
References to numbered sections in this Agreement shall
refer to all included sections. For example, references to
Section 6 shall also refer to Sections 6.1, 6.1(a), etc.
other defined terms
Other defined terms are contained within the body of
this Agreement.
List of Schedules
Schedule 1 List of Lenders and Commitments
Schedule 2 Initial Properties
Schedule 3 Notice Addresses
Schedule 4 Subsidiaries and Ownership
List of Exhibits
Exhibit A Notes (1.4)
Exhibit B Swingline Request (1.7)
Exhibit C Borrowing Notice (2.1)
Exhibit D Conversion Notice (2.4)
Exhibit E Attorney Opinion (3.1)
Exhibit F Borrowing Base Certificate (5.1)
Exhibit G Assignment (9.8)
Exhibit H Subsidiary Guaranty
Exhibit I Florida Restated Notes
Exhibit J Compliance Certificate
Signature page to
Revolving Credit Agreement
MID-AMERICA APARTMENT COMMUNITIES,
INC.
By /s/ Simon R.C. Wadsworth
Name Simon R.C. Wadsworth
Title CFO
MID-AMERICA APARTMENTS, L.P.
By Mid-America Apartments Communities,
Inc.
Its Sole General Partner
By /s/ Simon R.C. Wadsworth
Name Simon R.C. Wadsworth
Title CFO
Signature page to
Revolving Credit Agreement
AMSOUTH BANK,
in its individual capacity as Lender
and as Administrative Agent
By____/s/ Lawrence Clark
Name___Lawrence Clark
Title__VP
Signature page to
Revolving Credit Agreement
HIBERNIA NATIONAL BANK
By____/s/ Susan Robinson
Name______Susan Robinson
Title_____Vice President
Signature page to
Revolving Credit Agreement
COLUMBUS BANK & TRUST COMPANY
By____/s/ Jon C. Dodds
Name______Jon C. Dodds
Title_____Sr. Vice President
Signature page to
Revolving Credit Agreement
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY
By_____/s/ Harry Yergey
Name Harry Yergey
Title__Senior Vice President
By_____/s/ Eric Kagerer
Name___Eric Kagerer
Title__Vice President
Signature page to
Revolving Credit Agreement
PNC BANK, NATIONAL ASSOCIATION
By /s/ Lee K. Zoller
Name Lee K. Zoller
Title Assistant Vice President
Signature page to
Revolving Credit Agreement
FIRST TENNESSEE BANK, N.A.
By /s/ Rick Neal
Name Rick Neal
Title SVP
Signature page to
Revolving Credit Agreement
NATIONAL BANK OF COMMERCE
By /s/ Billy Frank
Name Billy Frank
Title Assistant Vice President
Signature page to
Revolving Credit Agreement
MELLON BANK, N.A.
By /s/ Wayne P. Robertson
Name Wayne P. Robertson
Title Vice President
SCHEDULE 1
List of Lenders Commitments: Percentage:
AmSouth Bank $37,000,000 18.5%
Hibernia National Bank 28,000,000 14.0%
Columbus Bank & Trust Company 15,000,000 7.5%
First Tennessee Bank, N.A. 20,000,000 10.0%
Commerzbank 24,000,000 12.0%
Aktiengesellschaft,
Atlanta Agency
PNC Bank, National Association 28,000,000 14.0%
National Bank of Commerce 20,000,000 10.0%
Mellon Bank, N.A. 28,000,000 14.0%
_____________ ______
TOTAL $200,000,000 100.0%
SCHEDULE 2
[List of Initial Properties]
Availability
Property Advance Rate as of 3/20/98
I. Stabilized Properties:
1. Paddock Club Huntsville (AL) 60% 4,980,000.00
2. Anatole (FL) 60% 5,106,000.00
3. Whisperwood (GA) 60% 13,980,000.00
4. Whisperwood Spa I (GA) 60% 9,060,000.00
5. Woods (TX) 60% 6,960,000.00
6. Township (VA) 60% 6,210,000.00
7. Paddock Club Brandon I (FL) 60% 12,600,000.00
8. Paddock Club Greenville (SC) 60% 7,680,000.00
9. Paddock Club Columbia I (SC) 60% 6,240,000.00
10. Paddock Club Columbia II (SC) 60% 4,800,000.00
11. Paddock Club Tallahassee (FL) 60% 5,700,000.00
12. Reflection Pointe (MS) 60% 7,830,000.00
13. Paddock Park Ocala II (FL) 54.5% 7,957,000.00
14. Colony at Southpark (SC) 60% 4,500,000.00
15. Walden Run (GA) 60% 8,259,000.00
16. Lane at Towne Crossing (TX) 60% 6,840,000.00
II. Development Projects:
1. Paddock Club 50% of cost 2,553,832.00
Huntsville II (AL)
2. Whisperwood Spa II (GA) 50% of cost 3,153,809.00
3. Paddock Club Gainesville 50% of cost 96,492.00
(FL)
4. Paddock Club Brandon II 50% of cost 0.00
(FL)
5. Paddock Club Mandarin 50% of cost 6,306,681.00
(FL)
_______________
TOTAL
BORROWING BASE $130,812,814.00
SCHEDULE 3
[Notice Addresses]
AmSouth Bank
Real Estate Department
9th Floor
AmSouth/Sonat Building
1900 5th Avenue North
Birmingham, Alabama 35203
Attention: Mr. Lawrence B. Clark
Hibernia National Bank
313 Carondolet Street
Suite 1400
New Orleans, Louisiana 70130
Attention: Edward "Skip" Santos
Columbus Bank & Trust Company
Real Estate Lending/Main Office
4th Floor
1148 Broadway
Columbus, Georgia 31902
Attention: Mr. Jon C. Dodds
First Tennessee Bank, N.A.
1st Floor-Real Estate 165 Madison Avenue
Memphis, Tennessee 38103
Attention: Ms. Jennifer Andrews
Commerzbank Aktiengesellschaft, Atlanta Agency
Promenade Two, Suite 3500
Atlanta, Georgia 30309
Attention: Mr. Eric Kagerer
PNC Bank, N.A.
500 West Jefferson Street, Suite 1200
Louisville, Kentucky 40202 Attention:
Mr. Lee K. Zoller
National Bank of Commerce
7770 Poplar Avenue
Suite 105
Germantown, Tennessee 38138
Attention: Mr. Billy Frank
Mellon Bank, N.A.
One Mellon Bank Center
Suite 2915
Pittsburgh, Pennsylvania 15258
Attention: Mr. Wayne Robertson
Mid-America Apartment Communities, Inc.
6584 Poplar
Suite 340
Memphis, Tennessee 38138
Attention: Mr. Simon R.C. Wadsworth
Mid-America Apartments, L.P.
6584 Poplar
Suite 340
Memphis, Tennessee 38138
Attention: Mr. Simon R.C. Wadsworth
SCHEDULE 4
[Subsidiaries and Ownership]
Paddock Club Huntsville, A Limited Partnership, a Georgia limited
partnership
Paddock Club Tallahassee, A Limited Partnership, a Georgia
limited partnership
Paddock Club Brandon, A Limited Partnership, a Georgia limited
partnership
Paddock Park Ocala II, A Limited Partnership, a Georgia limited
partnership
Whisperwood Associates, A Limited Partnership, a Georgia limited
partnership
Whisperwood Spa & Club, A Limited Partnership, a Georgia limited
partnership
Paddock Club Greenville, A Limited Partnership, a Georgia limited
partnership
Paddock Club Wildewood, A Limited Partnership, a Georgia limited
partnership
Paddock Club Columbia Phase II, A Limited Partnership, a Georgia
limited partnership
Mid-America Apartments of Texas, L.P., a Texas limited
partnership
EXHIBIT A
NOTE
Birmingham, Alabama
_______________, 1998
For value received, Mid-America Apartment Communities,
Inc., a Tennessee corporation, and Mid-America Apartments, L.P.,
a Tennessee limited partnership (jointly, the "Borrowers"),
jointly and severally promise to pay to the order of
_____________________, a banking association (the "Lender"), for
the account of its Lending Office, the principal sum of
_______________ Million and No/100 Dollars ($__,000,000.00), or
such lesser amount as shall equal the unpaid principal amount of
all Loans made by the Lender to the Borrowers pursuant to the
Credit Agreement referred to below, on the dates and in the
amounts provided in the Credit Agreement. The Borrowers jointly
and severally promise to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates
provided for in the Credit Agreement.
All such payments of principal and interest
shall be made in lawful money of the United States of America in
Federal or other immediately available funds at the office of
AmSouth Bank, 1900 5th Avenue North, Birmingham, Alabama, 35203,
or such other address as may be specified from time to time
pursuant to the Credit Agreement.
All Loans made by the Lender, the respective
maturities thereof, the interest rates from time to time
applicable thereto, and all repayments of the principal thereof
shall be recorded by the Lender and, prior to any transfer
hereof, endorsed by the Lender on the schedule attached hereto,
or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the joint and several
obligations of the Borrowers hereunder or under the Credit
Agreement. The books and records of the Administrative Agent
shall be prima facie evidence of all sums due Lender.
This Note is one of the Notes evidencing Loans referred
to in, and is entitled to the benefits of, the Revolving Credit
Agreement (Amended and Restated) dated as of March 16, 1998,
among the Borrowers, the Lenders listed on the signature pages
thereof and AmSouth Bank, as Administrative Agent (as the same
may be amended, supplemented and modified from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are
used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the optional and mandatory
prepayment and the repayment hereof and the acceleration of the
maturity hereof, as well as the obligation of the Borrowers to
pay all costs of collection, including reasonable attorneys fees,
in the event this Note is collected by law or through an attorney
at law.
Each Borrower hereby waives presentment, demand,
protest, notice of demand, protest and nonpayment and any other
notice required by law relative hereto, except to the extent as
otherwise may be expressly provided for in the Credit Agreement.
This Note shall be governed by and construed in
accordance with the laws of the State of Alabama.
IN WITNESS WHEREOF, each Borrower has caused this
Note to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.
MID-AMERICA APARTMENT COMMUNITIES, INC.,
a Tennessee corporation
By______________________________
Its___________________________
MID-AMERICA APARTMENTS, L.P.,
a Tennessee limited partnership
By Mid-America Apartment Communities, Inc.
Its Sole General Partner
By______________________________
Its___________________________
LOANS AND PAYMENTS OF PRINCIPAL
Base Rate or Amount of
Euro-Dollar Amount of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
EXHIBIT B
SWING LINE REQUEST
[Date]______________________
AmSouth Bank, as Administrative Agent
RE: Revolving Credit Agreement dated as of March 16, 1998,
between Mid-America Apartment Communities, Inc., Mid-America
Apartments, L.P., the Lenders parties thereto, and AmSouth
Bank, as Administrative Agent (as amended, supplemented or
modified from time to time, the "Credit Agreement";
capitalized terms used but not defined in this Request have
the meanings given them in the Credit Agreement)
Ladies and Gentlemen:
Pursuant to Section 1.7 of the Credit Agreement, the
undersigned Borrowers request an Advance under the Swing Line
Note as follows:
Date of Borrowing _____________ ___, 199____; and
Aggregate principal amount $_____________.
The net proceeds of the Borrowing are to be [deposited in our
account with you, No. ] [wire to [bank], A.B.A. #
, reference ].
Any questions regarding this notice should be directed
to [contact Person].
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:__________________________
Title:______________________
By:__________________________
Title:______________________
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities,
Inc. Title: The Sole General Partner
By:__________________________
Title:______________________
By:__________________________
Title:______________________
EXHIBIT C
BORROWING NOTICE
[Date]
AmSouth Bank, as Administrative Agent
RE: Revolving Credit Agreement dated as of March 16, 1998,
between Mid-America Apartment Communities, Inc., Mid-America
Apartments, L.P., the Lenders parties thereto, and AmSouth
Bank, as Administrative Agent (as amended, supplemented or
modified from time to time, the "Credit Agreement";
capitalized terms used but not defined in this Notice have
the meanings given them in the Credit Agreement)
Ladies and Gentlemen:
Pursuant to Section 2.1 of the Credit Agreement, the
undersigned Borrowers request a Borrowing, as follows:
Date of Borrowing: _____________ ___, 199____;
Aggregate principal amount: $_____________;
Interest Rate (check one):
__ (a) Eurodollar Rate; or
__ (b) Base Rate (If Base Rate is selected,
accrued interest will be payable on
the first day of each month.)
Interest Period (if Eurodollar Rate is selected):
circle one: 30 or 60 days.
The Borrowing [is/is not] to be utilized for a
Development Project. If the Borrowing is related to a
Development Project, such Development Project is known
as ______________________________________, and evidence
of the Work Completed is attached hereto.
The net proceeds of the Borrowing are to be [deposited in our
account with you, No. ] [wire to [bank], A.B.A. #
, reference ].
Any questions regarding this Notice should be directed
to [contact person].
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:_____________________________________
Title:_________________________________
By:_____________________________________
Title:_________________________________
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities, Inc.
Title: The Sole General Partner
By:_____________________________________
Title:_________________________________
By:_____________________________________
Title:_________________________________
EXHIBIT D
CONVERSION NOTICE
[Date]
AmSouth Bank, as Administrative Agent
RE: Revolving Credit Agreement dated as of March 16, 1998,
between Mid-America Apartment Communities, Inc., Mid-America
Apartments, L.P., the Lenders parties thereto, and AmSouth
Bank, as Administrative Agent (as amended, modified or
supplemented from time to time, the "Credit Agreement";
capitalized terms used but not defined in this Notice have
the meanings given them in the Credit Agreement)
Ladies and Gentlemen:
Pursuant to Section 2.4 of the Credit Agreement, the
undersigned Borrowers request a Conversion of certain Borrowings,
as follows:
Conversion date:
Borrowings to be converted:
Borrowing or Conversion date: _____________
Type: _____________
Interest Period: _____________
[Repeat as necessary]
Aggregate unpaid principal amount of Borrowings to be
converted: $
To be converted into the following Borrowings:
Type: _____________
Principal amount: _____________
Interest Period: _____________
[Repeat as necessary]
Any questions regarding this Notice should be directed
to [contact person].
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:
Title:
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities, Inc.
Title: The Sole General Partner
By:
Title:
EXHIBIT E
FORM OF OPINION OF COUNSEL TO BORROWERS
_______________, 1998
To the Lenders and the Administrative
Agent referred to below
c/o AmSouth Bank, as Administrative Agent
Ladies and Gentlemen:
I am Counsel for Mid-America Apartment Communities,
Inc., a Tennessee corporation ("MAAC") and Mid-America
Apartments, L.P., a Tennessee limited partnership ("Mid-America")
(jointly, the "Borrowers") and have acted as counsel for the
Borrowers in connection with the Revolving Credit Agreement dated
as of ________ ___, 1998 (the "Credit Agreement") between the
Borrowers, the Lenders parties thereto, and AmSouth Bank, as
Administrative Agent. Terms defined in the Credit Agreements are
used herein as therein defined.
I have examined originals or copies, certified or
otherwise identified to my satisfaction, of such documents,
corporate records, certificates of public officials and other
instruments and have conducted such other investigations of fact
and law as I have deemed necessary or advisable for purposes of
this opinion. I have assumed the due execution and delivery of
the Credit Agreement by the Administrative Agent and the Lenders.
Upon the basis of the foregoing, I am of the opinion
that:
1. MAAC is a real estate investment trust, duly
incorporated, validly existing and in good standing under the
laws of the State of Tennessee, and has all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
2. Mid-America is a limited partnership duly
incorporated, validly existing and in good standing under the
laws of the State of Tennessee, and has all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
3. [Same opinion as 1 for each corporate Subsidiary
and same as 2 for each partnership Subsidiary, executing a
Guaranty and a Mortgage on the closing date].
4. The execution, delivery and performance by the
Borrowers of the Credit Agreement and the Borrowings thereunder
are within each Borrower's corporate or partnership, as the case
may be, powers, have been duly authorized by all necessary
corporate or partnership, as the case may be, action, require no
action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or
of the certificate of incorporation, by-laws or partnership
agreement of either Borrower or of any material agreement,
judgment, injunction, order, decree or other instrument binding
upon either Borrower or result in the creation or imposition of
any Lien on any asset of a Borrower or any of its Subsidiaries.
5. [Same opinion as 4 for each Subsidiary signing a
Guaranty and a Mortgage on the closing date.]
6. The Notes and the Credit Agreement have been duly
executed and delivered by each Borrower and constitute the valid
and binding agreement of the Borrowers, enforceable in accordance
with their respective terms except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general. The enforcement of
the Borrowers' obligations under the Credit Agreement is subject
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law.)
7. [Same opinion as 6 as relates to execution,
delivery and enforceability of Guaranty and Mortgage by each
Subsidiary.]
8. There is no action, suit or proceeding pending
against, or to the best of my knowledge threatened against or
affecting, either Borrower or any of its Subsidiaries before any
court or arbitrator or any governmental body, agency or official
in which there is a reasonable possibility of a decision that
could materially adversely affect the business, consolidated
financial position or consolidated results of operations of
either Borrower and its consolidated Subsidiaries, considered as
a whole, or which in any manner draws into question the validity
of the Notes and the Credit Agreement.
9. The use of proceeds of any Loan under the Credit
Agreement, in the manner contemplated in the Credit Agreement,
will not entail a violation of any of the provisions of
Regulation G, U, T or X of the Board of Governors of the Federal
Reserve System.
10. Neither Borrower is an 'investment company' within
the meaning of the Investment Company Act of 1940 or a 'holding
company' within the meaning of the Public Utility Holding Company
Act of 1935.
I am admitted to practice law in the State of
Tennessee, and in giving the opinions set forth above, I express
no opinion as to any laws other than the federal laws of the
United States
Very truly yours,
BORROWING BASE CERTIFICATE
EXHIBIT F
FOR THE ________________ Quarter 199__
PART I BORROWING BASE CALCULATION
A. Stabilized Properties
PROPERTY UNITS REVENUE/ NOI MGMNT CAP.EX. ADJSTD CAPPED AVAILABLE
1,000 FEE5% ($200/u) NOI AT 9.5% 60%
B. Development Projects
PROPERTY PROJECT COSTS TO AVAILABILITY TO
BUDGET DATE DATE (AT 50%)
BORROWING BASE ______________
$_____________
PART II Representations and Warranties; Events of Default
1) The representations and warranties set forth in the
Agreement are true and correct as of the date of this
Certificate.
2) No Event of Default, or event which would constitute an
event of Default with the passage of time or giving of notice or
both, has occurred under the Agreement, except as follows:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Dated this _____ day of ______________, 199___.
MID-AMERICA APARTMENT COMMUNITIES, INC.
BY____________________________________
ITS___________________________________
MID-AMERICA APARTMENTS, L.P.
BY MID-AMERICA APARTMENT COMMUNITIES, INC.
ITS SOLE GENERAL PARTNER
BY________________________________
ITS_______________________________
Exhibit G
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Agreement is dated as of _________, 199_, between
__________________ (the "Assignor"), ________________ (the
"Assignee"), Mid-America Apartment Communities, Inc., Mid-America
Apartments, L.P. (the "Borrowers"), and AmSouth Bank, as
Administrative Agent (the "Administrative Agent").
R E C I T A L S
A. This Assignment and Assumption Agreement (the
"Agreement") relates to the Revolving Credit Agreement dated as
of March 16, 1998, between the Borrowers, the Assignor and the
other Lenders party thereto, as Lenders, and the Administrative
Agent (as amended, modified and supplemented from time to time,
the "Credit Agreement"). Except as otherwise provided herein,
terms used in this Agreement shall have the meanings given them
in the Credit Agreement.
B. The Assignor is obligated under the Credit
Agreement to make Loans to the Borrowers in an aggregate unpaid
principal amount not to exceed $[_______________].
C. At the date of this Agreement, the aggregate
unpaid principal amount of the Assignor's Loans to the Borrowers
is $[_____________].
D. The Assignor proposes to assign to the Assignee
all of the Assignor's rights under the Credit Agreement in
respect of $[_______________] of its Commitment (the "Assigned
Commitment Amount") together with a corresponding portion of its
outstanding Loans, and the Assignee proposes to accept assignment
of such rights and assume the Assignor's corresponding
obligations on such terms.
A G R E E M E N T
The parties, intending to be legally bound, agree as
follows:
1. Assignment. The Assignor hereby assigns and sells
to the Assignee all of the Assignor's rights under the Credit
Agreement to the extent of the Assigned Commitment Amount, and
the Assignee hereby accepts such assignment from the Assignor and
assumes all of the Assignor's obligations under the Credit
Agreement to the extent of the Assigned Commitment Amount,
including the purchase from the Assignor of the corresponding
portion of the unpaid principal amount of the Loans made by the
Assignor. Upon the execution and delivery of this Agreement by
the parties and the payment of the amounts specified in Section 2
required to be paid on the date of this Agreement, as of
[effective date1/:
(i) the Assignee shall succeed to the rights and
be obligated to perform the obligations of a Lender
under the Credit Agreement with a Commitment equal to
the Assigned Commitment Amount; and
(ii) the Commitment of the Assignor shall be
reduced by a like amount [like amounts] and the
Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been
assumed by the Assignee.
The assignment provided for in this Agreement shall be without
recourse to the Assignor.
2. Payments. As consideration for the assignment and
sale effected in paragraph 1 above, the Assignee shall pay the
Assignor on the date(s) and in the amount(s) previously agreed
between them. Facility Fees accrued to but not including the
date of this Agreement in respect of the Assigned Commitment
Amount are for the account of the Assignor and such fees accruing
from and including the date of this Agreement are for the account
of the Assignee. If the Assignor or Assignee receives any amount
under the Credit Agreement that is for the account of the other,
it shall promptly pay such other party.
3. Consent of the Borrowers2/ and acknowledgment of
the Administrative Agent. Pursuant to Section 10.7 of the Credit
Agreement, each Borrower consents to, and the Administrative
Agent acknowledges, the assignment and assumption provided in
this Agreement.
4. Non-reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency or financial
condition or statements of the Borrowers or the validity and
enforceability of the obligations of the Borrowers under the
Credit Agreement. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on
such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement
and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial
condition of the Borrowers.
5. Alabama law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Alabama.
6. Counterparts. This Agreement may be executed in
counterparts.
[Assignor]
By:
Title:
[Assignee]
By:
Title:
[Borrowers' consent not required if Assignee is a Lender]
The undersigned consent to the foregoing assignment:
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:
Title:
By:
Title:
MID-AMERICA APARTMENTS, L.P.
By: Mid-America Apartment Communities, Inc.
Title: The Sole General Partner
By:
Title:
By:
Title:
EXHIBIT H
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty"), dated as of
____________, 199_ (this "Guaranty"), is made by
__________________________, a ____________ (the "Guarantor"), of
the obligations of Mid-America Apartment Communities, Inc., a
Tennessee corporation, and Mid-America Apartments, L.P., a
Tennessee limited partnership (jointly, the "Borrowers"), under
the Credit Agreement (defined below) among the Borrowers, AmSouth
Bank, as Administrative Agent (the "Administrative Agent"), and
the lenders parties to the Credit Agreement (singly, a "Lender"
and collectively, the "Lenders").
BACKGROUND
1. The Borrower, the Administrative Agent, and the Lenders
have entered into a Revolving Credit Agreement, dated as of March
16, 1998 (said Credit Agreement, as it may hereafter be amended
or otherwise modified from time to time, being the "Credit
Agreement"). The capitalized terms not otherwise defined herein
have the meanings specified in the Credit Agreement.
2. Pursuant to the Credit Agreement, the Borrowers may,
subject to the terms of the Credit Agreement, request that the
Lenders make Advances.
3. It is a condition precedent to the obligation of the
Lenders to make such Advances that the Guarantor guarantee
repayment thereof upon the terms and conditions set forth herein.
4. The Guarantor is a Subsidiary of one of the Borrowers
and the Borrowers and the Guarantor are members of the same
consolidated group of companies and partnerships and are engaged
in related businesses.
5. The partners, members, or board of directors, as
applicable, of the Guarantor have determined that (i) the
execution, delivery, and performance of this Guaranty is
necessary and convenient to the conduct, promotion, and
attainment of the Guarantor's business and (ii) the Advances may
reasonably be expected to benefit, directly or indirectly the
Guarantor.
6. The Guarantor desires to induce the Lenders to make
such Advances.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and in
order to induce the Lenders to make Advances under the Credit
Agreement, the Guarantor hereby agrees as follows:
1. Guaranty
(a) The Guarantor, jointly and severally with any and
all other guarantors of the Advances and the Loans, hereby
unconditionally guarantees the full and punctual payment of,
and promises to pay, when due, whether at stated maturity,
by mandatory prepayment, by acceleration or otherwise, the
Loans, and agrees to pay any and all expenses (including
counsel fees and expenses) incurred in enforcement or
collection of all or any part thereof, whether such
obligations, indebtedness and liabilities are direct,
indirect, fixed, contingent, joint, several or joint and
several, and any rights under this Guaranty.
(b) Anything contained in this Guaranty to the
contrary notwithstanding, the obligations of the Guarantor
hereunder shall be limited to a maximum aggregate amount
equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of
comparable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other
liabilities of the Guarantor, contingent or otherwise, that
are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of the
Guarantor in respect of intercompany indebtedness to the
Borrowers or other Affiliates or Subsidiaries of the
Borrowers to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by the
Guarantor hereunder) and treating as assets, subject to
Paragraph 4(a) hereof, to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of
any rights to subrogation or contribution of the Guarantor
pursuant to (i) Applicable Law or (ii) any agreement
providing for an equitable allocation among the Guarantor
and other Affiliates or Subsidiaries of the Borrowers of
obligations arising under guaranties by such parties.
2. Guaranty Absolute. The Guarantor guarantees that the
Loans will be paid strictly in accordance with the terms of the
Credit Agreement, the Notes, and the other Loan Documents,
regardless of any Applicable Law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Lenders with respect thereto;
provided, however, nothing contained in this Guaranty shall
require the Guarantor to make any payment under this Guaranty in
violation of any Applicable Law, regulation or order now or
hereafter in effect. The obligations and liabilities of the
Guarantor hereunder are independent of the obligations of the
Borrowers under the Credit Agreement and any Applicable Law. The
liability of the Guarantor under this Guaranty shall be absolute
and unconditional irrespective of:
(a) the taking or accepting of any other security or
guaranty for any or all of the Loans, including any
reduction or termination of the Commitments;
(b) any increase, reduction or payment in full at any
time or from time to time of any part of the Loans;
(c) any lack of validity or enforceability of the
Credit Agreement, the Notes, or any other Loan Documents or
other agreement or instrument relating thereto, including
but not limited by the unenforceability of all or any part
of the Loans by reason of the fact that (i) the Loans and/or
the interest paid or payable with respect thereto, exceeds
the amount permitted by Applicable Law, (ii) the act of
creating the Loans, or any part thereof, is ultra vires,
(iii) the officers creating same acted in excess of their
authority, or (iv) for any other reason;
(d) any lack of corporate or partnership power of the
Borrowers, as the case may be, or any other Person at any
time liable for the payment of any or all of the Loans;
(e) any applicable bankruptcy, reorganization,
insolvency, receivership, liquidation, arrangement,
conservatorship, moratorium, or similar laws, rules or
regulations, or principles of equity affecting the
enforcement of creditors's rights generally ("Debtor Relief
Laws") involving the Borrowers, the Guarantor or any other
Person obligated on any of the Loans;
(f) any renewal, compromise, extension, acceleration
or other change in the time, manner or place of payment of,
or in any other term of, all or any of the Loans; any
adjustment, indulgence, forbearance, or compromise that may
be granted or given by any Lender or the Administrative
Agent to the Borrowers, the Guarantor, or any Person at any
time liable for the payment of any or all of the Loans; or
any other modification, amendment, or waiver of or any
consent to departure from the Credit Agreement, the Notes,
or any other Loan Documents and other agreement or
instrument relating thereto without notification of the
Guarantor (the right to such notification being herein
specifically waived by the Guarantor);
(g) any exchange, release, sale, subordination, or non-
perfection of any collateral or Lien therein or any lack of
validity or enforceability or change in priority,
destruction, reduction, or loss or impairment of value of
any collateral or Lien therein;
(h) any release or amendment or waiver of or consent
to departure from any other guaranty for all or any of the
Loans;
(i) the failure by any Lender or the Administrative
Agent to make any demand upon or to bring any legal,
equitable, or other action against the Borrowers or any
other Person (including without limitation any other
guarantor), or the failure or delay by any Lender or the
Administrative Agent to, or the manner in which any Lender
or the Administrative Agent shall, proceed to exhaust rights
against any direct or indirect security for the Loans;
(j) the existence of any claim, defense, set-off, or
other rights which the Borrowers or the Guarantor may have
at any time against the Borrowers, the Lenders, or any
guarantor, or any other Person, whether in connection with
this Guaranty, the other Loan Documents, the transactions
contemplated thereby, or any other transaction;
(k) any failure of any Lender or the Administrative
Agent to notify the Guarantor of any renewal, extension, or
assignment of the Loans or any part thereof, or the release
of any security, or of any other action taken or refrained
from being taken by any Lender or the Administrative Agent,
it being understood that the Lenders and the Administrative
Agent shall not be required to give the Guarantor any notice
of any kind under any circumstances whatsoever with respect
to or in connection with the Loans;
(l) any payment by the Borrowers to the Lenders or the
Administrative Agent is held to constitute a preference
under any Debtor Relief Law or if for any other reason the
Lenders or the Administrative Agent is required to refund
such payment or pay the amount thereof to another Person; or
(m) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Borrowers, the Guarantor, any other guarantor or other
Person liable on the Loans, including without limitation any
defense by reason of any disability or other defense of the
Borrowers, or the cessation from any cause whatsoever of the
liability of the Borrowers, or any claim that the
Guarantor's obligations hereunder exceed or are more
burdensome than those of the Borrowers.
This Guaranty shall continue to be effective or reinstated,
as the case may be, if any time any payment of any of the Loans
is rescinded or must otherwise be returned by any Lender or any
other Person upon the insolvency, bankruptcy or reorganization of
either Borrower, the Guarantor or otherwise, all as though such
payment had not been made.
3. Waiver. To the extent not prohibited by Applicable
Law, the Guarantor hereby waives: (a) promptness, protests,
diligence, presentments, acceptance, performance, demands for
performance, notices of nonperformance, notices of protests,
notices of dishonor, notices of acceptance of this Guaranty and
of the existence, creation or incurrence of new or additional
indebtedness, and any of the events described in Paragraph 2 and
of any other occurrence or matter with respect to any of the
Loans, this Guaranty or any of the other Loan Documents; (b) any
requirement that the Administrative Agent or any Lender protect,
secure, perfect, or insure any Lien or security interest or any
property subject thereto or exhaust any right or take any action
against the Borrowers or any other Person or any collateral or
pursue any other remedy in the Administrative Agent's or any
Lender's power whatsoever; (c) any right to assert against the
Administrative Agent or any Lender as a counterclaim, set-off or
cross-claim, any counterclaim, set-off or claim which it may now
or hereafter have against the Borrowers or either of them or
other Person liable on the Loans; (d) any right to seek or
enforce any remedy or right that the Administrative Agent or any
Lender now has or may hereafter have against the Borrowers or
either of them (to the extent permitted by Applicable Law); (e)
any right to participate in any collateral or any right
benefitting the Administrative Agent or the Lenders in respect of
the Loans; and (f) any right by which it might be entitled to
require suit on an accrued right of action in respect of any of
the Loans or require suit against the Borrowers or either of them
or any other Person.
4. Subrogation and Subordination. The Guarantor hereby
irrevocably waives any claim or other rights which it may have or
hereafter acquire against the Borrowers or either of them that
arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, any right to
participate in any claim or remedy of any Lender against the
Borrowers or either of them or any collateral which any Lender
now has or hereafter acquires, whether or not such claim, remedy
or right arises in equity, or under contract, statutes or common
law, including without limitation, the right to take or receive
from the Borrowers or either of them, directly or indirectly, in
cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If
any amount shall be paid to the Guarantor in violation of the
preceding sentence and the Loans shall not have been paid in
full, such amount shall be deemed to have been paid to the
Guarantor for the benefit of, and held in trust for the benefit
of, the Lenders, and shall forthwith be paid to the
Administrative Agent to be credited and applied upon the Loans,
whether matured or unmatured, in accordance with the terms of the
Credit Agreement. The Guarantor acknowledges that it will
receive direct and indirect benefits from the financing
arrangements contemplated by the Credit Agreement and that the
waiver set forth in this Paragraph 4 is knowingly made in
contemplation of such benefits. Notwithstanding anything to the
contrary contained in this Paragraph 4, any waiver and release
shall not be effective as to any such claim or entitlement or
such subrogation and other rights that accrue after the
indefeasible payment, performance and other satisfaction in full
of the Loans, all other amounts payable under this Guaranty and
termination of the Commitments.
5. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor is a ___________________ duly
organized, validly existing and in good standing under the
laws of the State of _________; it has the power and
authority to own its properties and assets and is in good
standing and duly qualified to carry on its business in
every jurisdiction wherein such qualification is necessary,
including, without limitation, every state in which it owns
an Apartment Community.
(b) The execution, delivery and performance by the
Guarantor of this Guaranty are within the Guarantor's
corporate or partnership, as the case may be, powers, have
been duly authorized by all necessary corporate or
partnership, as the case may be, action, require no action
by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation
or of the articles of incorporation or by-laws or
partnership agreement of the Guarantor or of any material
agreement, judgment, injunction, order, decree or other
instrument binding upon the Guarantor or result in the
creation or imposition of any Lien on any asset of the
Guarantor.
(c) There is no action, suit or proceeding pending
against, or, to the knowledge of the Guarantor, threatened
against or affecting, the Guarantor before any court or
arbitrator or any governmental body, agency or official in
which there is a reasonable probability of an adverse
decision that would materially adversely affect the
business, financial position or results of operations of the
Guarantor or that in any manner draws into question the
validity or enforceability of this Guaranty.
(d) The Guarantor is not a party to, nor subject to,
any agreement or instrument, including, without limitation,
any partnership agreement, partnership restrictions, voting
trust or shareholders' agreement, materially and adversely
affecting its business, Apartment Communities, or other
assets, operations or condition (financial or otherwise).
(e) To the best of the Guarantor's knowledge, (a)
except strictly in compliance with all applicable
Environmental Laws, no Hazardous Substances are located upon
or have been stored, processed or disposed of on or released
or discharged (including ground water contamination) from
any Apartment Community owned or leased by the Guarantor,
and (b) no aboveground or underground storage tanks exist on
any of the Apartment Communities owned or leased by the
Guarantor. No private or governmental lien or judicial or
administrative notice or action related to Hazardous
Substances or other environmental matters has been filed
against any Apartment Community owned or leased by the
Guarantor.
6. Covenants. The Guarantor hereby expressly assumes,
confirms, and agrees to perform, observe, and be bound by all
conditions and covenants set forth in the Credit Agreement, to
the extent applicable to it, as if it were a signatory thereto.
The Guarantor further covenants and agrees (a) punctually and
properly to perform all of the Guarantor's covenants and duties
under any Mortgage or other Loan Documents; (b) from time to time
promptly to furnish the Administrative Agent with any information
or writings which the Administrative Agent may reasonably request
concerning this Guaranty; and (c) to notify promptly the
Administrative Agent of any claim, action, or proceeding
affecting this Guaranty.
7. Amendments, Etc. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing
and signed by the Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
8. Addresses for Notices. Unless otherwise provided herein,
all notices, requests, consents and demands shall be in writing and
shall be delivered by hand or overnight courier service, mailed or
sent by telecopy to the respective addresses specified herein and to
the attention of the individuals listed thereunder, or, as to any
party, to such other addresses as may be designated by it in written
notice to all other parties. All notices, requests, consents and
demands hereunder shall be deemed to have been given on the date of
receipt if delivered by hand or overnight courier service or sent by
telecopy, or if mailed, effective on the earlier of actual receipt or
three (3) days after being mailed by certified mail, return receipt
requested, postage prepaid, addressed as aforesaid.
9. No Waiver; Remedies. No failure on the part of the
Administrative Agent or any Lender to exercise, and no delay in
exercising, any right hereunder or under any of the other Loan
Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder or under any of the other Loan
Documents preclude any other or further exercise thereof or the
exercise of any other right. Neither the Administrative Agent nor any
Lender shall be required to (a) prosecute collection or seek to
enforce or resort to any remedies against the Borrowers or either of
them or any other Person liable on any of the Loans, (b) join the
Borrowers or either of them or any other Person liable on any of the
Loans in any action in which Lender prosecutes collection or seeks to
enforce or resort to any remedies against the Borrowers or either of
them or other Person liable on any of the Loans, or (c) seek to
enforce or resort to any remedies with respect to any Liens granted to
(or benefitting, directly or indirectly) the Administrative Agent or
any Lender by the Borrowers or either of them or any other Person
liable on any of the Loans. Neither the Administrative Agent nor any
Lender shall have any obligation to protect, secure or insure any of
the Liens or the properties or interest in properties subject thereto.
The remedies herein provided are cumulative and not exclusive of any
remedies provided by Applicable Law.
10. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized
at any time and from time to time, to the fullest extent permitted by
Law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or
the account of the Guarantor against any and all of the obligations of
the Guarantor now or hereafter existing under this Guaranty,
irrespective of whether or not such Lender shall have made any demand
under this Guaranty. Each Lender agrees promptly to notify the
Guarantor after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set
off and application. The rights of each Lender under this Paragraph
10 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
11. Continuing Guaranty; Transfer of Notes. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) remain in
full force and effect until termination of the Commitments and final
payment in full (after the Maturity Date) of the Loans and all other
amounts payable under this Guaranty, (b) be binding upon the
Guarantor, its successors and assigns, and (c) inure to the benefit of
and be enforceable by each Lender and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c),
to the extent permitted by Section 10.7 of the Credit Agreement, each
Lender may assign or otherwise transfer its rights under the Credit
Agreement, the Notes or any of the other Loan Documents or any
interest therein to any Person, and such other Person shall thereupon
become vested with all the rights or any interest therein, as
appropriate, in respect thereof granted to the Lender herein or
otherwise.
12. Information. The Guarantor acknowledges and agrees that it
shall have the sole responsibility for obtaining from the Borrowers
such information concerning each Borrower's financial condition or
business operations as the Guarantor may require, and that neither the
Administrative Agent nor any Lender has any duty at any time to
disclose to any Guarantor any information relating to the business
operations or financial conditions of the Borrowers.
13. GOVERNING LAW. THE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA AND THE
UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION,
THE GUARANTOR AGREES THAT THE STATE AND FEDERAL COURTS OF ALABAMA
LOCATED IN BIRMINGHAM, ALABAMA, SHALL HAVE JURISDICTION OVER
PROCEEDINGS IN CONNECTION HEREWITH.
14. WAIVER OF JURY TRIAL. THE GUARANTOR, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND
INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A MATERIAL
INDUCEMENT TO EACH LENDER ENTERING INTO THE CREDIT AGREEMENT.
15. Ratable Benefit. This Guaranty is for the ratable benefit
of the Lenders, each of which shall share any proceeds of this
Guaranty pursuant to the terms of the Credit Agreement.
16. Guarantor Insolvency. Should the Guarantor become
insolvent, fail to pay its debts generally as they become due,
voluntarily seek, consent to, or acquiesce in the benefits of any
Debtor Relief Law or become a party to or be made the subject of any
proceeding provided for by any Debtor Relief Law (other than as a
creditor or claimant) that could suspend or otherwise adversely affect
the right of any Lender granted hereunder, then, the obligations of
the Guarantor under this Guaranty shall be, as between the Guarantor
and such Lender, a fully-matured, due, and payable obligation of the
Guarantor to such Lender (without regard to whether there is a Default
or Event of Default under the Credit Agreement or whether any part of
the Loans is then due and owing by the Borrowers to such Lender),
payable in full by the Guarantor to such Lender upon demand, which
shall be the estimated amount owing in respect of the contingent claim
created hereunder.
17. ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER
LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
duly executed and delivered by its duly authorized representative as
of the date first above written.
___________________________________
By________________________________
Its______________________________
EXHIBIT I
In order to derive the benefit of Florida law providing exemption
from certain documentary stamp taxes and intangible taxes, the parties
have agreed that the Notes (a) amend and restate in their entirety and
renew those certain notes secured, inter alia, by Florida real
property, issued by various borrowers to other lenders who have
assigned their interest thereunder to the Administrative Agent (unless
previously held by Mortgagee) for the benefit of the Lenders (the
"Assigned Notes"), being more particularly described below, and (b)
consolidate said Assigned Notes with the new and additional
indebtedness represented by this Agreement.
See page 2 of this Exhibit I for a description of the Assigned Notes.
Table 1 to Exhibit "I"
Property Original Original Date of Original Outstanding
Obligor Obligee Note Principal Principal
Amount of Balance of
Note Note
1. Anatole Mid-America AmSouth
Apartments Bank
, L.P.
2. Paddock Paddock Club First Union June 4, $15,760,000 $15,607,570.65
Club Brandon, A National 1996 0.00
Brandon, Limited Bank of
Phase I Georgia
3. Paddock Flournoy AmSouth July 15, $14,950,000
Club Development Bank 1997
Mandarin Company
4.Paddock Paddock Berkshire August 2, $8,600,000 $8,402,246.66
Club Club Mortgage 1990
Tallahassee Tallahassee, Finance
Phase I A Limited (f/k/a
Partnership Krupp
Mortgage
Corporation)
EXHIBIT J
TO
REVOLVING CREDIT AGREEMENT
CHIEF FINANCIAL OFFICER'S
CERTIFICATE OF COVENANT COMPLIANCE
In accordance with the requirements of the Revolving Credit
Agreement (the "Loan Agreement") between Mid-America Apartment
Communities, Inc., and Mid-America Apartments, L.P., and AmSouth Bank,
as Administrative Agent, dated March 16, 1998 (the "Agreement"), I do
hereby certify as follows (capitalized terms used in this certificate
having the meanings defined for them in the Loan Agreement):
1. I am the Chief Financial Officer of the
Borrower and am duly authorized to execute and deliver
this Certificate.
2. On and as of the date hereof, the Borrower is
in compliance with all the terms and provisions set
forth in the Loan Agreement on its part to be observed
and performed, and no Event of Default specified in
Article Seven of the Loan Agreement, nor any event that
upon notice or lapse of time or both would constitute
such an Event of Default, exists.
3. The attached calculations are true and
correct based on the Borrower's unaudited financial
statement for the fiscal quarter ended ________, ____.
Dated: ________________ _________________________
Simon R.C. Wadsworth
Chief Financial Officer
Mid-America Apartment Communities, Inc.
Mid-America Apartment Communities
Revolving Credit Agreement
Debt Covenant Worksheet
for Compliance Certificate
Quarter Quarter
Ending Ending Annualized
_________ _________ __________
Total Liabilities
EBITDA-MAA
EBITDA-FDC
EBITDA-Combined
Total Market Value
Total Liabilities/Total
Market Value
Total Development and JV
Investment
As % of Total Market Value
Total Annualized Fixed
Charges
Preferred Dividend
Principal (from below)
Interest
Total Annualized Fixed
Charges
EBITDA/ANNUALIZED FIXED
CHARGES:
Principal
From Mac Schedule
Westside Creek II
FDC
Total Principal
Total Annualized Debt
Service:
Principal
Interest
Total Debt Service
EBITDA/DEBT SERVICE
Tangible Net Worth
Equity
Less Intangibles
Tangible Net Worth
AmSouth Properties only
Adjusted NOI of Mortgaged
Properties
Assumed Debt Service
Adjusted NOI/Assumed Debt
Service
Dividend Payments
Common Dividend Payment
Preferred Divident Payment
Total Dividend Payment
FFO
FFO + Preferred Dividend
Total Dividends/FFO+Preferred
[Quarter]
>2.00:1 Debt Service Ratio
>1.75:1 Fixed Charge Ratio
>1.0:1.0 Adjusted NOI Ratio
>$470MM Net Worth
<10% MVA Development &
Construction Debt
<90% FFO Dividend payout
<60% Debt/Total Market
Value of Assets
_______________________________
1/Not earlier than fifth Business Day after execution.
2/Consent not required if Assignee is a Lender.
EXHIBIT 10.10
NOTE PURCHASE AGREEMENT
MID-AMERICA APARTMENTS, L.P.
6584 Poplar Avenue
Memphis, TN 38138
MID-AMERICA APARTMENT COMMUNITIES, INC.
6584 Poplar Avenue
Memphis, TN 38138
As of November 24, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Ravinia Drive
Suite 1400
Atlanta, Georgia 30346
Ladies and Gentlemen:
The undersigned, Mid-America Apartments, L.P. (the
"Partnership") and Mid-America Apartment Communities, Inc. (the
"REIT"), hereby agree with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Partnership has
authorized the issuance of its senior unsecured promissory notes
in the aggregate principal amount of the Converted Loans, to be
dated the date of issuance thereof, to mature on the Conversion
Maturity Date, to bear interest on the unpaid balance thereof
from the date thereof until the principal thereof shall have
become due and payable at the Converted Note Rate, and on overdue
payments at the rate specified therein, and to be substantially
in the form of Schedule 1A attached hereto. The term "Notes" as
used herein shall include each such senior unsecured promissory
note delivered pursuant to any provision of this Agreement and
each such senior unsecured promissory note delivered in
substitution or exchange for any other Note pursuant to any such
provision. Other capitalized terms that are used herein are
defined in Section 10 hereof, beginning on page 34.
2. PURCHASE AND SALE OF NOTES. The Partnership hereby
agrees to sell to you and, subject to the terms and conditions
herein set forth, you agree to purchase from the Partnership,
Notes in the aggregate principal amount equal to the aggregate
principal amount of the Converted Loans. The Partnership will
deliver to you, at your offices described above (or at such other
place as you may designate), one or more Notes registered in your
name, evidencing the aggregate principal amount of Notes to be
purchased by you and in such denomination or denominations as may
be acceptable to you, against the payment of the purchase price
of such Notes by delivery of the notes evidencing the Converted
Loans in an aggregate principal amount equal to the principal
amount of Converted Loans on the date of closing of this
transaction, which shall be the Conversion Date (hereinafter also
called the "closing" or the "date of closing").
Notwithstanding anything to the contrary in this Agreement,
should you suffer a loss of principal on any loan to the
Partnership, the REIT or any Affiliate of either, your obligation
hereunder to purchase the Notes shall automatically terminate and
be of no further force or effect.
3. CONDITIONS OF CLOSING. On the Conversion Date, you
will purchase the Notes and will release your Liens against the
Collateral, subject to the fulfillment, on or prior to the
Conversion Date, of the following conditions.
3A. Conversion Issues.
(i) No default nor any event which, through the giving
of notice or the passage of time, would constitute a
default, (A) shall have occurred on any of your loans with
the Partnership, the REIT or Affiliates of either, and be
continuing at the Conversion Date, or (B) will result from
the conversion of the Converted Loans as provided for
herein.
(ii) As more particularly outlined herein, the
Partnership shall have (A) executed and delivered to you
such documents evidencing the conversion of the Converted
Loans into senior, unsecured, fully recourse loans of the
Partnership as you may require, including, without
limitation, the Notes,(B) delivered such evidence as you may
require to evidence the Partnership's authority to enter
into the conversion transaction, and (C) provided such
representations and warranties as of the Conversion Date as
you may reasonably require including matters relating to
title, environmental matters, possession of agreements,
permits, easements, trademarks, labor and employee
relations.
(iii) No earlier than sixty (60) days prior to the
Conversion Date, you shall have received letters from S & P
and one other Nationally Recognized Rating Agency, stating
that, based on the assumption that the Liens held by you in
the Collateral and securing the Converted Loans will be
released, the Notes and the other senior long term unsecured
debt of the Partnership have received a rating of at least
"BBB-" from S&P and the equivalent of S&P's BBB- rating from
one such other Nationally Recognized Rating Agency.
(iv) The Partnership and the REIT shall provide written
evidence satisfactory to you that the covenants in this
Agreement, except in paragraph 5L hereof, have been
satisfied during the term of this Agreement, and the
covenants in paragraph 6A have been strictly satisfied for
the four (4) consecutive financial quarters immediately
preceding the date of the Partnership's conversion request.
Any calculations required to provide such evidence shall
treat the Converted Loans and any other secured Debt of the
Partnership and its Subsidiaries that will be converted to
unsecured contemporaneously with the Converted Loans, as
having been unsecured for the four (4) consecutive financial
quarters preceding the request.
(v) The Partnership shall provide sixty (60) days
written notice to you prior to the Conversion Date. Such
notice shall include, at minimum, a proposed Conversion
Date, a list of the Convertible Loans to be converted, and a
statement that all conditions to the conversion as described
herein have been satisfied or will be satisfied as of
closing.
(vi) The Partnership shall pay your reasonable out-of-
pocket expenses relating to the conversion, including the
fees and expenses of your outside legal counsel.
(vii) With its conversion notice the Partnership
shall pay to you a $20,000 non-refundable fee. At closing,
the Partnership shall pay you an additional fee equal to
.25% multiplied by the principal amount of the Converted
Loans, less the $20,000 fee described in the preceding
sentence.
(viii) The (A) market value of the outstanding
common stock of the REIT on a date within thirty (30) days
of closing plus (B) the Consolidated Funded Debt of the REIT
as of that date, shall exceed $1 billion.
(ix) On the closing date, no more than eighteen percent
(18%) of the apartment units owned by the Partnership, the
REIT and their respective Affiliates collectively shall be
located in one Metropolitan Statistical Area. For the
purposes of this determination, the counties in which
Southhaven, Mississippi, Olive Branch, Mississippi and Horn
Lake Mississippi are located shall be considered part of the
Memphis, Tennessee, Metropolitan Statistical Area.
(x) All of the Converted Loan Borrowers shall have
been dissolved and their assets distributed to the
Partnership pursuant to documentation satisfactory to you.
(xi) All accrued and unpaid interest on the Converted
Loans through the Conversion Date shall have been paid to
you in immediately available federal funds.
3B. Execution and Delivery of Documents. The Partnership
and the REIT shall have delivered, or caused to be delivered, to
you duly executed, original or certified copies of the following
documents, each to be dated the date of Closing unless otherwise
indicated:
(i) the Note(s).
(ii) a favorable opinion of Baker, Donelson, Bearman &
Caldwell, special counsel to the Partnership and the REIT
(or such other counsel designated by the Partnership and the
REIT and reasonably acceptable to you) satisfactory to you
and substantially in the form of Schedule 3B(ii) attached
hereto and as to such other matters as you may reasonably
request. The Partnership and the REIT hereby direct such
counsel to deliver such opinion, agree that the issuance and
sale of any Notes will constitute a reconfirmation of such
direction, and understand and agree that you will and are
hereby authorized to rely on such opinion.
(iii) the Certificate of Limited Partnership of the
Partnership and the Articles of Incorporation of the REIT,
each certified as of a date within thirty (30) days of
Closing by the Secretary of State of the State in which each
such entity was formed.
(iv) the limited partnership agreement of the
Partnership, and the By-Laws of the REIT, certified (as to
the REIT) by its Secretary and (as to the Partnership) by
its general partner.
(v) an incumbency certificate signed by the general
partner of the Partnership and an incumbency certificate
signed by the Secretary or an Assistant Secretary and one
other officer (who is not signing any other document or
agreement in connection herewith) of the REIT, in each case
certifying as to the names, titles and true signatures of
the general partners of the Partnership and the officers of
the REIT authorized to sign this Agreement and the Notes and
the other documents to be delivered hereunder.
(vi) (a) certificate of the general partner of the
Partnership and certificate of the Secretary of the REIT
(A) attaching appropriate authority documents of the
Partnership and the REIT (respectively) evidencing approval
of the transactions contemplated by this Agreement, and the
other Loan Documents and the issuance of the Notes, and the
other Loan Documents, and the execution, delivery and perfor
mance thereof, and authorizing certain general partners (as
to the Partnership) and certain officers of the REIT (as to
the REIT) to execute and deliver the same, and certifying
that such authority documents were duly and validly adopted
and such consents and resolutions have not since been
amended, revoked or rescinded,(B) certifying that no
dissolution, liquidation or winding up proceedings as to the
Partnership or the REIT have been commenced or are
contemplated, and (C) identifying and attaching any proposed
or effected amendments to or changes in the Certificate of
Limited Partnership of the Partnership or the Articles of
Incorporation of the REIT since the date of the certified
copies thereof provided pursuant to clause (i) above or, if
none, so certifying.
(vii) an Officer's Certificate certifying that(A)
the representations and warranties contained in paragraph 8
hereof shall be true on and as of the date of closing,
except to the extent of changes caused by the transactions
herein contemplated; (B) there shall exist on the date of
closing no Default or Event of Default; (C) no condition,
event or act that has had or would have a Material Adverse
Effect has occurred since the date of this Agreement nor is
threatened or reasonably likely to occur.
(viii) corporate and tax good standing certificates
as to (A) the Partnership, from the State of Tennessee,
(B) the REIT, from the State of Tennessee, and (C) each of
the other Converted Loan Borrowers, from their respective
States of incorporation or formation (as the case may be).
(ix) a letter or letters from the auditor or auditors
for the Partnership, the REIT and the Converted Loan
Borrowers addressed to you, stating that such firm or firms
have reviewed the provisions for Federal, state and other
income taxes of the Partnership, the REIT and the Converted
Loan Borrowers contained in the financial statements as of
and for the periods ended in the last quarter prior to the
Conversion Date and that, in the opinion of such firm, the
Partnership, the REIT and the Converted Loan Borrowers have
each either paid or made adequate provision in the
consolidated balance sheets included in such financial
statements for all unpaid Federal, state and other income
taxes for the fiscal years then ended, and for all fiscal
years ended prior thereto which have not been examined and
reported on by the taxing authorities or closed by
applicable statute.
(x) Certified copies of Requests for Information or
Copies (Form UCC-11) or equivalent reports listing all
effective financing statements which name the Partnership,
the REIT or any of the Converted Loan Borrowers (under their
present name and previous names) as debtor and which are
filed in the offices of the Secretaries of State of
Tennessee, Florida, and Georgia and any other State in which
a Converted Borrower was either organized, incorporated or
owned property, together with copies of such financing
statements, which shall show no Liens other than the
Permitted Liens.
(xi) Such documents as you may reasonably request
evidencing the authorization of the dissolution of the
Converted Loan Borrowers and the distribution of their
assets to the Partnership.
(xii) One or more unconditional guaranties of
payment and performance from the REIT of all of the
obligations of the Partnership hereunder and under the other
Loan Documents, including, without limitation, the Notes,
reasonably satisfactory in form and content to you and in
the form of Schedule 3B (xii) attached hereto (each, a "REIT
Guaranty"; collectively, the "REIT Guaranties").
(xiii) documents evidencing the satisfaction of the
conditions contained in 3A hereof.
(xiv) Additional documents or certificates with
respect to such legal matters or partnership or corporate or
other proceedings related to the transactions contemplated
hereby as may be reasonably requested by you.
3C. Opinion of Purchaser's Special Counsel. You shall have
received from Glass, McCullough, Sherrill & Harrold, LLP, or such
other counsel who is acting as special counsel for you in
connection with this transaction, a favorable opinion
satisfactory to you as to such matters incident to the matters
herein contemplated as you may reasonably request.
3D. Purchase Permitted By Applicable Laws. The purchase of
and payment for the Notes to be purchased by you on the date of
closing on the terms and conditions herein provided (including
the use of the proceeds of such Notes by the Partnership) shall
not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act
or Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and shall not subject you to any tax, penalty,
liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and you shall have
received such certificates or other evidence as you may request
to establish compliance with this condition.
3E. Proceedings. All partnership, corporate and other
proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident
thereto shall be satisfactory in substance and form to you, and
you shall have received all such counterpart originals or
certified or other copies of such documents as you may reasonably
request.
3F. Privity Letter. You shall have received a letter
addressed to you from KMPG Peat Marwick (or such other nationally
recognized firm of independent public accountants that are
members of the SEC practice section of the American Institute of
Certified Public Accountants) to the effect that it acknowledges
and understands that (i) the Partnership and the REIT have
provided you with a copy of their most recent annual financial
statements, as audited by said accounting firm, together with the
report of such accounting firm on such financial statements, (ii)
you intend to rely upon the report of said accounting firm in
connection with your decision to purchase the Notes hereby and
(iii) accordingly, you are in privity with said accounting firm
with respect to such audited financial statements.
4. PREPAYMENTS.
4A. Optional Prepayments. Notes shall be subject to
prepayment, in whole at any time or from time to time in part (in
multiples of $5,000,000), at the option of the Partnership, at
100% of the principal amount so prepaid plus interest thereon to
the prepayment date and the Prepayment Premium, if any, with
respect to each Note.
The Partnership shall give the holder of each Note
irrevocable written notice of any prepayment pursuant to this
paragraph 4A not less than 30 days prior to the prepayment date,
specifying such prepayment date and the principal amount of the
Notes, and of the Notes held by such holder, to be prepaid on
such date and stating that such prepaying is to be made pursuant
to this Paragraph 4A. Notice of prepayments having been given as
aforesaid, the principal amount of the Notes specified in such
notice, together with interest thereon to the prepayment date and
together with the Prepayment Premium, if any, with respect
thereto, shall become due and payable on such prepayment date.
The Partnership shall, on or before the day on which it gives
written notice of any prepayment pursuant to this Paragraph 4A,
give telephonic notice of the principal amount of the Notes to be
prepaid and the prepayment date to each Significant Holder which
shall have designated a recipient of such notices by notice in
writing to the Partnership.
Upon any partial prepayment of the Notes pursuant to this
Section 4A, the principal amount so prepaid shall be allocated to
all Notes at the time outstanding (including, for the purpose of
this Paragraph 4A only, all Notes prepaid or otherwise retired or
purchased or otherwise acquired by the Partnership, the REIT or
any of their Subsidiaries or Affiliates) in proportion to the
respective outstanding principal amounts thereof.
4B. Prepayment Premium. The Prepayment Premium required
under this Agreement shall be due and payable, except as
otherwise provided in this Agreement or as limited by law, upon
any prepayment of any Note, whether voluntary or involuntary, and
Holder shall not be obligated to accept any prepayment of the
Note unless it is accompanied by the Prepayment Premium, all
accrued interest and all other obligations and indebtedness due
under the Loan Documents. The holders of the Notes shall notify
Partnership of the amount and calculation of the Prepayment
Premium. Partnership and the REIT agree that, in determining the
Prepayment Premium, (a) the holders of the Notes shall not be
obligated to actually reinvest the amount prepaid in any Treasury
obligation and (b) the Prepayment Premium is directly related to
the damages that the holders will suffer as a result of the
prepayment. Notwithstanding the foregoing or anything to the
contrary in this Agreement, no Prepayment Premium shall be due on
the Notes if they are prepaid during the last fourteen (14) days
prior to the Conversion Maturity Date.
5. AFFIRMATIVE COVENANTS. Upon the issuance of the Notes,
and so long as all or any of the Notes remain outstanding:
5A. Financial Statements. The Partnership and the REIT
covenant that they will deliver to each Significant Holder in
triplicate:
(i) as soon as practicable and in any event within
fifty-five (55) days after the end of each quarterly period
(other than the last quarterly period) in each fiscal year,
comparative Consolidated statements of income and cash flows
and changes in financial position for each of (A) the
Partnership and (B) the REIT, for the period from the
beginning of the current fiscal year to the end of such
quarterly period, and a comparative Consolidated balance
sheet for each of (A) the Partnership and (B) the REIT, as
at the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding
period in the preceding fiscal year, all in reasonable
detail and certified by an authorized financial officer or
general partner (as the case may be) of the Partnership and
the REIT, respectively, subject to changes resulting from
year-end adjustments; provided, however, that delivery
pursuant to clause (iii) below of copies of the Quarterly
Report on Form 10-Q of the REIT for such quarterly period
filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this clause (i) with
respect to the REIT;
(ii) as soon as practicable and in any event within one
hundred twenty (120) days after the end of each fiscal year,
audited comparative Consolidated statements of income, cash
flows and changes in financial position of each of (A) the
Partnership and (B) the REIT, for such year, and a
comparative Consolidated balance sheet of each of (A) the
Partnership and (B) the REIT as at the end of such year,
setting forth in each case in comparative form corresponding
Consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required
Holder(s) and reported on by independent public accountants
of recognized national standing that are members of the SEC
practice section of the American Institute of Certified
Public Accountants selected by the Partnership or the REIT
whose report shall be without limitation as to the scope of
the audit and reasonably satisfactory in substance to the
Required Holder(s) and, as to the consolidating statements,
certified by an authorized financial officer or general
partner (as the case may be) of the Partnership and the
REIT, respectively; provided, however, that delivery
pursuant to clause (iii) below of copies of the Annual
Report on Form 10-K of the REIT for such fiscal year filed
with the Securities and Exchange Commission shall be deemed
to satisfy the requirements of this clause (ii) with respect
to the REIT;
(iii) promptly upon transmission thereof, copies of
all such financial statements, proxy statements, notices and
reports as the Partnership or the REIT shall send to its
shareholders, and copies of all registration statements
(without exhibits), and all reports which either of them
files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of
the Securities and Exchange Commission);
(iv) as often as reported to REIT shareholders, such
supplemental financial and property level information, in
the form provided to the shareholders, which includes
property level information regarding all of the REIT's real
estate assets, certified by a financial officer of the REIT;
(v) within fifteen (15) days of delivery thereof, a
copy of each other report submitted to the Partnership or
the REIT by independent accountants in connection with any
annual, interim or special audit made by them of the books
of the Partnership or the REIT;
(vi) with reasonable promptness information on adverse
litigation and ERISA events; the occurrence or announcement
of a Designated Event;
(vii) with reasonable promptness, such other
financial data and other information as the Partnership or
the REIT regularly provides to its other lenders, other
holders of Debt or other creditors;
(viii) with reasonable promptness, and in any event
within thirty (30) days after receipt thereof, a copy of any
notice, summons, citation, directive, letter or other form
of communication from any governmental authority or court in
any way concerning any action or omission on the part of
Partnership or the REIT or any Subsidiary of either in
connection with any Hazardous Material or concerning the
filing of a lien upon, against or in connection with
Partnership or the REIT or any Subsidiary of either or any
of its leased or owned real or personal property, in
connection with a Hazardous Substance Superfund or a Post-
Closure Liability Fund as maintained pursuant to U.S.C.
9507; and
(ix) with reasonable promptness, such other financial
data and property level information or documents as may be
reasonably requested by you, including accountant,
shareholder and Securities and Exchange Commission notices,
reports and filings, rating agency reports and material
correspondence, management letters and material press
releases; and
(x) with reasonable promptness, such other information
and documents any Significant Holder may reasonably request.
Together with each delivery of financial statements required by
clauses (i) and (ii) above, the Partnership and the REIT will
each deliver to each Significant Holder an Officer's Certificate
demonstrating (with computations in reasonable detail) compliance
by the Partnership and the REIT (as the case may be) with the
provisions of paragraphs 6A and 6C and stating that there exists
no Default or Event of Default, or, if any Default or Event of
Default exists, specifying the nature and period of existence
thereof and what action the Partnership or the REIT, as the case
may be, proposes to take with respect thereto. Together with
each delivery of financial statements required by clause
(ii) above, the Partnership and the REIT will deliver to each
Significant Holder a certificate of such accountants stating
that, in making the audit necessary for their report on such
financial statements, they have obtained no knowledge of any
Default or Event of Default, if they have obtained knowledge of
any Default or Event of Default, specifying the nature and period
of existence thereof. Such accountants, however, shall not be
liable to anyone by reason of their failure to obtain knowledge
of any Default or Event of Default, which would not be disclosed
in the course of an audit conducted in accordance with generally
accepted auditing standards.
The Partnership and the REIT also covenant that immediately
and in no event later than ten (10) Business Days after any
Responsible Officer obtains knowledge of a Default or Event of
Default, he or she will deliver to each Significant Holder an
Officer's Certificate specifying the nature and period of
existence thereof and what action the Partnership or the REIT (as
the case may be) has taken, is taking or proposes to take with
respect thereto.
For purposes of paragraphs 3F and 5A, any of the accounting
firms of Coopers & Lybrand, Arthur Andersen & Co., Deloitte &
Touche, KPMG Peat Marwick, Price Waterhouse, Ernst & Young, and
their respective successor entities, or an independent accounting
firm that is a member in good standing of the SEC Practice
Section (or any successor group or section) of the American
Institute of Certified Public Accountants shall be deemed to be
accountants "of recognized national standing."
5B. Information Required by Rule 144A. The Partnership and
the REIT covenant that they will, upon the request of the holder
of any Note, provide such holder, and any qualified institutional
buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be
necessary in order to permit compliance with the information
requirements of Rule 144A under the Securities Act (or any other
applicable exemption from registration under the Securities Act
similar to such Rule 144A) in connection with the resale of
Notes, except at such times as the Partnership and the REIT are
subject to the reporting requirements of section 13 or 15(d) of
the Exchange Act. For the purpose of this paragraph 5B, the term
"qualified institutional buyer" shall have the meaning specified
in Rule 144A under the Securities Act.
5C. Inspection of Property. The Partnership and the REIT
covenant that they, upon two (2) days prior notice to the
Partnership and the REIT (except in the case of a situation that
any Significant Holder determines, in its sole discretion may
have a negative effect on the health and safety of the tenants or
may have a negative effect on the condition of the improvements
located on the applicable properties of the Partnership, the REIT
and their Subsidiaries) and subject to the rights of tenants and,
unless a Default or Event of Default has occurred and is
continuing, that any Person who inspects the books and records of
the Partnership or REIT, or discusses the same and the finances
of the Partnership or REIT (or any Subsidiary thereof) with any
executive officer thereof, shall execute a confidentiality
agreement in form and substance reasonably satisfactory to the
Partnership and the REIT prior to such inspection or discussion;
provided, however, such confidentiality agreement shall not
preclude a holder from discussing the results thereof with any
other holder of the Notes or with any of its participants or with
any applicable regulatory agency with jurisdiction over such
holder, will permit any Person designated by any Significant
Holder in writing, at such Significant Holder's expense prior to
a Default or Event of Default and at Partnership's and REIT's
expense after a Default or Event of Default, to visit and inspect
any of the properties of the Partnership, the REIT, or any of
their Subsidiaries, to examine the corporate books and financial
records of the Partnership, the REIT or any of their Subsidiaries
and make copies thereof or extracts therefrom and to discuss the
affairs, finances and accounts of any of such Persons with the
principal officers of the Partnership, the REIT, and their
independent public accountants, all at such reasonable times and
as often as such Significant Holder may reasonably request.
5D. Payment of Taxes and Claims. The Partnership and the
REIT will pay, and will cause all of their Subsidiaries to pay,
all taxes, assessments and other governmental charges imposed
upon them or any of their properties or assets or in respect of
any of their franchises, business, income or profits before any
penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and which by
law have or might become a Lien upon any of their properties or
assets; provided, that no such charge or claim need be paid if
subject to a Good Faith Contest.
5E. Maintenance of Properties; Compliance with Laws. The
Partnership and the REIT covenant that they will, and will cause
each of their Subsidiaries to (i) maintain or cause to be
maintained in good repair, working order and condition all
equipment and other properties necessary at that time in their
businesses and from time to time will make or cause to be made
all appropriate repairs, renewals and replacements thereof; and
(ii) comply in all material respects with all applicable (A) laws
(including Environmental and Safety Laws), rules, regulations,
decrees and orders of all Federal, state, local or foreign courts
or governmental agencies, authorities, instrumentalities or
regulatory bodies and (B) rules, regulations and requirements
necessary to maintain their operating and business licenses,
authorizations and permits, noncompliance with which could
reasonably be expected to result in a Material Adverse Effect.
5F. Maintenance of Insurance. The Partnership and the REIT
covenant that they will maintain, and will cause each of their
Subsidiaries to maintain, insurance in such amounts and against
such casualties, liabilities, risks, contingencies and hazards as
is customarily maintained by other similarly situated Persons
operating similar businesses and together with each delivery of
financial statements under clause (ii) of paragraph 5A, will
deliver an Officers' Certificate specifying the details of such
insurance in effect. Insurance required by this paragraph 5F
shall be with insurers rated A or better by A.M. Best Company (or
accorded a similar rating by another nationally or
internationally recognized insurance rating agency of similar
standing if A.M. Best Company is not then in the business of
rating insurers or rating foreign insurers) or such other
insurers as may from time to time be reasonably acceptable to the
Required Holders.
5G. Maintenance of Priority. The Partnership and the REIT
will cause the Notes to, at all times, constitute senior
Unsecured Debt of the Partnership that is not subordinated to any
other Unsecured Indebtedness of the Partnership and shall rank
equally or higher with other existing and future senior Unsecured
Debt of the Partnership.
5H. Maintenance of Sole General Partnership. The REIT
shall at all times be the sole general partner in the
Partnership.
5I. Management of Properties. The Partnership and the REIT
shall cause their properties and the properties of their
Subsidiaries to be managed by Persons owned or controlled by the
REIT or the Partnership. The Partnership and the REIT shall
cause all such management agreements to be subordinated to the
obligations of the REIT and the Partnership to you.
5J. Investment of Assets. Without in any way limiting the
restrictions contained in Paragraph 6A(8) hereof, the Partnership
and the REIT shall each keep their assets invested only in the
following types of investments: cash and cash equivalents,
investments in apartment real property and improvements,
development in progress, land held for development, publicly
traded securities, mortgages, and investment in Affiliates.
5K. Stock Exchange Listing; REIT Status. The REIT shall
maintain a listing for its common stock on the New York Stock
Exchange and shall maintain its status as a "real estate
investment trust" under Section 856 of the Code.
5L. Investment Grade Rating. The Partnership and the REIT
shall at all times, and at their expense, take all action
required to maintain, and shall maintain, ratings for the Notes
and the senior unsecured Indebtedness of the Partnership and the
REIT of at least "BBB-" from S&P and at least the equivalent of
S&P's BBB- rating from the other Nationally Recognized Rating
Agency that provided them with such rating in connection with the
issuance of the Notes. Such Nationally Recognized Rating Agency
used must be the same as that used initially unless the original
such Nationally Recognized Rating Agency no longer issues such
ratings, in which case you, the Partnership and the REIT shall
mutually agree on a second Nationally Recognized Rating Agency.
The Partnership and the REIT shall provide letters from S&P and
the other original Nationally Recognized Rating Agency regarding
the ratings of the Notes and of the other senior long term
unsecured Indebtedness of the Partnership and the REIT within one
hundred eighty (180) days following the end of each fiscal year
of the Partnership and the REIT. The Partnership and the REIT
hereby agree to promptly give you notice of any downgrade or
potential downgrade with respect to the Notes or other of their
senior unsecured Indebtedness of the Partnership or the REIT by
S&P or the other original Nationally Recognized Rating Agency.
5M. Covenant Regarding Guarantees. The Partnership and the
REIT covenant that if any Person provides a Guarantee of (i) any
Unsecured Debt of the Partnership or the REIT or (ii) any Debt of
the REIT or the Partnership other than Unsecured Debt and the
amount of such Debt secured by such a Guarantee then exceeds
$25,000,000, they will cause such Person to Guarantee the Notes
equally and ratably with such Debt for so long as such Debt is
guaranteed; provided, that the provision of any such Guarantee
with respect to the Notes shall not in any way limit or modify
the rights of the holders of the Notes to enforce the provisions
of paragraph 6C(2) hereof.
5N. ERISA. The Partnership and the REIT covenant that
they will, and will cause their Subsidiaries to, deliver to you
promptly and in any event within ten (10) days after it knows or
has reason to know of the occurrence of any event of the type
specified in clause (xiv) of paragraph 7A notice of such event
and the likely impact on the Partnership, the REIT and their
Affiliates. In the event the Partnership, the REIT or any
Affiliate of either have participated, now participates or will
participate in any Plan or Multiemployer Plan, the Partnership
and the REIT covenant that they will, and will cause any
Affiliate to, deliver to you: (i) promptly and in any event
within ten (10) Business Days after it knows or has reason to
know of the occurrence of a Reportable Event with respect to a
Plan, a copy of any materials required to be filed with the PBGC
with respect to such Reportable Event, together with an Officer's
Certificate of the Partnership and the REIT setting forth details
as to such Reportable Event and the action which the Partnership
and/or the REIT proposes to take with respect thereto; (ii) at
least ten (10) Business Days prior to the filing by any plan
administrator of a Plan of a notice of intent to terminate such
Plan, a copy of such notice; (iii) promptly upon the reasonable
request of a Significant Holder, and in no event more than ten
(10) Business Days after such request, copies of each annual
report on Form 5500 that is filed with the Internal Revenue
Service, together with certified financial statements for the
Plan (if any) as of the end of such year and actuarial statements
on Schedule B to such Form 5500; (iv) promptly and in any event
within ten (10) Business Days after it knows or has reason to
know of any event or condition which might constitute grounds
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, an Officer's
Certificate of the REIT and the Partnership describing such event
or condition; (v) promptly and in no event more than ten (10)
Business Days after its or any ERISA Affiliate's receipt thereof,
the notice concerning the imposition of any withdrawal liability
under section 4202 of ERISA; and (vi) promptly after receipt
thereof, a copy of any notice the Partnership, the REIT or any
ERISA Affiliate of either may receive from the PBGC or the
Internal Revenue Service with respect to any Plan or
Multiemployer Plan; provided, however, that this paragraph 5N
shall not apply to notices of general application promulgated by
the PBGC or the Internal Revenue Service.
5O. Environmental and Safety Laws. The Partnership and the
REIT covenant that they will, and will cause each of their
Subsidiaries to, deliver promptly to you any notice of (i) any
material enforcement, cleanup, removal or other material
governmental or regulatory actions instituted, completed or, to
the Partnership's and the REIT's best knowledge, threatened
pursuant to any Environmental and Safety Laws; (ii) all material
Environmental Costs and Liabilities against or in respect of any
Property, the Partnership, the REIT or any Subsidiary of either;
and (iii) the Company's, the REIT's or any Subsidiary's discovery
of any occurrence or condition on any real property adjoining or
in the vicinity of any Property that such Partnership, REIT or
Subsidiary has reason to believe could cause such Property or any
material part thereof to be subject to any material restrictions
on its ownership, occupancy, transferability or use under any
Environmental and Safety Laws.
5P. Existence, etc.; Business. The Partnership and the
REIT covenant that they will, and will cause all their
Subsidiaries to, preserve and keep in full force and effect at
all times their corporate or partnership existence, and permits,
licenses, franchises and other rights material to their
businesses, except that the corporate or partnership existence of
any Subsidiary may be terminated if, in the good faith judgment
of the of the Partnership or the REIT (as the case may be), such
termination is in the best interest of the Partnership or the
REIT and is not disadvantageous to the holders of the Notes. The
Partnership and the REIT covenant they will not, and will not
permit any Affiliate to, engage in any business other than the
businesses conducted by the Partnership, the REIT and their
Affiliates on the date of the financial statements described in
paragraph 8B.
5Q. Maintenance of License Agreements. The Partnership and
the REIT covenant that (i) they will maintain and preserve their
current and any future license agreements, and shall not do or
suffer to be done anything that will adversely affect such
license arrangements except to the extent that any such adverse
effect(s) is or are not, in the aggregate, material to the
business, property, prospects, assets, liabilities or financial
position of the Partnership or the REIT; and (ii) they shall give
the Significant Holders notice of any material amendments to
their license agreements currently in existence, such notice to
be given at least five (5) Business Days in advance of the
effectiveness of such amendment.
5R. Books and Accounts. The Partnership and the REIT
covenant that they will, and will cause each of their
Subsidiaries to, maintain proper and accurate books of record and
account in which full, true and correct entries shall be made of
its transactions and set aside on its books from its earnings for
each fiscal period all such proper reserves as in each case shall
be required in accordance with GAAP, consistently applied.
5S. Compensation Committee. The REIT shall continue to
have a compensation committee of its Board of Directors comprised
of a majority of independent directors to set compensation for
its and the Partnership's senior executives.
6. Negative Covenants. Upon the issuance of the Notes,
and so long as any Note or amount owing under the Notes or this
Agreement shall remain unpaid, or you shall have any commitment
hereunder:
6A. Financial Covenants. Neither the Partnership nor the
REIT will, on a Consolidated basis, permit (or, in the case of
clause 6A(8) hereof, make or have exist):
6A(1). Fixed Charge Coverage. The ratio of its
Consolidated Income Available for Debt Service to its Annual Debt
Service Charge to be less than 2.0 to 1.0 for the four (4)
consecutive fiscal quarter periods most recently ended as of the
last day of the fiscal quarter.
6A(2). Debt to Real Property. Its outstanding Debt to be
greater than fifty-five percent (55%) of Undepreciated Real
Estate Assets as of the last day of the fiscal quarter.
6A(3). Secured Debt. Its outstanding Debt or other
Indebtedness secured by total Liens on any of its property or
assets to be greater than thirty-seven percent (37%) of its
Undepreciated Real Estate Assets as of the last day of the
quarter.
6A(4). Unencumbered Assets. Its Total Unencumbered Assets
to be less than one hundred sixty-seven percent (167%) of the
aggregate principal amount of all of its outstanding Unsecured
Debt (on a Consolidated basis) as of the last day of the quarter.
6A(5). Coverage. Its Property Income from its Total
Unencumbered Assets to be less than 1.67 multiplied by its Annual
Debt Service Charge from its Unsecured Debt for the four (4)
consecutive fiscal quarters most recently ended as of the last
day of the fiscal quarter.
6A(6). Sale or Disposal. The sale or disposal of more
than ten percent (10%) of its Total Assets in any twelve (12)
month period unless seventy-five percent (75%) or more of the
proceeds of all such sales or dispositions are reinvested in
other apartment real estate assets or used to pay down/off Debt
within twelve (12) months from the date of such sales or
dispositions.
6A(7) Net Worth. Its Net Worth to be less than $300
million (excluding Minority Interests) or eighty-five percent
(85%) of the Net Worth of the REIT at the quarter end immediately
prior to Conversion, whichever is greater.
6A(8) Investments. As a percentage of its Total Assets,
Investments in the following categories of properties greater
than the following amounts:
(i) Development in progress plus land held for
development: 10%
(ii) Land held for development: 3%
(iii)Publicly traded securities: 5%
(iv) Mortgages: 3%
6B. Restricted Payments. Each of the Partnership and the
REIT covenants that it will not, and will not permit any
Subsidiary to, make, pay or declare, or commit to make, pay or
declare, any Restricted Payment unless no Default or Event of
Default exists or would exist after giving effect to such
Restricted Payment. Notwithstanding in this Paragraph 6B shall
prevent the REIT from making such distributions to its
Shareholders as shall be required to maintain its status as a
"real estate investment trust" under Section 856 of the Code.
6C. Debt, and Other Restrictions. Each of the Partnership
and the REIT will not, and will not permit any Subsidiary to:
6C(1). Debt. Create, incur, assume or suffer to exist any
Debt, except
(i) (A) Debt of any Subsidiary to the Partnership, the
REIT or any Wholly Owned Subsidiary of either, or (B) the
Convertible Loans that are not the Converted Loans.
(ii) Current Debt of the Partnership or the REIT (other than
Current Debt owed to any Subsidiary) in an amount not in excess
of 40% of its total Debt at any time.
(iii) other Funded Debt of the Partnership or the REIT
(other than Debt to any Subsidiary), provided that
(A) the aggregate principal amount of all of its
Funded Debt (including, for the
Partnership, the Notes), including
Priority Debt, on a Consolidated
basis does not cause the
Partnership or the REIT to violate
the limitations set forth in
paragraph 6A hereof; and
(B) the Partnership or the REIT shall not
Guarantee Debt of any Subsidiary except pursuant to a
subordination agreement subordinating the beneficiary
of such Guarantee's rights with respect to payment of
such Debt to the payment of the Notes and otherwise in
form and substance satisfactory to the Required Holders
and only if such Subsidiary unconditionally Guarantees
the Notes pursuant to a guaranty in form and substance
satisfactory to the Required Holders;
(iv) non-recourse mortgage Debt of Subsidiaries secured by
their real property assets, so long as such Debt does not cause a
violation of paragraph 6A hereof.
Notwithstanding the foregoing, no floating rate Debt permitted
under this Agreement (including under Paragraph 6A hereof) shall
be permitted thereunder if, after such Debt is incurred, the
REIT's or the Partnership's total floating rate Debt (on a
Consolidated basis) would exceed 40% of its total Debt.
6C(2). Loans, Advances, Investments and Contingent
Liabilities. Make or permit to remain outstanding any loan or
advance to, or extend credit other than credit extended in the
normal course of business to any Person who is not an Affiliate
of the Partnership or the REIT to, or Guarantee, directly or
indirectly, in connection with the obligations, stock or
dividends of, or own, purchase or acquire any stock, obligations
or securities of, or any other interest in, or make any capital
contribution to, any Person, or commit to do any of the
foregoing, (all of the foregoing collectively being
"Investments"), except for the Investments set forth in clauses
(i) - (xvii) below (collectively, "Permitted Investments"):
(i) loans or advances to any Wholly Owned Subsidiary,
(ii) stock, obligations or other securities of, or capital
contributions to, a Wholly Owned Subsidiary or a corporation
which immediately after the purchase or acquisition of such
stock, obligations or other securities will be a Wholly Owned
Subsidiary;
(iii)obligations backed by the full faith and credit of
the United States Government (whether issued by the United States
Government or an agency thereof), and obligations guaranteed by
the United States Government, in each case which mature within
one (1) year from the date acquired;
(iv) (A) demand and time deposits with, Eurodollar deposits
with or certificates of deposit or other securities or
obligations fully backed by letters of credit issued by or
(B) bankers' acceptances eligible for rediscount under require
ments of The Board of Governors of the Federal Reserve System
that are accepted by, any commercial bank or trust Partnership
(1) organized under the laws of the United States or any of its
states or having branch offices therein, (2) having equity
capital in excess of $250,000,000 and (3) who issues either
(x) senior debt securities rated A or better by S&P, A by Moody's
or (y) commercial paper rated A-1 by S&P or Prime-1 by Moody's
(or, in either case, an equivalent rating from another Rating
Agency), in each case payable in the United States in United
States dollars, in each case which mature within one year from
the date acquired;
(v) readily marketable commercial paper rated as A-1 or
better by S&P or Prime-1 or better by Moody's (or, in either
case, an equivalent rating from another Rating Agency) and
maturing not more than two hundred seventy (270) days from the
date acquired;
(vi) bonds, debentures, notes or similar debt instruments
issued by a state or municipality given a "AA" rating or better
by S&P or an equivalent rating by another Rating Agency and
maturing not more than one (1) year from the date acquired;
(vii) negotiable instruments endorsed for collection in
the ordinary course of business;
(viii) the loans, investments and advances existing as of
the date hereof and listed on Schedule 6C(2) hereto, and
extensions, renewals and/or modifications thereof (so long as the
principal amount thereof is not increased);
(ix) Investments arising from transactions by the
Partnership or the REIT or any Subsidiary of either with
customers or suppliers or otherwise in settlement of debt
(including Investments received in settlement of trade
receivables which trade receivables are fully reserved against on
the books of the Partnership, the REIT or such Subsidiary or are
less than one (1) year overdue) in the ordinary course of
business;
(x) repurchase agreements for terms of less than one (1)
year, provided that such repurchase agreement or undertakings are
secured and collateralized by obligations backed by the full
faith and credit of the United States Government in aggregate
face amount equal to or greater than the obligations so secured;
(xi) money market mutual funds that (A) are denominated in
U.S. Dollars, (B) have average asset maturities not in excess of
three hundred sixty-five (365) days, (C) have total invested
assets in excess of $1,000,000,000 and (D) invest exclusively in
Permitted Investments, as defined hereby;
(xii)readily marketable floating rate cumulative
Preferred Stocks, money market Preferred Stocks or other
equivalent Dutch auction Preferred Stock maturing within three
hundred sixty-five (365) days of the date of acquisition thereof
with a credit rating of A or better from S&P or A2 or better from
Moody's or a comparable rating from another Rating Agency
acceptable to the Required Holders, or in stocks of investment
companies registered under the Investment Company Act of 1940, as
amended, which invest solely in Preferred Stock of the type just
described;
(xiii)Preferred Stock of industrial or utility
corporations having senior unsecured debt ratings of A or better
from S&P or A2 or better from Moody's;
(xiv) Investments that do not violate the terms of
Paragraph 6A(8) hereof.
(xv) Investments (including loans to officers, directors,
partners, shareholders and employees of the Partnership and the
REIT) other than those set forth in the preceding clause (i) -
(xvi) of this definition; provided that the aggregate amount of
such Investments, valued at the original cost thereof, shall not
exceed 5% of its Consolidated Tangible Net Worth at any time.
Notwithstanding the foregoing, no Subsidiary of either the
REIT or the Partnership shall make any loan or advance to, or
acquire any stock, obligations or securities of, the Partnership
or the REIT.
6C(3). Sale of Stock and Debt of Subsidiaries. Sell or
otherwise dispose of, or part with control of, any shares of
stock, Debt or partnership or other interests of any Subsidiary,
except (i) to the Partnership, the REIT or a Wholly Owned
Subsidiary of either, (ii) for issuance of Subsidiary Debt in
compliance with paragraph 6C(1) or (iii) that all shares of stock
(or partnership or other interests, as the case may be) and Debt
of any Subsidiary at the time owned by or owed to the
Partnership, the REIT, and/or any Subsidiary may be sold as an
entirety for a cash consideration which represents the fair value
(as determined in good faith by the Partnership or the Board of
Directors of the REIT, as applicable) at the time of sale of the
shares of stock and Debt so sold; provided that(A) such sale or
other disposition is permitted by paragraph 6C(5) and (B) at the
time of such sale, such Subsidiary shall not own, directly or
indirectly, any equity interests in any other Subsidiary (unless
all of the equity interests in such other Subsidiary owned,
directly or indirectly, by the Partnership, the REIT or the
Subsidiaries of either are simultaneously being sold as permitted
by this Paragraph 6C(3));
6C(4). Merger and Consolidation. Merge or consolidate with
or into any other Person, except that:
(i) any Subsidiary thereof may merge or consolidate
with or into the Partnership or the REIT; provided that the
Partnership or the REIT (as the case may be) is the
continuing or surviving entity,
(ii) any Subsidiary of the Partnership or the REIT may
merge or consolidate with or into a Wholly Owned Subsidiary
of the same entity; provided that such Wholly Owned
Subsidiary is the continuing or surviving entity,
(iii)the Partnership or the REIT may consolidate
or merge with any other entity if (A) (1) the Partnership or
the REIT (as the case may be) shall be the continuing or
surviving entity or (2) the continuing or surviving entity
is a solvent corporation, partnership or other limited
liability entity duly organized and existing under the laws
of any state of the United States of America, with
substantially all of its assets located and substantially
all of its operations conducted within the United States of
America, and such continuing or surviving corporation
expressly assumes, by a written agreement satisfactory in
form and substance to the Required Holders (which agreement
may require, in connection with such assumption, the
delivery of such opinions of counsel as the Required Holders
may require), the obligations of the Partnership and the
REIT under this Agreement, the REIT Guaranties and the
Notes, including all covenants herein and therein contained,
and such successor or acquiring entity shall succeed to and
be substituted for the Partnership or the REIT (as the case
may be) with the same effect as if it had been named herein
as a party hereto, and (B) no Default or Event of Default
exists or would exist after giving effect to such merger or
consolidation;
(iv) any Affiliate may merge or consolidate with any
other corporation, provided that, immediately after giving
effect to such merger or consolidation (a) a Wholly Owned
Affiliate shall be the continuing or surviving corporation
and (b) no Default or Event of Default exists or would exist
after giving effect to such merger or consolidation and the
Partnership and the REIT shall each be able to incur at
least $1.00 of additional Debt under clause (iv) of
paragraph 6C(1);
6C(5). Transfer of Assets. Transfer, or agree or otherwise
commit to Transfer, any of its assets or acquire all or
substantially all of the assets of any Person except that:
(i) any Subsidiary may Transfer assets to the Partnership,
the REIT or a Wholly Owned Subsidiary of either;
(ii) the Partnership, the REIT or any Subsidiary may sell
inventory in the ordinary course of business,
(iii) the Partnership, the REIT or any Subsidiary of
either may otherwise Transfer assets, provided that after giving
effect thereto no Default or Event of Default shall occur,
including, without limitation, under paragraph 6A(6) hereof;
6C(6). Lease Rentals. Permit the aggregate of all payments
under operating leases with a term, inclusive of all renewal
options, in excess of one year from the date of inception, to
exceed $750,000 during any fiscal year;
6C(7). Sale and Lease-Back. Enter into any arrangement
with any lender or investor or to which such lender or investor
is a party providing for the leasing by the Partnership, the REIT
or any Subsidiary of either of real or personal property which
has been or is to be Transferred by the Partnership, the REIT or
any Subsidiary of either to such lender or investor or to any
Person to whom funds have been or are to be advanced by such
lender or investor on the security of such property or rental
obligations of the Partnership, the REIT or any Subsidiary of
either;
6C(8). Sale or Discount of Receivables. Sell with
recourse, or discount or otherwise sell for less than the face
value thereof, any of its notes or accounts receivable;
6C(9). Related Party Transactions. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer
or lease any property to, or otherwise deal with, in the ordinary
course of business or otherwise any Related Party, except in the
ordinary course of business and upon terms that are no less
favorable to the Partnership, the REIT or an Subsidiary of
either, as the case may be, than those that could be obtained in
an arm's-length transaction with an unrelated third party;
6C(10). Superior Debt. Create, assume or incur, or in any
manner become or be liable in respect of, Indebtedness for money
borrowed, advances made, or goods purchased, if the lender of
such money or the Person making such advances, or the vendor of
such goods (or any Person who guarantees or otherwise becomes
surety for the whole or any part of such Indebtedness or acquires
any right or incurs any obligation to become, either immediately
or upon the occurrence of some future contingency, the owner of
the whole or any part thereof) shall have any right, by reason of
statute (including, without limitation, United States Revised
Statutes 3466, 31 U.S.C.A. 191), or otherwise to have any
claim in respect of such Indebtedness first satisfied out of the
general assets of the Partnership, the REIT or such Subsidiary in
priority to the claims of its general creditors, unless such
Indebtedness constitutes permitted Priority Debt under paragraph
6(C)(1) hereof.
6C(11). Transfer of Assets to Subsidiaries. Transfer any
real property assets (whether developed or undeveloped) to a
Subsidiary;
6C(12). Affiliate Restrictions. Except (x) as set forth in
Schedule 6C(12) attached hereto and (y) in connection with
acquisition (to the extent otherwise permitted under this
Agreement) of Subsidiaries or properties that are, as applicable,
parties to or subject to Debt (A) from or through the Department
of Housing and Urban Development or constituting tax exempt
industrial development bonds under Section 103 (a) of the Code
(provided, in each such case under this clause (y), the amount of
such Debt for each project does not exceed $25,000,000), enter
into, or be otherwise subject to, any contract, agreement or
other binding obligation that directly or indirectly limits the
amount of, or otherwise restricts (i) the payment to the
Partnership or the REIT of dividends or other redemptions or
distributions with respect to its equity interests by any
Affiliate, (ii) the repayment to the Partnership or the REIT by
any Affiliate of intercompany loans or advances, or (iii) other
intercompany transfers to the Partnership or the REIT of property
or other assets by Affiliates.
6C(13). Prudential Debt. Permit the aggregate amount of
the Notes and all other Debt owed to Prudential and its
Affiliates to exceed at any time 25% of the aggregate amount of
all its Debt on a Consolidated basis.
6C(14). ERISA. (A) With respect to any Plan, fail to
satisfy the minimum funding standards of ERISA or the Code for
any plan year or part thereof or seek or have granted a waiver of
such standards or extension of any amortization period under
section 412 of the Code, (B) file, have filed (by it or any other
Person) or permit to be filed, a notice of intent to terminate
any Plan or permit to exist any condition under which it is
reasonably expected that a notice of intent will be filed with
the PBGC, or permit to exist any condition under which the PBGC
shall have instituted proceedings under ERISA section 4042 to
terminate or appoint a trustee to administer any Plan or permit
to exist any condition under which the PBGC shall have notified
the Partnership, the REIT or any ERISA Affiliate of either that a
Plan may become a subject of such proceedings, (C) permit the
aggregate "amount of unfunded benefit liabilities" (within the
meaning of section 4001(a)(18) of ERISA) under all Plans,
determined in accordance with Title IV of ERISA, to exceed $1.00,
(D) incur or permit to exist any condition under which it is
reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (E) withdraw from any
Multiemployer Plan, or (F) establish or amend any employee
welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the
Partnership, the REIT or any Subsidiary of either thereunder; and
any such event or events described in clauses (A) through (F)
above, either individually or together with any other such event
or events, could reasonably be expected to have a Material
Adverse Effect.
6D. Issuance of Stock by Subsidiaries. Each of the
Partnership and the REIT covenants that it will not permit any
Subsidiary of either of them (either directly, or indirectly by
the issuance of rights or options for, or securities convertible
into, such shares) to issue, sell or dispose of any equity
interests of any class except to the Partnership, the REIT or a
Wholly Owned Subsidiary of either;
7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or otherwise):
(i) the Partnership defaults in the payment of any
principal of, or Prepayment Premium payable with respect to, any
Note when the same shall become due, either by the terms thereof
or otherwise as herein provided and such default continues for
more than five (5) days after notice of the occurrence of such
default (but with only one such notice and cure period during any
such 12 month period); or
(ii) the Partnership defaults in the payment of
any interest on any Note for more than ten (10) days after notice
of such default (but with only one such notice and cure period
during any such 12 month period); or
(iii) the Partnership, the REIT or any Subsidiary
defaults (whether as primary obligor or as guarantor or other
surety) in any payment of principal of or interest on any other
obligation for money borrowed (or any Capitalized Lease
Obligation, any obligation under a conditional sale or other
title retention agreement, any obligation issued or assumed as
full or partial payment for property whether or not secured by a
purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit) beyond any
period of grace provided with respect thereto, or the
Partnership, the REIT or any Affiliate fails to perform or
observe any other agreement, term or condition contained in any
agreement under which any such obligation is created (or if any
other event thereunder or under any such agreement shall occur
and be continuing) and the effect of such failure or other event
is to cause, or to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due (or to be repurchased by the
Partnership, the REIT or any Subsidiary of either) prior to any
stated maturity, provided that the aggregate amount of all
obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting
acceleration (or resale to the Partnership, the REIT or any
Subsidiary of either) shall occur and be continuing exceeds
$5,000,000 (or, with respect to obligations that are nonrecourse
debt secured by recourse only to specific assets, the
$25,000,000); or
(iv) any representation or warranty made by or on
behalf of the Partnership, the REIT, or any of their general
partners or officers (as the case may be) herein or in any other
writing furnished in connection with or pursuant to this
Agreement or the transactions contemplated hereby shall be false
in any material respect on the date as of which made; or
(v) the Partnership or the REIT fails to perform or
observe any agreement contained in paragraph 5F or 6 and such
failure continues for more than ten (10) days after notice
thereof; or
(vi) the Partnership or the REIT fails to perform or
observe any other agreement, term or condition contained herein
and such failure shall not be remedied within thirty (30) days
after the earlier of (A) any Responsible Officer obtaining actual
knowledge thereof and (B) the Partnership or the REIT (as the
case may be) receiving written notice of such default from any
holder of a Note; or
(vii) the Partnership, the REIT or any Subsidiary
of either makes an assignment for the benefit of creditors or is
generally not paying its debts as such debts become due; or
(viii) any decree or order for relief in respect of
the Partnership, the REIT or any Subsidiary of either is entered
under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect (herein called
the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Partnership, the REIT or any Subsidiary of
either petitions or applies to any tribunal for, or consents to,
the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the Partnership, the
REIT or any Subsidiary of either, or of any substantial part of
the assets of the Partnership, the REIT or any Subsidiary of
either, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings relating to the Partnership
or any Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(x) any such petition or application is filed, or any
such proceedings are commenced, against the Partnership, the REIT
or any Subsidiary of either, and the Partnership, the REIT or
such Subsidiary by any act indicates its approval thereof,
consents thereto or acquiescences therein, or an order, judgment
or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order, judgment or
decree remains unstayed and in effect for more than sixty (60)
days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Partnership , the REIT or any Subsidiary
of either decreeing the dissolution of the Partnership, the REIT
or such Subsidiary, and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days; or
(xii) any order, judgment or decree is entered in
any proceedings against the Partnership, the REIT or any
Subsidiary of either decreeing a split-up of the Partnership, the
REIT or any Subsidiary of either which requires the divestiture
of assets representing a substantial part, or the divestiture of
the stock of a Subsidiary whose assets represent a substantial
part, of the consolidated assets of the Partnership, the REIT or
the Subsidiaries of either(determined in accordance with GAAP) or
which requires the divestiture of assets, or stock of a
Subsidiary, which shall have contributed a substantial part of
the Consolidated Net Income of the Partnership, the REIT and its
Subsidiaries (determined in accordance with GAAP) for any of the
three (3) fiscal years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than
60 days (as used in this clause (xii), "substantial" shall mean
in excess of 20% of Consolidated Tangible Net Worth or
Consolidated Net Income, as the case may be); or
(xiii) one or more final judgments in an aggregate
amount in excess of $2,000,000 is rendered against the
Partnership, the REIT or any Subsidiary of either and, within
sixty (60) days after entry thereof, a solvent insurance carrier
or carriers have not confirmed in writing that each such judgment
is fully insured or any such judgment is not discharged or
execution thereof stayed pending appeal, or within sixty (60)
days after the expiration of any such stay, any such judgment is
not discharged or a judgment in an amount in excess of $5,000,000
is rendered against the Partnership, the REIT or any Subsidiary
of either, irrespective of whether such judgment is discharged or
stayed pending appeal; or
(xiv) any of the REIT Guaranties, for any reason
other than satisfaction in full of the obligations of the
Partnership hereunder and under the Notes, ceases to be in full
force and effect or is declared null and void, or the validity or
enforceability thereof is contested in a judicial proceeding or
the REIT denies that it has any further liability under any of
the REIT Guaranties or the REIT shall default in the performance
or observance of any of its obligations under any of the REIT
Guaranties, and such default shall not have been remedied within
thirty (30) days;
(xv) any Material Right of the Partnership, the REIT,
or any Subsidiary necessary to own or operate its business is
suspended, withdrawn or revoked or modified in a manner
materially adverse to the rights of the Partnership, the REIT or
such Subsidiary;
(xvi)(i) any Person or two or more Persons (except the
REIT, its sole general partner) acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) directly or indirectly, of equity interests
of the Partnership or the REIT (or other interests convertible
into such securities) representing thirty percent (30%) or more
of all equity interests in the Partnership or the REIT (as the
case may be); or (ii) any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise, or shall
have entered into a contract or arrangement which upon
consummation will result in its or their acquisition of, control
over equity interests of the Partnership or the REIT (or other
interests convertible into such interests) representing thirty
percent (30%) or more of all interests of the Partnership or the
REIT; or (iii) (a) during any period of two (2) consecutive
years, Persons who at the beginning of such period constitute the
Partnership's general partners cease for any reason to be general
partners of the Partnership, or (b) during any period of two (2)
consecutive years, individuals who at the beginning of such
period constitute the REIT's Board of Directors (together with
any new director whose election by the REIT's Board of Directors
or whose nomination for election by the REIT's shareholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the directors then in office;
then (a) if such event is an Event of Default specified in clause
(i) or (ii) of this paragraph 7A which is not cured within any
applicable grace or cure period, the holder of any Note (other
than the Partnership, the REIT or any of their Subsidiaries), the
outstanding principal amount of which at the time exceeds ten
percent (10%) of the outstanding principal amount of all of
Notes, may at its option during the continuance of such Event of
Default, by notice in writing to the Partnership and the REIT,
declare such Note to be, and such Note shall thereupon be and
become, immediately due and payable at par, together with
interest accrued thereon and Prepayment Premium, if any, without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Partnership and the REIT, (b) if
such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 7A, all of the Notes at the time
outstanding shall automatically become immediately due and
payable, together with interest accrued thereon and the
Prepayment Premium, if any, and to the extent permitted by law,
with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the
Partnership and the REIT, and(c) with respect to any other event
constituting an Event of Default, the Required Holder(s) may at
its or their option, by notice in writing to the Partnership,
declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together
with interest accrued thereon and together with the Prepayment
Premium, if any, with respect to each Note, without presentment,
demand, protest or other notice of any kind, all of which are
hereby waived by the Partnership.
The Partnership and the REIT acknowledge, and the parties
hereto agree, that each holder of a Note has the right to
maintain its investment in the Notes free from repayment(except
as herein specifically provided for) and that the provision for
payment of the Prepayment Premium by the Partnership or the REIT
in the event that the Notes are prepaid or are accelerated as a
result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such
circumstances.
Promptly following the acceleration of all of the Notes, the
Computing Holder shall give written notice to the Partnership and
the REIT of the amount of the Prepayment Premium in respect of
the Notes (which notice shall set forth in reasonable detail the
computation of such Prepayment Premium and the assumptions made
in connection therewith). Such notice shall be given within five
(5) Business Days if such Computing Holder has given such notice
of acceleration, and otherwise promptly after such Computing
Holder has knowledge of such acceleration. If any Note has been
accelerated pursuant to clause (i) of this paragraph 7A, then the
holder which has so accelerated such Note shall give written
notice to the Partnership and the REIT of the Prepayment Premium
in respect of such Note promptly after such acceleration. The
failure by a Computing Holder to give notice as aforesaid as to
the computation of the Prepayment Premium in respect of any Note
shall not relieve the Partnership or the REIT of the obligation
as of the date of such acceleration to pay such Prepayment
Premium forthwith after such Prepayment Premium is determined
(and in such case the determination of such Prepayment Premium by
the holder of any Note which has been so accelerated shall be
deemed to be conclusive with respect to such Note absent manifest
error).
7B. Rescission of Acceleration. At any time after any or
all of the Notes shall have been declared immediately due and
payable pursuant to paragraph 7A, the Required Holder(s) may, by
notice in writing to the Partnership and the REIT, rescind and
annul such declaration and its consequences if (i) the
Partnership or the REIT shall have paid all overdue interest on
the Notes, the principal of and the Prepayment Premium, if any,
payable with respect to any Notes which have become due otherwise
than by reason of such declaration, and interest on such overdue
interest and overdue principal and the Prepayment Premium at the
rate specified in the Notes, (ii) the Partnership or the REIT
shall not have paid any amounts which have become due solely by
reason of such declaration, (iii) all Defaults and Events of
Default other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or
waived pursuant to paragraph 11C, and (iv) no judgment or decree
shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement. No such rescission or
annulment shall extend to or affect any subsequent Default or
Event of Default, or impair any right arising therefrom.
7C. Notice of Acceleration or Rescission. Whenever any
Note shall be declared immediately due and payable pursuant to
paragraph 7A or any such declaration shall be rescinded and
annulled pursuant to paragraph 7B, the Partnership shall
forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. Other Remedies. If any Event of Default or Default
shall occur and be continuing, the holder of any Note may proceed
to protect and enforce its rights under this Agreement and such
Note by exercising such remedies as are available to such holder
in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of
any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No
remedy conferred in this Agreement upon the holder of any Note is
intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or now or hereafter existing at law
or in equity or by statute or otherwise.
Without limiting the generality of the immediately preceding
paragraph, the parties hereto agree that the covenants and
agreements contained herein are of a unique nature, the breach of
which either cannot be adequately compensated by monetary damages
or may not necessarily result in the ability of the aggrieved
party to obtain relief. The parties therefore agree that the
breach by one party of its covenants or other agreements
contained herein shall entitle the other, aggrieved party to seek
and obtain specific performance or such other equitable relief as
such party deems appropriate, and each party hereto consents to
the availability of such remedies, and agrees and represents that
this Agreement is a material inducement to its entry into this
Agreement.
8. REPRESENTATIONS AND WARRANTIES. The Partnership and
the REIT represent, covenant and warrant as follows:
8A1. Organization - Partnership. The Partnership is a
limited partnership duly organized and existing in good standing
under the laws of the State of Tennessee, and is duly qualified
as a foreign entity and is in good standing in each jurisdiction
in which such qualification is required by law. Further, each
Subsidiary of the Partnership is duly organized and existing in
good standing under the laws of the jurisdiction in which it was
formed. The Partnership and each Subsidiary of the Partnership
have the corporate or partnership (as the case may be) power and
authority to own or hold under lease the properties it purports
to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement
and the Notes and to perform the provisions hereof and thereof.
8A2. Organization - REIT. The REIT is a corporation duly
organized and existing in good standing under the laws of the
State of Tennessee, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which
such qualification is required by law. The REIT and each
Subsidiary of the REIT is duly organized and existing in good
standing under the laws of the jurisdiction in which it is
incorporated or organized. Each of the REIT and its Subsidiaries
has the corporate or partnership (as the case may be) power and
authority to own or hold under lease the properties it purports
to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement
and the Notes and to perform the provisions hereof and thereof.
8A3. Subsidiaries. Schedule 8A contains (except as noted
therein) complete and correct lists (i) of Subsidiaries of the
Partnership and the REIT, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and
the percentage of shares of each class of its equity interests
outstanding owned by the Partnership and the REIT and each other
Subsidiary, (ii) of the Subsidiaries of the Partnership and the
REIT, and (iii) of the directors, senior officers, general
partners, limited partners, members, Shareholders of the
Partnership and the REIT.
8B. Financial Statements. The Partnership and the REIT
have furnished you with the following financial statements,
identified by a principal financial officer of the Partnership
and the REIT respectively: (i) a consolidated and consolidating
balance sheet of the REIT and its Subsidiaries as at December 31
in each of the years 1994 to 1996, inclusive, and consolidated
and consolidating statements of income, stockholders' equity and
cash flows of the REIT and its Subsidiaries for each such year,
all reported on by KPMG Peat Marwick; and (ii) a consolidated and
consolidating balance sheet of the REIT and its Subsidiaries as
at June 30 1997 and consolidated and consolidating statements of
income, stockholders' equity and cash flows for the six-month
period ended on such date, prepared by the REIT. Such financial
statements (including any related schedules and/or notes) are
true and correct in all material respects (subject, as to interim
statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with GAAP
consistently followed throughout the periods involved and show
all liabilities, direct and contingent, of the Partnership, the
REIT and their Subsidiaries required to be shown in accordance
with such principles. The balance sheets fairly present the
condition of the Partnership, the REIT and their Subsidiaries as
and at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of
the operations of the Partnership, the REIT and their
Subsidiaries and their cash flows for the periods indicated.
There has been no material adverse change in the business,
condition (financial or otherwise) or operations of the
Partnership, the REIT and their Subsidiaries taken as a whole
since the date of this Agreement.
8C. Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of the
Partnership or the REIT, threatened against the Partnership, the
REIT or any of their Subsidiaries, or any properties or rights of
the Partnership, the REIT or any of their Subsidiaries, by or
before any court, arbitrator or administrative or governmental
body which (i) might result in a Material Adverse Effect or
(ii) purports to affect the validity or enforceability of this
Agreement, any Note issued hereunder, the REIT Guaranties, any
document executed or delivered in connection with the Notes or
the REIT Guaranties, or the transactions contemplated hereby or
thereby.
8D. Outstanding Debt. Neither the Partnership, the REIT,
nor any of their Subsidiaries, has outstanding any Debt except as
permitted by paragraph 6A and paragraph 6C(1) hereof. There
exists no default under the provisions of any instrument
evidencing such Debt or of any agreement relating thereto.
8E. Title to Properties. The Partnership, the REIT and
each of their Subsidiaries have good and indefeasible title to
their real properties (other than properties which it leases) and
good title to all of their other properties and assets, including
the properties and assets reflected in the balance sheet as at
the Conversion Date referred to in paragraph 8B (other than
properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted
by paragraph 6C(1) All leases necessary in any material respect
for the conduct of the respective businesses of the Partnership,
the REIT and their Subsidiaries are valid and subsisting and are
in full force and effect.
8F. Taxes. The Partnership, the REIT and each of their
Subsidiaries has filed all federal, state and other income tax
returns which, to the knowledge of the officers of the REIT and
the general partner of the Partnership, are required to be filed,
and each has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have
become due, except such taxes as are subject to a Good Faith
Contest.
8G. Conflicting Agreements and Other Matters. Neither the
Partnership, the REIT or any of their Subsidiaries is a party to
any contract or agreement or subject to any charter or other
corporate restriction which materially and adversely affects its
business, property or assets, or financial condition. Neither
the execution nor delivery of this Agreement, the REIT
Guaranties, or the Notes, nor the offering, issuance and sale of
the Notes or the REIT Guaranties, nor fulfillment of nor
compliance with the terms and provisions hereof, the Notes or the
REIT Guaranties will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation
of any Lien upon any of the properties or assets of the
Partnership, the REIT or any of its Subsidiaries pursuant to, the
charter documents of the Partnership, the REIT or any of their
Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the
Partnership, the REIT or any of their Subsidiaries is subject.
Neither the Partnership, the REIT nor any of their Subsidiaries
is a party to, or otherwise subject to any provision contained
in, any instrument evidencing Indebtedness of the Partnership,
the REIT or such Subsidiary of either, any agreement relating
thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Partnership or the
REIT of the type to be evidenced by the Notes except as set forth
in the agreements listed in Schedule 8G attached hereto.
8H. Offering of Notes. Neither the Partnership, the REIT,
nor any agent acting on behalf of either or both of them has,
directly or indirectly, offered the Notes or any similar security
of the Partnership for sale to, or solicited any offers to buy
the Notes or any similar security of the Partnership from, or
otherwise approached or negotiated with respect thereto with,
any Person other than you, and neither the Partnership, the REIT
nor any agent acting on behalf of either has taken or will take
any action which would subject the issuance or sale of the Notes
to the provisions of section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable
jurisdiction.
8I. Use of Proceeds. Neither the Partnership, the REIT nor
any Subsidiary of either owns or has any present intention of
acquiring any "margin stock" as defined in Regulation G (12 CFR
Part 207) of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). The proceeds of sale of the
Notes will be used to refinance all or a portion of the
Convertible Loans. None of such proceeds will be used, directly
or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any Indebtedness
which was originally incurred to purchase or carry any stock that
is currently a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning
of such Regulation G. Neither the Partnership, the REIT or any
of their Subsidiaries are engaged principally, or as one of their
important activities, in the business of extending credit for the
purpose of purchasing or carrying " margin stock" (within the
meaning of Regulation G of the Board of Governors of the Federal
Reserve System), and the aggregate market value of all "margin
stock" owned by the Partnership, the REIT and the Subsidiaries of
both does not exceed twenty-five percent (25%) of the aggregate
value of the assets thereof, as determined by any reasonable
method. Neither the Partnership, the REIT nor any agent acting
on behalf of either of them has taken or will take any action
which might cause this Agreement or the Notes to violate
Regulation G, Regulation T or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the
Exchange Act, in each case as in effect now or as the same may
hereafter be in effect.
8J. ERISA. (i) No accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, exists with respect to any Plan (other
than a Multiemployer Plan).
(ii) No liability to the PBGC has been or is expected by the
Partnership, the REIT or any ERISA Affiliate of either to be
incurred with respect to any Plan (other than a Multiemployer
Plan) by the Partnership , the REIT or any Subsidiary of either
or any ERISA Affiliate which is or would be materially adverse to
the business, condition (financial or otherwise) or operations of
the Partnership, the REIT and the Subsidiaries of both, taken as
a whole.
(iii) Neither the Partnership, the REIT, any Subsidiary
of either, nor any ERISA Affiliate of either of them has incurred
or presently expects to incur any withdrawal liability under
Title IV of ERISA with respect to any Multiemployer Plan which is
or would be materially adverse to the business, condition
(financial or otherwise) or operations of the Partnership, the
REIT and their Subsidiaries taken as a whole.
(iv) The expected post-retirement benefit obligations
(determined as of the last day of the Partnership's and the
REIT's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement 106, without
regard to liabilities attributable to continuation coverage
mandated by Section 4980B of the Code) of the Partnership, the
REIT and their Subsidiaries is not material.
(v) The present value of the aggregate benefit liabilities
under each Plan (other than Multiemployer Plans), determined as
of the end of such Plans' most recently ended Plan year on the
basis of the actuarial assumption specified for funding purposes
in such Plans most recent actuarial valuation report, did not
exceed the aggregate current value of the assets of such plan
allocable to such benefit liabilities. The term "benefit
liabilities" has the meaning specified as section 4001 of ERISA
and the terms "current value" and "present value" have the
meaning specified in Section 3 of ERISA.
(vi) The execution and delivery of this Agreement and the
REIT Guaranties, and the issuance and sale of the Notes, will be
exempt from, or will not involve any transaction which is subject
to, the prohibitions of section 406 of ERISA and will not involve
any transaction in connection with which a penalty could be
imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the
Partnership and the REIT in the next preceding sentence is made
in reliance upon and subject to the accuracy of your
representation in paragraph 9B.
8K. Governmental Consent. No circumstance in connection
with the offering, issuance, sale or delivery of the Notes is
such as to require any authorization, consent, approval,
exemption or other action by or notice to or filing with any
court or administrative or governmental body (other than routine
filings after the date of closing with the Securities and
Exchange Commission and/or state Blue Sky authorities) in
connection with the execution and delivery of this Agreement and
the REIT Guaranties, the offering, issuance, sale or delivery of
the Notes or fulfillment of or compliance with the terms and
provisions hereof, of the REIT Guaranties or of the Notes.
8L. Compliance with Laws. The Partnership, the REIT and
their Subsidiaries and all of their respective properties and
facilities have complied at all times and in all material
respects with all federal, state, local and regional statutes,
laws, ordinances and judicial or administrative orders,
judgments, rulings and regulations, including those relating to
protection of the environment except, in any such case, where
failure to comply would not result in a material adverse effect
on the business, condition (financial or otherwise) or operations
of the Partnership, the REIT and their Subsidiaries taken as a
whole.
8M. Environmental Compliance. Except as disclosed on
Schedule 8M hereto, the Partnership, the REIT and each Subsidiary
of each (i) has complied in all material respects with all
applicable material Environmental and Safety Laws and all laws
regulating or relating to their businesses, and neither the
Partnership, the REIT nor any Subsidiary of either has received
(A) notice of any material failure so to comply, (B) any letter
or request for information under Section 104 of CERCLA or
comparable state laws or (C) any information that would lead it
to believe that it is the subject of any Federal, state or local
investigation concerning Environmental and Safety Laws; (ii) does
not manage, generate, transport, discharge or store any Hazardous
Materials in material violation of any material Environmental and
Safety Laws; (iii) does not own, operate or maintain any
underground storage tanks or surface impoundments; and (iv) is
not aware or any conditions or circumstances associated with
their respective currently or previously owned or leased
Properties or operations (or those of their respective tenants)
which may give rise to any Environmental Costs and Liabilities
which could have a Material Adverse Effect.
8N. Utility Company Status. Neither the Partnership, the
REIT nor any Subsidiary of either is a (i) "holding company," an
"subsidiary company" of a "holding company" or an "affiliate" of
a "holding company" or of an " subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended or (ii) public utility within the
meaning of the Federal Power Act, as amended.
8O. Investment Company Status. Neither the Partnership,
the REIT nor any Subsidiary of either is an "investment company"
or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or an
"investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
8P. Bank Holding Company Status. Neither the Partnership,
the REIT nor any Subsidiary of either is a "bank holding company"
within the meaning of the Federal Deposit Insurance Act (12
U.S.C. Section 1811, et. seq.), as amended.
8Q. Possession of Material Rights and Intellectual
Property. The Partnership, the REIT and their Subsidiaries
possess all material franchises, certificates, affiliation
agreements, licenses, approvals, registrations, development and
other permits and authorizations, and easements, rights of way
and similar rights from governmental or political subdivisions,
regulatory authorities or other Persons (collectively, "Material
Rights") and all Intellectual Property, free from burdensome
restriction, that are necessary in the judgement of the
Partnership and the REIT in any material respect for the
ownership, maintenance and operation of their business,
properties and assets, (and those of their Subsidiaries) and
neither the Partnership, the REIT nor any Subsidiary of either is
in violation of any Material Rights in any material respect nor
has infringed upon or violated the Intellectual Property of any
third party. From and after the date hereof, all Material Rights
and Intellectual Property will be validly issued and will be in
full force and effect and will not contain any provision or
restriction which could materially affect or impair their value
or use. No event has occurred which permits, or after notice or
lapse of time or both would permit, the revocation or termination
of any such Material Rights or Intellectual Property, or
materially and adversely affect the rights of the Partnership,
the REIT or any Subsidiary of either thereunder.
8R. Solvency. The fair value of the property and other
assets of the Partnership is greater than the total amount of its
liabilities, including without limitation, contingent
liabilities; the present fair saleable value of the property and
other assets of the Partnership is not less than the amount that
will be required to pay the probable amount of its liabilities as
such liabilities become due and payable; the Partnership does not
intend to, nor does it believe that it will, incur debts or
liabilities beyond its ability to repay as such debts and
liabilities mature; and the Partnership's property and other
assets do not constitute an unreasonably small amount of capital
for the line of business it is engaged in.
The fair value of the property and other assets of the REIT
is greater than the total amount of its liabilities, including
without limitation, contingent liabilities; the present fair
saleable value of the property and other assets of the REIT is
not less than the amount that will be required to pay the
probable amount of its liabilities as such liabilities become due
and payable; the REIT does not intend to, nor does it believe
that it will, incur debts or liabilities beyond its ability to
repay as such debts and liabilities mature; and the REIT's
property and other assets do not constitute an unreasonably small
amount of capital for the line of business it is engaged in.
8S. Labor and Employee Relations Matters. Except as set
forth on Schedule 8S:
(i) Neither the Partnership, the REIT nor any Subsidiary of
either is or expects to be the subject of any union organizing
activity or labor dispute, nor has there been any strike of any
kind called, or, to the knowledge of the company, threatened to
be called against them or any Subsidiary; and neither the
Partnership, the REIT nor any Subsidiary of either has violated
any applicable federal or state law or regulation relating to
labor or labor practices.
(ii) No present or former employees of the Partnership, the
REIT or any Subsidiary of either have advanced claims in writing
against the Partnership, the REIT or any Subsidiary of either
(whether under any foreign, federal, state or common law, through
a government agency, under an employment agreement, collective
bargaining agreement, personal service or independent contractor
agreement or otherwise) that are currently pending for (A)
overtime pay, other than overtime pay for the current period; (B)
wages, salaries or profit sharing (excluding wages, salaries or
profit sharing for the current payroll period); (C) vacations,
time off (including without limitation, potential sick leave) or
pay in lieu of vacation or time off, other than vacation or time
off (or pay in lieu thereof) earned in respect of the current
fiscal year; (D) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work;
(E) discrimination against employees on any basis; (F) unlawful
employment or termination practices; (G) unfair labor practices
or alleged violations of collective bargaining agreements;
(H) any violation of occupational safety and/or health standards;
(I) benefits under any employee plans or compensation
arrangement; and (J) breach of any employment, personal service
or independent contractor agreement.
(iii)There is not pending against the Partnership, the
REIT or any Subsidiary of either or, to the knowledge of the
Partnership or the REIT threatened, any labor dispute, strike or
work stoppage that materially affects or materially interferes
with, or may materially affect or materially interfere with, the
Partnership's, the REIT's or such Subsidiary's operations after
the date hereof.
(iv) There is not pending or, to the knowledge or the
Partnership or the REIT threatened, any charge or complaint
against the Partnership, the REIT or any Subsidiary of either by
or before the National Labor Relations Board, any representative
thereof, or any comparable foreign or state agency or authority.
(v) All collective bargaining agreements to which the
Partnership, the REIT or any Subsidiary of either is a party are
described in Schedule 8S.
8T. No Improper Payment or Influence. Neither the
Partnership, the REIT nor any Subsidiary of either has directly
or indirectly paid or delivered any fee, commission or other
money or property, or engaged in any lobbying, influencing or
other behavior, however characterized, to any agent, government
official, regulatory body, governmental agency or other Person,
in the United States or any other country, related to the
business or operations of the Partnership, the REIT or any of
their Subsidiaries, and that the Partnership, the REIT or any
Subsidiary knows or has reason to believe to have been illegal
under any Federal, state, or local law of the United States or
any other country having jurisdiction, or to have been for the
purpose of, and to have had the effect of, inducing or
encouraging the breach by the recipient thereof of any legal
duties, whether as an employee or otherwise to another Person.
8U. Foreign Enemies and Regulations.
(i) Neither the issue and sale of the Notes by the
Partnership, its use of the proceeds thereof as contemplated by
this Agreement, or the issuance of the REIT Guaranties by the
REIT will violate (A) any regulations promulgated or
administered by the Office of Foreign Assets Control, United
States Department of the Treasury, including without limitation,
the Foreign Assets Control Regulations, the Transaction Control
Regulations, the Cuban Assets Control Regulations, the Foreign
Funds Control Regulations, the Iranian Assets Control
Regulations, the Nicaraguan Trade Control Regulations, the South
African Transaction Regulations, the Iranian Transactions
Regulations, the Iraqi Sanctions Regulations, the Soviet Gold
Coin Regulations, the Panamanian Transaction Regulations or the
Libyan Sanctions Regulations of the United States Treasury
Department, 31 C.F.R., Subtitle B, Chapter V, as amended, (B) the
Trading with the Enemy Act, as amended, (C) Executive Orders
8389, 9095, 9193, 12543 (Libya), 12544 (Libya), 12722 or 12724
(Iraq), 12775 or 12779 (Haiti), or 12959 (Iran), as amended, of
the President of the United States or (D) any rule, regulation or
executive order issued or promulgated pursuant to the laws or
regulations described in the foregoing clauses (A) -(C).
(ii) None of the transactions contemplated in this Agreement
(including without limitation, the use of the proceeds from the
sale of the Notes) will violate the Comprehensive Anti-Apartheid
Act of 1986, or any rules or regulations promulgated thereunder.
8V. Interstate Commerce Act. Neither the Partnership, the
REIT nor any Subsidiary of either is a "rail carrier" or a person
controlled by or Subsidiary with a "rail carrier" within the
meaning of Title 49, U.S.C., and neither the Partnership, the
REIT nor any Subsidiary of either is a "carrier" to which 49
U.S.C. Section 11301(b)(1) is applicable.
8W. Due Authorization, etc. This Agreement, the REIT
Guaranties, the Notes and the other Loan Documents have been duly
authorized by all necessary corporate action on the part of the
Partnership and the REIT, and this Agreement constitutes, and
upon execution and delivery thereof each Note and each of the
REIT Guaranties will constitute, a legal, valid and binding
obligation of the Partnership and the REIT, enforceable against
the Partnership and the REIT in accordance with their respective
terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
8X. Publicly Traded Debt. The Notes and the REIT
Guaranties are not of the same class as securities or other
equity interests of the Partnership or the REIT, if any, listed
on a national securities exchange registered under Section 6 of
the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.
8Y. Disclosure. Neither this Agreement nor any other
document, certificate or statement furnished to you by or on
behalf of the Partnership or the REIT in connection herewith
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact
peculiar to the Partnership, the REIT or any of its Subsidiaries
which materially adversely affects or in the future may (so far
as the Partnership or the REIT can now foresee) materially
adversely affect the business, property or assets, or financial
condition of the Partnership, the REIT or any of their
Subsidiaries and which has not been set forth in this Agreement
or in the other documents, certificates and statements furnished
to you by or on behalf of the Partnership and the REIT prior to
the date hereof in connection with the transactions contemplated
hereby.
9. REPRESENTATIONS OF THE PURCHASER. You represent as
follows:
9A. Nature of Purchase. You are not acquiring the Notes to
be purchased by you hereunder with a view to or for sale in
connection with any distribution thereof within the meaning of
the Securities Act, provided that the disposition of your
property shall at all times be and remain within your control.
You understand that the Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to
the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where
neither such registration nor such an exemption is required by
law, and that the Partnership is not required to register the
Notes.
9B. Source of Funds. No part of the funds being used by
you to pay the purchase price of the Notes being purchased by you
hereunder constitutes assets allocated to any separate account
maintained by you.
The source of funds from which this investment is to be made
is the general account of The Prudential Insurance Company of
America, which is not considered to be plan assets for purposes
of the prohibited transaction rules of Section 406 of ERISA
pursuant to Department of Labor Interpretive Bulletin 75-2.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of
this Agreement, the terms defined in paragraph 10A(or within the
text of any other paragraph) shall have the respective meanings
specified therein and all accounting matters shall be subject to
determination as provided in paragraph 10B.
10A. Terms.
"Affiliate" shall mean, with respect to any Person, any
Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, that Person. A
Person shall be deemed to control a legal entity if such Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such legal
entity, whether through the ownership of voting securities, by
contract or otherwise.
"Annual Debt Service Charge" means, for any period and with
respect to any Person, the principal amortization plus interest
expense for such period, including, without duplication, (i) all
amortization of debt discount, (ii) all accrued interest, (iii)
all capitalized interest, and (iv) the interest component of
Capitalized Lease Obligations.
"Annual Percentage of Earnings Capacity Transferred" shall
mean, with respect to any four (4) consecutive fiscal quarter
period, the sum of a Person's Percentages of Earnings Transferred
for each asset that is Transferred by such Person during such
period.
"Annual Percentage of Net Worth Transferred" shall mean for
any Person, with respect to any four (4) consecutive fiscal
quarter period, the sum of that Person's Percentages of Net Worth
Transferred for each asset that is Transferred by such Person
during such period.
"Bankruptcy Law" shall have the meaning specified in clause
(viii) of paragraph 7A.
"Business Day" shall mean any day except Saturday, Sunday,
or any other day on which banks in Atlanta, Georgia are required
or authorized to close.
"Capitalized Lease Obligation" shall mean any rental obliga
tion which, under GAAP, would be required to be capitalized on
the books of the Person having such obligation, taken at the
amount thereof accounted for as indebtedness (net of interest
expense) in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean your interest in real and personal
property of the Converted Borrowers securing the Converted Loans.
"Computing Holder" shall mean, with respect to the Notes, as
of the date of acceleration pursuant to paragraph 7A, the holder
with the highest aggregate unpaid principal amount of Notes,
which holder is willing to act in such capacity. In case two (2)
or more holders of Notes would, by reason of holding Notes in the
same aggregate unpaid principal amount, qualify as the Computing
Holder as aforesaid as of any date of determination, the
Computing Holder shall be the qualifying holder or holders as
mutually determined by all such qualifying holders. For purposes
of such determination, Notes then held by any holder and its
Subsidiaries and Affiliates shall be aggregated.
"Consolidated" shall mean the consolidation of the accounts
of the Partnership or the REIT (as the case may be) and its
Subsidiaries in accordance with GAAP, including principles of
consolidation, consistent with those applied in the preparation
of the Consolidated financial statements referred to in paragraph
8B.
"Consolidated Income Available for Debt Service" for any
period and with respect to any Person means Consolidated Net
Income for such period, plus amounts which have been deducted and
minus amounts which have been added in calculation of such
Person's Consolidated Net Income for (without duplication) (i)
interest expense on debt, (ii) provision for taxes based on
income, (iii) amortization of debt discount and deferred
financing costs, (iv) provisions for gains and losses on
properties, (v) property depreciation and amortization, (vi) the
effect of any non-cash items resulting from a change in
accounting principles in determining Consolidated Net Income, and
(vii) amortization of deferred charges.
"Consolidated Net Income (Loss)" shall mean, as to any
period and with respect to any Person, Consolidated gross
revenues less all operating and non-operating expenses on a
Consolidated basis for such period, including all charges of a
proper character (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are
included in gross revenues, and current additions to reserves),
but not including in gross revenues the following:
(i) any gains (net of expenses and taxes
applicable thereto) in excess of losses resulting
from the Transfer of capital assets (i.e., assets
other than current assets);
(ii) any gains resulting from the write-up of
assets;
(iii) any equity of such Person in the
undistributed earnings (but not losses) of any
corporation which is not a Subsidiary;
(iv) undistributed earnings of any Subsidiary
to the extent that such Subsidiary is not at the
time permitted to (A) make or pay dividends to any
Subsidiary parent thereof or to such Person,
(B) repay intercompany loans or advances to any
Subsidiary parent thereof or to such
Person,(C) convert such earnings into U.S. dollars
or repatriate earnings to any Subsidiary parent
thereof or such Person or (D) otherwise Transfer
property or other assets to any Subsidiary parent
thereof or such Person, whether by the terms of
its charter or any agreement, instrument,
judgment, decree, order, statute, rule or
governmental regulation applicable to such
Subsidiary;
(v) any earnings or losses of any Person
acquired by such Person or any Subsidiary thereof
through purchase, merger, consolidation or
otherwise for any fiscal period prior to the
fiscal period in which the acquisition occurs;
(vi) any deferred credit representing the
excess of equity in any Subsidiary at the date of
acquisition over the cost of the investment in
such Subsidiary;
(vii) gains or losses from the acquisition of
securities or the retirement or extinguishment of
Debt;
(viii) gains on collections from insurance
policies or settlements;
(ix) any income or gain during such period
from any change in accounting principles, from any
discontinued operations or the disposition
thereof, from any extraordinary items or from any
prior period adjustments,
(x) any restoration to income of any
contingency reserve, except to the extent that
provision for such reserve was made out of income
accrued during such period;
(xi) in the case of a successor to such
Person by consolidation or merger or as a
transferee of its assets, any earnings of the
successor corporation prior to such consolidation,
merger or transfer of assets.
If the preceding calculation results in a number less than zero,
such amount shall be considered a Consolidated Net Loss.
"Consolidated Tangible Net Worth" shall mean, as at any
time of determination thereof and with respect to any Person,
such Person's Consolidated equity, less , on a Consolidated basis
(i) the book value of all such Person's Intangibles, (ii) any net
gains or losses attributed to cumulative translation adjustments,
(iii) Minority Interests of such Person.
"Converted Loan Borrowers" shall mean Persons (other
than the Partnership and the REIT) that are obligated on the
Converted Loans.
"Converted Loan Rate" shall mean the interest rate on
the Converted Loans as of the Conversion Date.
"Converted Loans" shall mean those of the Convertible
Loans with respect to which the Partnership provides to you sixty
(60) days written notice of its intention to convert such loans
to unsecured loans through the sale to you of the Notes pursuant
to the terms of this Agreement, provided that (i) at least $43
million in principal amount of Convertible Loans are included in
such notice, (ii) Prudential Loan # 6 100 628 (as further
described in the definition of Convertible Loans) or all five (5)
of Prudential Loans # 6 102 394, 6 102 395, 6 102 395, 6 102 437
and 6 107 438 are included in such notice, (iii) with respect to
any Convertible Loan, the entirety of such loan is indicated as
being converted, and (iv) all of the conditions to conversion
outlined herein have been satisfied.
"Conversion Date" shall mean the day agreed to between
you and the Partnership upon which the purchase and sale of the
Notes will be closed and upon which all of the conditions to
closing shall be either satisfied or waived in writing.
"Conversion Maturity Date" means December 15, 2004.
"Convertible Loans" shall mean the loans from you that
are evidenced by (i) that certain Promissory Note, dated July 18,
1994, from the Partnership to you in an original principal amount
of $43,400,000, and such other documents and instruments executed
and delivered in connection therewith (Prudential Loan # 6 100
628), (ii) that certain Promissory Note, dated June 21, 1993,
from the Partnership (as successor by merger) to you in an
original principal amount of $4,700,000, and such other documents
and instruments executed and delivered in connection therewith
(Prudential Loan # 6 100 370), (iii) that certain Promissory
Note, dated August 11, 1993, from Mid-America Apartments of
Texas, L.P. to you in an original principal amount of $8,000,000,
and such other documents and instruments executed and delivered
in connection therewith (Prudential Loan # 6 100 383), and
(iv)(a) that certain Amended and Restated Promissory Note, dated
of even date herewith, from Paddock Club Jacksonville, A Limited
Partnership, to you in an original principal amount of
$6,063,000.00, together with all documents evidencing, securing
or relating to the loan evidenced thereby (Prudential Loan #
6 102 395); (b) that certain Amended and Restated Promissory
Note, dated of even date herewith, from Paddock Club Lakeland, a
Limited Partnership, to you in an original principal amount of
$5,751,000.00, together with all documents evidencing, securing
or relating to the loan evidenced thereby (Prudential Loan # 6
102 396); (c) that certain Amended and Restated Promissory Note,
dated of even date herewith, from Paddock Club Lakeland Phase II,
A Limited Partnership, to you in an original principal amount of
$8,123,000.00, together with all documents evidencing, securing
or relating to the loan evidenced thereby (Prudential Loan # 6
102 437); (d) that certain Promissory Note, dated of even date
herewith, from the Partnership to you in the amount of
$19,510,000.00, together with all documents evidencing, securing
or relating to the loan evidenced thereby (Prudential Loan # 6
102 394); and (e) that certain Consolidated, Amended and Restated
Promissory Note, dated of even date herewith, from Paddock Club
Jacksonville Phase II, A Limited Partnership, to you, in an
original principal amount of $8,053,000.00, together with all
documents evidencing, securing or relating to the loan evidenced
thereby (Prudential Loan # 6 102 395).
"Current Debt" shall mean, with respect to any Person,
all Indebtedness of such Person for borrowed money which by its
terms or by the terms of any instrument or agreement relating
thereto matures on demand or within one (1) year from the date of
the creation thereof and is not directly or indirectly renewable
or extendible at the option of the debtor to a date more than one
(1) year from the date of the creation thereof, provided that
Indebtedness for borrowed money outstanding under a revolving
credit or similar agreement which obligates the lender or lenders
to extend credit over a period of more than one (1) year shall
constitute Funded Debt and not Current Debt, even though such
Indebtedness by its terms matures on demand or within one (1)
year from the date of the creation thereof.
"Debt" shall mean Current Debt and Funded Debt.
"Default" shall mean (i) any of the events specified in
paragraph 7A, whether or not any requirement for such event to
become an Event of Default has been satisfied, and (ii) any
event, act or condition which, with the giving of notice of lapse
of time, or both, would constitute an Event of Default.
"Environmental and Safety Laws" shall mean all laws
relating to pollution, the release or other discharge, handling,
disposition or treatment of Hazardous Materials and other
substances or the protection of the environment or of employee
health and safety, including without limitation, CERCLA, the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801
et. seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 7401 et. seq.), the Clean Air Act (42 U.S.C. Section 401
et. seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et. seq.), the Occupational Safety and Health Act (29 U.S.C.
Section 651 et. seq.) and the Emergency Planning and Community
Right-To-Know Act (42 U.S.C. Section 11001 et. seq.), each as the
same may be amended and supplemented, and such other similar laws
as may be enacted by the Congress of the United States.
"Environmental Costs and Liabilities" shall mean, as to
any Person, all liabilities, obligations, responsibilities,
remedial actions, losses, damages, punitive damages,
consequential damages, treble damages, contribution, cost
recovery, costs and expenses (including all fees, disbursements
and expenses of counsel, expert and consulting fees, and costs of
investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute,
permit, order or agreement with any Federal, state or local
governmental authority or other Person, arising from
environmental, health or safety conditions, or the release or
threatened release of a contaminant, pollutant or Hazardous
Material into the environment, resulting from the operations of
such person or its Subsidiaries, or breach of any Environmental
and Safety Law or for which such Person or its Subsidiaries is
otherwise liable or responsible.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall mean any Person which is a
member of the same controlled group of Persons as the Partnership
or the REIT (as the case may be) within the meaning of section
414(b) of the Code, or any trade or business which is under
common control with the Partnership or the REIT within the
meaning of section 414(c) of the Code.
"Event of Default" shall mean any of the events
specified in paragraph 7A, provided that there has been satisfied
any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further
condition, event or act.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Full Rating Category" shall mean (i) with respect to
S&P, any of the following categories: BB, B, CCC and C, (ii) with
respect to Moody's, any of the following categories: Ba, B, Caa,
Ca and C and (iii) with respect to any other Rating Agency, the
equivalent of any such category of S&P or Moody's used by such
other Rating Agency. In determining whether the rating of the
Notes has decreased by the equivalent of one Full Rating
Category, gradations within Full Rating Categories (+ and - for
S&P; 1, 2 and 3 for Moody's; or the equivalent gradation for
another Rating Agency) shall be taken into account (e.g., with
respect to S&P, a decline in a rating from BB+ to B+ will
constitute a decrease of one Full Rating Category).
"Funded Debt" shall mean, with respect to any Person,
all Indebtedness of such Person which by its terms or by the
terms of any instrument or agreement relating thereto matures, or
which is otherwise payable or unpaid, more than one (1) year
from, or is directly or indirectly renewable or extendible at the
option of the debtor to a date more than one year (including an
option of the debtor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over
a period of more than one year) from, the date of the creation
thereof, including current maturities of long-term debt that
appear as current liabilities in accordance with GAAP.
"GAAP" shall have the meaning set forth in paragraph
10C.
"Good Faith Contest" shall mean, with respect to any
tax, assessment, Lien, obligation, claim, liability, judgment,
injunction, award, decree, order, law, regulation, statute or
similar item, any challenge or contest thereof by appropriate
proceedings timely initiated in good faith for which adequate
reserves therefor have been taken in accordance with GAAP.
"Guarantee" shall mean, with respect to any Person, any
direct or indirect liability, contingent or otherwise, of such
Person with respect to any indebtedness, lease, dividend or other
obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed (otherwise
than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or
in respect of which such Person is otherwise directly or
indirectly liable, including, without limitation, any such
obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to:
(i) purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock
purchases, capital contributions or otherwise),
(ii) maintain the solvency or any balance sheet or
other financial condition of the obligor of such
obligation, or
(iii) make payment for any products, materials or
supplies or for any transportation or services
regardless of the non-delivery or non-furnishing
thereof,
(iv) rent or lease (as lessee) any real or personal
property if such contract (or any related document)
provides that the obligation to make payments
thereunder is absolute and unconditional under
conditions not customarily found in commercial leases
then in general use or requires that the lessee
purchase or otherwise acquire securities or obligations
of the lessor, or
(v) sell or provide materials, supplies or other
property or services, if such agreement (or any related
document) requires that payment for such materials,
supplies or other property or services, shall be
subordinated to any indebtedness (of the purchaser or
user of such materials, supplies or other property or
the Person entitled to the benefit of such services)
owed or to be owed to any Person,
in any such case if the purpose, intent or effect of such
agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will
be complied with, or that the holders of such obligation will be
protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of
the obligation guaranteed or such lesser amount to which the
maximum exposure of the guarantor shall have been specifically
limited.
"Hazardous Materials" shall mean (i) any material or
substance defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous material," "toxic
substances" or any other formulations intended to define, list or
classify substances by reason of their deleterious properties,
(ii) any oil, petroleum or petroleum derived substance, (iii) any
flammable substances or explosives, (iv) any radioactive
materials, (v) asbestos in any form, (vi) electrical equipment
that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per
million, (vii) pesticides or (viii) any other chemical, material
or substance, exposure to which is prohibited, limited or
regulated by any governmental agency or authority or which may or
could pose a hazard to the health and safety of persons in the
vicinity thereof.
"including" shall mean, unless the context clearly
requires otherwise, "including without limitation".
"Indebtedness" shall mean, with respect to any Person
and without duplication (i) all items (excluding items of
contingency reserves or of reserves for deferred income taxes)
which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance
sheet of such Person as of the date on which Indebtedness is to
be determined,(ii) all indebtedness secured by any Lien on, or
payable out of the proceeds or production from, any property or
asset owned or held by such Person, whether or not the
indebtedness secured thereby shall have been assumed, (iii) all
indebtedness of third parties, including joint ventures and
partnerships of which such Person is a venturer or general
partner, recourse to which may be had against such Person,
(iv) redemption obligations in respect of mandatorily redeemable
Preferred Stock; and (v) all indebtedness and other obligations
of others with respect to which such Person has become liable by
way of a Guarantee.
"Institutional Investor" shall mean any insurance
company, commercial, investment or merchant bank, finance
company, mutual fund, registered money or asset manager, savings
and loan association, credit union, registered investment
advisor, pension fund, investment company, licensed broker or
dealer, "qualified institutional buyer" (as such term is defined
under Rule 144A promulgated under the Securities Act, or any
successor law, rule or regulation) or "accredited investor" (as
such term is defined under Regulation D promulgated under the
Securities Act, or any successor law, rule or regulation).
"Intangibles" shall mean, without duplication, all
Material Rights, Intellectual Property and operating agreements,
treasury stock, deferred or capitalized research and development
costs, goodwill (including any amounts, however designated,
representing the cost of acquisition of business and investments
in excess of the book value thereof), unamortized debt discount
and expense, any write-up of asset value after he Conversion Date
and any other amounts reflected in contra-equity accounts, and
any other assets treated as intangible assets under GAAP.
"Intellectual Property" shall mean all patents,
trademarks, service marks, trade names, copyrights, brand names,
mechanical or technical processes and paradigms, know-how, and
similar intellectual property and applications, licenses and
similar rights in respect of the same.
"Investment Grade" shall mean BBB- or higher by S&P or
Baa3 or higher by Moody's or the equivalent of such ratings by
S&P or Moody's or by any other Rating Agency selected as provided
herein.
"Investments" shall have the meaning provided in
paragraph 6C(3).
"Lien" shall mean any mortgage, pledge, security
interest, encumbrance, minimum or compensating deposit
arrangement, lien (statutory or otherwise) or charge of any kind
(including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any
jurisdiction) or any other type of preferential arrangement for
the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an
obligation.
"Loan Documents" shall mean this Agreement, the Notes,
the REIT Guaranties, and all other documents or agreements
executed or delivered in connection with the issuance of the
Notes hereunder and the closing of the transactions contemplated
hereby.
"Material Adverse Effect" shall mean (i) a material
adverse effect on the business, assets, liabilities, operations,
prospects or condition, financial or otherwise, of a Person,
taken as a whole, (ii) material impairment of a Person to perform
any of their obligations under the Agreement, the Notes or the
REIT Guaranties or (iii) material impairment of the validity or
enforceability or the rights of, or the benefits available to,
the holders of any of the Notes under this Agreement, the REIT
Guaranties or the Notes.
"Material Rights" shall have the meaning provided in
paragraph 8Q.
"Minority Interests" shall mean any equity interests in
an Subsidiary that are not owned by the Partnership, the REIT or
a Wholly Owned Subsidiary of either.
"Moody's" shall mean Moody's Investors Services, Inc.,
including the NCO/Moody's Commercial Division, or any successor
Person.
"Multiemployer Plan" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section
4001(a)(3) of ERISA).
"Nationally Recognized Rating Agency" shall mean S & P,
Moody's, Duff & Phelps Credit Rating Co., and Fitch Investors
Service, Inc., and if any of those agencies whose rating was
previously used to satisfy the rating covenant ceases to issue
such ratings generally, another rating agency of similar national
status as may be reasonably determined by you.
"Net Worth" shall mean, as of any date and with respect
to any Person, such Person's net worth as determined in
accordance with GAAP and on a Consolidated basis.
"Officer's Certificate" shall mean a certificate signed
(i) in the name of the Partnership by its general partner,
(ii) in the name of the REIT, by its President, Vice President or
Secretary, and (iii) in the name of any Subsidiary, by a general
partner or its President (as the case may be).
"Partnership" shall mean Mid-America Apartments, L.P.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation, or any successor or replacement entity thereto under
ERISA.
"Permitted Investments" shall have the meaning set
forth in paragraph 6C(2).
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a limited liability
company, a limited liability partnership, any other entity having
limited liability for its owners under the law of its creation, a
trust, an unincorporated organization and a government or any
department or agency thereof.
"Plan" shall mean any "employee pension benefit plan"
(as such term is defined in section 3 of ERISA) which is or has
been established or maintained, or to which contributions are or
have been made, by the Partnership, the REIT or any ERISA
Affiliate of either.
"Preferred Stock" shall mean any class of capital stock
of a corporation that is preferred over any other class of
capital stock of such corporation as to the payment of dividends
or the payment of any amount upon liquidation or dissolution of
such corporation.
"Prepayment Premium" means an amount equal to the
greater of (a) one percent (1%) of the principal amount being
prepaid multiplied by the quotient of the number of full months
remaining until the Conversion Maturity Date divided by the
number of full months comprising the original term (on a monthly
basis) of the Note, or (b) the Present Value of the Loan (defined
below) less the amount of principal and accrued interest (if any)
being prepaid, calculated as of the prepayment date; unless
prepayment occurs on an interest payment date for the Note (each,
a "Due Date"), the actual number of days until the next Due Date
will be used to discount during that partial month; the "Present
Value of the Loan" shall be determined by discounting all
scheduled payments remaining to the Conversion Maturity Date
attributable to the amount being prepaid at the Discount Rate
(defined below); the "Discount Rate" is the rate which, when
compounded monthly, is equivalent to the Treasury Rate (defined
below), when compounded semi-annually; the "Treasury Rate" is the
semi-annual yield on the Treasury Constant Maturity Series with
maturity equal to the remaining weighted average life of the loan
evidenced by this Note, for the week prior to the prepayment
date, as reported in Federal Reserve Statistical Release H.15 -
Selected Interest Rates, conclusively determined by Holder
(absent a clear mathematical calculation error) on the prepayment
date, and the rate will be determined by linear interpolation
between the yields reported in Release H.15, if necessary;
provided, if Release H.15 is no longer published, the holders of
the Notes shall select a comparable publication to determine the
Treasury Rate.
"Priority Debt" shall mean, without duplication and as
at any time of determination thereof, the sum of the following
items: (i) Debt of the Partnership or the REIT secured by Liens
(other than as described in clauses (i), (ii), (iii), (iv), (vi),
(viii), (ix)], (x), (xii), (xiii), (xiv), (xv) and (xvii)(but
only to the extent renewing, refunding or extending Liens of the
type specified in this parenthetical)) in the definition of
Permitted Liens); and (ii) Debt or Preferred Stock of any
Subsidiary to any Person other than the Partnership, the REIT or
a Wholly Owned Subsidiary of either.
"Property Income" shall mean as for any date with
respect to any Person such Person's Consolidated revenues from
rents and other direct property operations (excluding interest
income)on a Consolidated basis minus direct operating expenses of
the property (excluding depreciation and interest expense)on a
Consolidated Basis minus a management fee equal to four percent
(4%) of property revenues on a Consolidated basis minus a capital
reserve of three hundred dollars ($300) per unit on a
Consolidated basis.
"Rating Agency" shall mean any of S&P, Moody's, Duff &
Phelps Credit Rating Co., and Fitch Investors Service, Inc. or
any other rating agency of similar national status as may be
reasonably determined by you
"REIT" shall mean Mid-America Apartment Communities,
Inc.
"REIT Guaranty" and "REIT Guaranties" shall have the
meaning attributed to them in paragraph 3B(xii) hereof.
"Related Party" shall mean (i) any Shareholder, general
partner or limited partner,(ii) any executive officer, director,
agent, managing agent or employee, (iii) all persons to whom such
Persons are related by blood, adoption or marriage and (iv) all
Subsidiaries of the foregoing Persons.
"Reportable Event" shall mean any of the events set
forth in section 4043(b) of ERISA or the regulation thereunder, a
withdrawal from a plan described in Section 4063 of ERISA, or a
cessation of operations described in section 4062(e) of ERISA.
"Required Holder(s)" shall mean the holder or holders
of at least two-thirds (66-2/3%) of the aggregate principal
amount of the Notes from time to time outstanding.
"Responsible Officer" shall mean (i) with respect to a
limited partnership, a general partner, (ii) with respect to a
limited liability company, a managing agent, (iii) with respect
to a corporation, the chief executive officer, chief operating
officer, chief financial officer or chief accounting officer or
any other officer involved principally in its financial
administration or its controllership function, or (iv) with
respect to any other Person that is a legal entity, a person with
similar responsibilities to those listed in (i) through (iii).
"Restricted Investment" shall mean any Investment other
than a Permitted Investment.
"Restricted Payments" shall mean any of the following:
(i) any dividend on any class of the
Partnership's, the REIT's or any Subsidiary's
equity interests;
(ii) any other distribution on account of any
class of the Partnership's, the REIT's or any
Subsidiary's equity interests;
(iii) any redemption, purchase or other
acquisition, direct or indirect, of any equity
interest of the Partnership, the REIT or any
Subsidiary of either;
(iv) any unscheduled payment of principal or
interest or premium of, or retirement, redemption,
purchase or other acquisition of, any Subordinated
Debt, including convertible subordinated debt;
(v) any Restricted Investment.
"S&P" shall mean Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Shareholder" shall mean and include any Person who
owns, beneficially or of record, directly or indirectly, at any
time during any year with respect to which a computation is being
made, either individually or together with all persons to whom
such Person is related by blood, adoption or marriage, 5% or more
of the outstanding equity interests of a Person.
"Significant Holder" shall mean (i) you, so long as you
shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least five percent (5%) of
the aggregate principal amount of the Notes from time to time
outstanding.
"Subsidiary" shall mean, with respect to any Person,
any second Person at least fifty percent (50%) of the equity
interests of which shall, at the time as of which any determi
nation is being made, be owned by such Person, either directly or
through Subsidiaries.
"Total Assets" shall mean, as of any date and with
respect to any Person, the sum of (without duplication) such
Person's (i) Undepreciated Real Estate Assets and (ii) all other
assets (excluding accounts receivable and intangibles) of such
Person on a Consolidated basis.
"Total Unencumbered Assets" shall mean, as of any date
and with respect to any Person, the sum of (without duplication)
such Person's (i) Undepreciated Real Estate Assets which are not
subject to a Lien and (ii) all other assets (excluding accounts
receivable and intangibles) of such Person on a Consolidated
basis not subject to a Lien.
"Transfer" shall mean, with respect to any item, the
sale, exchange, conveyance, lease, transfer or other disposition
of such item.
"Transferee" shall mean any direct or indirect
transferee of all or any part of any Note purchased or to be
purchased by you under this Agreement or any interest in your
rights and obligations under this Agreement.
"Undepreciated Real Estate Assets" as of any date shall
mean such Person's cost (original cost plus capital improvements)
of its real estate assets on such date net of any write downs or
impairments before depreciation and amortization, all calculated
on a Consolidated basis.
"Unsecured Debt" means debt which is not secured by a
lien on any property or assets plus the amount of recourse
secured debt (or guaranteed debt) in excess of the undepreciated
book value of the applicable security.
"Wholly Owned Subsidiary" shall mean any Person, all of
the equity interests of every class of which is, at the time as
of which any determination is being made, owned by the
Partnership or the REIT, as the case may be, either directly or
through Wholly Owned Subsidiaries, and which has outstanding no
options, warrants, rights or other rights entitling the holder
thereof (other than the Partnership, the REIT or a Wholly Owned
Subsidiary of either) to acquire any equity interests of such
Person.
10C. Accounting and Legal Principles, Terms and
Determinations. All references in this Agreement to "GAAP" shall
mean generally accepted accounting principles, as in effect in
the United States from time to time. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted,
all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and
certificates and reports as to financial matters required to be
furnished hereunder shall be prepared, in accordance with GAAP,
applied on a basis consistent with the most recent audited
consolidated financial statements of the Partnership, the REIT
and their Subsidiaries delivered pursuant to paragraph 5A(i) or
(ii) or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of
paragraph 8B. Any reference herein to any specific citation,
section or form of law, statute, rule or regulation shall refer
to such new, replacement or analogous citation, section or form
should citation, section or form be modified, amended or
replaced.
11. MISCELLANEOUS.
11A. Note Payments. The Partnership agrees that, so long
as you shall hold any Note, it will make payments of principal
of, interest on and any Prepayment Premium payable with respect
to such Note, which comply with the terms of this Agreement, by
wire transfer of immediately available funds for credit (not
later than 12:00 noon, New York City time, on the date due) to
your account or accounts as specified by the applicable
Noteholder, or such other account or accounts in the United
States as you may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the
place of payment. You agree that, before disposing of any Note,
you will make a notation thereon (or on a schedule attached
thereto) of all principal payments previously made thereon and of
the date to which interest thereon has been paid. Upon written
request of the Partnership made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you
shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Partnership at its principal
executive office. The Partnership agrees to afford the benefits
of this paragraph 11A to any Transferee which shall have made the
same agreement as you have made in this paragraph 11A.
11B. Expenses. The Partnership and the REIT agree, whether
or not the transactions contemplated hereby shall be consummated,
to pay, and save you and any Transferee harmless against
liability for the payment of, all out-of-pocket expenses arising
in connection with such transactions, including:
(i) (A) all stamp and documentary taxes and similar
charges, (B) costs of obtaining a private placement
number for the Notes and (C) reasonable fees and
expenses of brokers, agents, dealers, investment banks
or other intermediaries or placement agents, in each
case as a result of the execution and delivery of this
Agreement or the issuance of the Notes;
(ii) document production and duplication charges and
the reasonable fees and expenses of any special counsel
engaged by you or such Transferee in connection with
(A) this Agreement and the transactions contemplated
hereby (B) and any subsequent proposed waiver,
amendment or modification of, or proposed consent
under, this Agreement, whether or not such the proposed
action shall be effected or granted;
(iii) the reasonable costs and expenses, including
attorneys' and financial advisory fees, incurred by you
or such Transferee in enforcing (or determining whether
or how to enforce) any rights under this Agreement or
the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued
in connection with this Agreement or the transactions
contemplated hereby or by reason of your or such
Transferee's having acquired any Note, including,
without limitation, costs and expenses incurred in any
workout, restructuring or renegotiation proceeding or
bankruptcy case;
(iv) any judgment, liability, claim, order, decree,
cost, fee, expense, action or obligation resulting from
the consummation of the transactions contemplated
hereby, including the use of the proceeds of the Notes
by the Partnership; and
(v) any Environmental Costs and Liabilities
; provided that the Partnership and the REIT shall not be
responsible for (1) any of your expenses or those of a Transferee
incurred solely in connection with any transfer of any Note;
(2) the fees and expenses of more than one counsel for the
holders of the Notes, except to the extent the Required Holders
determine that (a) either legal advice is needed in a
jurisdiction other than that specified in paragraph 11K or
(b) there exists a conflict of interest amongst the holders of
the Notes; and (3) any fees, costs or expenses incurred with
respect to any amendment that is proposed prior to the occurrence
of a Default or Event of Default by a holder of the Notes rather
than the Partnership, unless such holder shall have consulted
with the Partnership and the REIT prior to proceeding with such
amendment. The obligations of the Partnership and the REIT under
this paragraph 11B shall survive the transfer of any Note or
portion thereof or interest therein by you or any Transferee and
the payment of any Note.
11C. Consent to Amendments. This Agreement may be amended,
and the Partnership may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, if
the Partnership shall obtain the written consent to such
amendment, action or omission to act, of the Required Holder(s)
except that, without the written consent of the holder or holders
of all Notes at the time outstanding, no amendment to this
Agreement shall change the maturity of any Note, or change the
principal of, or the rate, method of computation or time of
payment of interest on or any Prepayment Premium payable with
respect to any Note, or affect the time, amount or allocation of
any prepayments, or change the proportion of the principal
amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Each holder of any Note at the
time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall
have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No
course of dealing between the Partnership, the REIT and the
holder of any Note nor any delay in exercising any rights
hereunder or under any Note or the REIT Guaranties shall operate
as a waiver of any rights of any holder of such Note or the REIT
Guaranties. As used herein and in the Notes, the term "this
Agreement" and references thereto shall mean this Agreement as it
may from time to time be amended or supplemented.
11D. Form, Registration, Transfer and Exchange of Notes;
Lost Notes. The Notes are issuable as registered notes without
coupons in denominations of at least $1,000,000, except as may be
necessary to (i) reflect any principal amount not evenly
divisible by $1,000,000 or (ii) enable the registration of
transfer by a holder of its entire holding of Notes. The
Partnership shall keep at its principal office a register in
which the Partnership shall provide for the registration of Notes
and of transfers of Notes. Upon surrender for registration of
transfer of any Note at the principal office of the Partnership,
the Partnership shall, at its expense, execute and deliver one or
more new Notes of like tenor and of a like aggregate principal
amount, registered in the name of such transferee or transferees.
At the option of the holder of any Note, such Note may be
exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of
the Partnership. Whenever any Notes are so surrendered for
exchange, the Partnership shall, at its expense, execute and
deliver the Notes which the holder making the exchange is
entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by
a written instrument of transfer duly executed, by the holder of
such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of
written notice from the holder of any Note of the loss, theft,
destruction or mutilation of such Note and, in the case of any
such loss, theft or destruction, upon receipt of such holder's
indemnity agreement (which shall be unsecured if such holder is
an insurance company rated A or better by A.M. Best Company or is
an Institutional Investor whose senior debt securities are rated
BBB- or Baa3 or better by S&P or Moody's, respectively, and,
otherwise, which shall be unsecured unless the Partnership
requests in writing that such indemnity agreement be secured), or
in the case of any such mutilation upon surrender and cancella
tion of such Note, the Partnership will make and deliver a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note. The Partnership shall give to any holder of a
Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses
of all registered holders of Notes.
11E. Persons Deemed Owners; Participations. Prior to due
presentment for registration of transfer, the Partnership may
treat the Person in whose name any Note is registered as the
owner and holder of such Note for the purpose of receiving
payment of principal of, interest on and any Prepayment Premium
payable with respect to such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the
Partnership shall not be affected by notice to the contrary.
Subject to the preceding sentence, the holder of any Note may
from time to time grant participations in such Note to any Person
on such terms and conditions as may be determined by such holder
in its sole and absolute discretion, provided that any such
participation shall be in a principal amount of at least
$100,000.
Notwithstanding anything to the contrary herein, upon your
sale and transfer from time to time of all or any portion of a
Converted Loan prior to the Conversion Date, such sale shall be
deemed an assignment to and assumption by such purchaser of your
obligation to purchase Notes hereunder in an amount equal to the
principal amount of such Converted Loan so purchased, and you
shall have no further obligation hereunder to purchase those
Notes.
11F. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein
or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this
Agreement, the Notes, and the REIT Guaranties, the transfer by
you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any Transferee,
regardless of any investigation made at any time by or on behalf
of you or any Transferee. Subject to the preceding sentence,
this Agreement, the Notes and the REIT Guaranties embody the
entire agreement and understanding between you and the Company
and supersede all prior agreements and understandings relating to
the subject matter hereof. No provision of this Agreement shall
be interpreted for or against any party because that party or its
legal representative drafted the provision.
11G. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of either
of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether so
expressed or not.
Nothing express or implied in this Agreement is intended,
nor shall be construed, to confer (i) any legal rights, remedies,
obligations, or liabilities, legal or equitable, including the
right to receive funds, on any Person other than the parties to
this Agreement and their permitted successors and assigns, or
(ii) otherwise constitute any Person a third party beneficiary
under or by reason of this Agreement.
11H. Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to
you, addressed to you at your address specified for such
communications at the address specified above, or at such other
address as you shall have specified to the Partnership in
writing, (ii) if to any other holder of any Note, addressed to
such other holder at such address as such other holder shall have
specified to the Partnership in writing or, if any such other
holder shall not have so specified an address to the Partnership,
then addressed to such other holder in care of the last holder of
such Note which shall have so specified an address to the
Partnership, and (iii) if to the Partnership or the REIT,
addressed to it at 6584 Poplar Avenue, Memphis, TN 38138,
Attention: Mr. Simon R.C. Wadsworth, or at such other address as
the Partnership or the REIT shall have specified to the holder of
each Note in writing; provided, however, that any such
communication to the Partnership or the REIT may also, at the
option of the holder of any Note, be delivered by any other means
either to the Partnership or the REIT at its address specified
above or to any general partner of the Partnership.
Notice given pursuant to this paragraph 11H shall be deemed
delivered (A) five (5) Business Days after deposit in the U.S.
mail, if by first class mail and (B) so long as the sending party
retains a confirmation or similar number, the date specified by
the delivery service as the promised delivery date, in the case
of overnight delivery.
11I. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any
payment of principal of or interest on any Note that is due on a
date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended
to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be included in the
computation of the interest payable on such Business Day.
11J. Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be taken,
is by the terms of this Agreement required to be satisfactory to
you or to the Required Holder(s), the determination of such
satisfaction shall be made by you or the Required Holder(s), as
the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
11K. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall
be governed by, the law of the State of Georgia.
11L. Consent to Jurisdiction; Waiver or Immunities. The
Partnership and the REIT hereby irrevocably submit to the
jurisdiction of any Georgia state or Federal court sitting in
Atlanta, Georgia, in any action or proceeding arising out of or
relating to this Agreement, and the Partnership and the REIT
hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in Georgia state
or Federal court. The Partnership and the REIT hereby
irrevocably waive, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of
such action or proceeding. The Partnership and the REIT agree
and irrevocably consent to the service of any and all process in
any such action or proceeding by the mailing, by registered or
certified U.S. mail, or by any other means or mail that requires
a signed receipt, of copies of such process to CT Corporation
System at 1201 Peachtree Street, NE, Atlanta, Georgia 30361. The
Partnership and the REIT agree that a final judgement in any such
action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this paragraph 11L shall
affect the right of any holder of the Notes to serve legal
process in any other manner permitted by law or affect the right
of any holder of the Notes to bring any action or proceeding
against the Partnership and/or the REIT or their property in the
courts of any other jurisdiction. To the extent that the
Partnership or the REIT has or hereafter may acquire immunity
from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgement,
attachment in aid of execution, execution or otherwise) with
respect to itself or its property, the Partnership and the REIT
hereby irrevocably waive such immunity in respect of its
obligations under this agreement.
11M. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
11N. Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
11O. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but
all of which together shall constitute one instrument.
11P. Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action
or condition is prohibited by any one of such covenants, the fact
that it would be permitted by an exception to, or otherwise be in
compliance within the limitations of, another covenant shall not
(i) avoid the occurrence of a Default or Event of Default if such
action is taken or such condition exists or (ii) in any way
prejudice an attempt by the holders to prohibit (through
equitable action or otherwise) the taking of any action by the
Partnership, the REIT or an Subsidiary of either which would
result in a Default or Event of Default.
11Q. Mandatory Arbitration. The Partnership, the REIT and
you agree that all controversies, claims or disputes between them
arising out of this Agreement or any agreements or instruments
relating hereto or delivered in connection herewith, or relating
to the transaction contemplated by the Agreement, whether
individual, joint or class in nature, including, without
limitation, contract, tort, or other controversies, claims or
disputes shall be arbitrated in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
No act to take or dispose of any collateral, or to exercise
any right in connection with collateral, or to seek to obtain
provisional or ancillary relief from a court of competent
jurisdiction before, during or after the pendency of any
arbitration proceeding conducted pursuant to this arbitration
agreement, including, without limitation, by judicial
foreclosure, by power of sale on a deed of trust or mortgage,
obtaining or executing a writ of attachment, or the exercise of
any rights relating to personal property, including, without
limitation, taking or disposing of such property with or without
judicial process pursuant to Article 9 of the Uniform Commercial
Code as codified under applicable law, shall constitute a waiver
of this arbitration agreement. Either the Partnership, the REIT
or you may apply to a court of competent jurisdiction for an
injunction, the appointment of a receiver, declaratory relief or
any provisional or ancillary relief referred to in the preceding
sentence. Any statutes of limitations or doctrines of estoppel,
waiver, laches or similar statutes or doctrines, which would
otherwise be applicable in a judicial action brought by a party
shall be applicable in any arbitration proceeding hereunder.
Any controversies, claims or disputes concerning the
lawfulness or reasonableness of any act, or the exercise of any
right concerning collateral, including, without limitation any
claim to rescind, reform or otherwise modify any agreements or
instruments relating hereto or delivered in connection herewith,
shall also be arbitrated; provided however, that no arbitrator
shall have the right or power to enjoin or restrain any act of
any party.
Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction.
The Federal Arbitration Act, U.S.C. 1-14, shall apply to the
construction and interpretation of this arbitration provision.
11R. Waiver of Jury Trial. The Partnership, the REIT and
the holders of the Notes agree to waive their respective rights
to a jury trial of any claim or cause of action based upon or
arising out of this Agreement, the Notes, or any dealings between
them relating to the subject matter of this transaction and the
lender/borrower relationship that is being established. The
scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate
to the subject matter of this transaction, including without
limitation, contract claims, tort claims, breach of duty claims,
and all other common law and statutory claims. The holders of
the Notes, the Partnership and the REIT each acknowledge that
this waiver is a material inducement to enter into this business
relationship, that each has already relied on the waiver in
entering into this Agreement, and that each will continue to rely
on the waiver in their related future dealings. The holders of
the Notes, the Partnership and the REIT further warrant and
represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENT, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT, THE NOTES, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE NOTES. In the event of litigation,
this Agreement may be filed as a written consent to a trial by
the court.
11S. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (a)
consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except
the Notes themselves), and (c) financial statements, certificates
and other information previously or hereafter furnished to you,
may be reproduced by you by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar
process and you may destroy any original document so reproduced.
The Partnership and the REIT agree and stipulate that, to the
extent permitted by applicable law, any such reproduction shall
be admissible in evidence as the original itself in any judicial
or administrative proceeding (whether or not the original itself
in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was
made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such
reproduction shall likewise by admissible in evidence. This
paragraph 11S shall not prohibit the Partnership, the REIT or any
other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such
reproduction.
11T. Severalty of Obligations. The sales of Notes to the
Purchasers are to be several sales, and the obligations of the
Purchasers under this Agreement are several obligations. No
failure by any Purchaser to perform its obligations under this
Agreement shall relieve any other Purchaser or the Partnership of
any of its obligations hereunder, and no Purchaser shall be
responsible for the obligations of, or any action taken or
omitted by, any other Purchaser hereunder.
11U. Independent Investigation. Each Purchaser has made its
own independent investigation of the condition (financial and
otherwise), prospects and affairs of the Partnership, the REIT
and their Subsidiaries in connection with its purchase of the
Notes hereunder and has made and shall continue to make its own
appraisal of the creditworthiness of the Partnership. No Holder
shall have any duty or responsibility to any other Holder, either
initially or on a continuing basis, to make any such
investigation or appraisal or to provide any credit or other
information with respect thereto. No Holder is acting as agent
or in any other fiduciary capacity on behalf of any other Holder.
11V. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be
applicable whether the action in question is taken directly or
indirectly by such Person.
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Partnership, whereupon this letter shall
become a binding agreement between the Partnership, the REIT and
you.
Very truly yours,
MID-AMERICA APARTMENTS, L.P., a
Tennessee limited partnership
By: Mid-America Apartment
Communities, Inc., a Tennessee
corporation, General Partner
By: /s/ Simon R.C. Wadsworth
Name: Simon R. C. Wadsworth
Title: CFO
MID-AMERICA APARTMENT COMMUNITIES,
INC., a Tennessee corporation,
General Partner
By: /s/ Simon R. C. Wadsworth
Name: Simon R. C. Wadsworth
Title: CFO
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
The foregoing Agreement is
hereby accepted and agreed to
as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Daniel C. Moore
Title: Daniel C. Moore
Vice President
[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
List of Schedules for
Note Purchase Agreement
(11/17/97)
Schedule 1A - Form of Note
Schedule 3B(ii) - Opinion Form for Baker, Donelson
Schedule 3B(xii) - Form of REIT Guaranty
Schedule 6C(3) - Existing Investments
Schedule 6C(12) - Restrictive Agreements
Schedule 8A - List of Subsidiaries
Schedule 8G - Existing Agreement that Limit Debt
Schedule 8M - Environmental Exceptions
Schedule 8S - Labor Exceptions and List of
Collective Bargaining Agreements
EXHIBIT 10.11
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT (the
"Amendment") is made and entered into as of the 25th day of
November, 1998, by and among MID-AMERICA APARTMENTS, L.P.,
a Tennessee limited partnership (the "Partnership") and MID-
AMERICA APARTMENT COMMUNITIES, INC., a Tennessee corporation (the
"REIT"), and THE PRUDENTIAL LIFE INSURANCE COMPANY OF AMERICA, a
New Jersey corporation ("Prudential").
W I T N E S S E T H:
WHEREAS, the Partnership, the REIT and Prudential
(collectively, the "Parties") have heretofore entered into that
certain Note Purchase Agreement, dated as of November 24, 1997
(the "Note Purchase Agreement"), which set forth the terms and
conditions of purchase and sale of the Notes (as defined in the
Note Purchase Agreement) (the Note Purchase Agreement and all
other documents evidencing, securing or pertaining to the
promissory notes referenced therein are hereinafter collectively
referred to as the "Loan Documents"); and
WHEREAS, the Parties desire to amend the Note Purchase
Agreement and the other Loan Documents as set forth herein; and
NOW, THEREFORE, for and in consideration of the sum of Ten
and No/100ths Dollars ($10.00) in hand paid, the premises
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties, intending to be legally bound, hereby agree as follows:
1. MODIFICATION OF NOTE PURCHASE AGREEMENT. The Note Purchase
Agreement is hereby modified and amended as follows:
1.1 Schedule 1A [Form of Note] to the Note Purchase
Agreement is hereby deleted in its entirety and the
Schedule 1A attached hereto is substituted in lieu
thereof.
1.2 Except as specifically modified and amended, all of the
terms, conditions and provisions of the Note Purchase
Agreement shall remain in full force and effect.
2. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are
hereby modified and amended as follows:
2.1 All references to the Note Purchase Agreement in the
Loan Documents shall mean the Note Purchase Agreement
as modified and amended hereby.
2.2 Except as specifically modified and amended, all of the
terms, conditions and provisions of the Loan Documents
shall remain in full force and effect.
3. RATIFICATION AND CONSENT BY THE PARTNERSHIP AND THE REIT.
Each of the Partnership and the REIT hereby (i) ratifies and
affirms all of its obligations under the Note Purchase
Agreement as modified and amended hereby; (ii) acknowledges,
represents and warrants that the Note Purchase Agreement
constitutes a valid and enforceable obligation, as of this
date, free from any defenses, setoffs, claims, counterclaims
or causes of action of any kind or nature whatsoever by the
Partnership and/or the REIT against Prudential or any of
Prudential's directors, officers, employees, agents or
attorneys; (iii) consents to the modification and amendment
of the Loan Documents as set forth herein; (iv) acknowledges
that this Amendment does not constitute and shall not be
construed as a novation or release of the Note Purchase
Agreement; and (v) acknowledges that this Amendment does not
constitute and shall not be construed as a novation or
release of the other Loan Documents.
4. BINDING AGREEMENT. This Amendment shall be binding upon and
shall inure to the benefit of the Parties hereto and their
respective heirs, successors, and assigns.
5. ENTIRE AGREEMENT. This Amendment constitutes the entire
understanding and agreement of the Parties hereto with
respect to the modification of the Note Purchase Agreement
and supersedes all prior agreements, understandings, or
negotiations regarding said modification.
6. TIME. Time is of the essence of this Amendment and the
Partnership and the REIT each hereby acknowledges that all
time periods contained in the Note Purchase Agreement and
the Loan Documents shall be strictly construed.
7. GEORGIA LAW. This Amendment shall be governed by and
interpreted in accordance with the laws of the State of
Georgia.
8. COUNTERPARTS. This Amendment may be executed simultaneously
in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be executed under seal as of the date first above
written.
THE PARTNERSHIP:
MID-AMERICA APARTMENTS, L.P., a
Tennessee limited partnership
By: Mid-America Apartment
Communities, Inc., a Tennessee
corporation, General Partner
By: /s/ Simon R. C. Wadsworth
Name: Simon R. C.
Wadsworth
Title: CFO
THE REIT:
MID-AMERICA APARTMENT COMMUNITIES,
INC., a Tennessee corporation,
General Partner
By: /s/ Simon R. C. Wadsworth
Name: Simon R. C. Wadsworth
Title: CFO
PRUDENTIAL:
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Daniel C. Moore
Name: Daniel C. Moore
Title: Vice President
EXHIBIT 21.1
Listing of subsidiaries of Mid-America Apartment Communities, Inc.
MAC II of Delaware, Inc
MAC of Delaware, Inc
America First Austin Reit, Inc
America First Florida Reit Inc
America First Sourth Carolina Reit inc
America First Tennessee Reit Inc
America First Texas Reit Inc
MAC of Austin Inc
MAC Capital Partners, Inc
Mid-America Service Corporation
Mid-America Holdings LLC
Mid-America Apartments, LP
Mid-America Capital Partners, L.P.
Mid-America Apartments of Texas LP
Mid-America Apartments of Duval LP
Mid-America Apartments of Austin LP
Mid-America Apartments Stassney Woods LP
Mid-America Apartments Runaway Bay LP
Mid-America Apartments Travis Station LP
MAAC,Tanglewood LP
Fairways-Columbia LP
Pine Trails Joint Venture LP
LP Woodridge Joint Venture LP
River Hills Partnership
Madison LP
LP Jackson LP
Woods Post House LP
Hidden Lake Ltd.
Hidden Oaks Associates
Paddock Park Apartments Ltd.
Park Walk Apartments Ltd.
River Trace Apartments Ltd.
River Trace Apartments Phase II Ltd.
The Vistas Ltd.
Westbury Springs Ltd.
Copper Field Apartments, A Limited Partnership
Fountain Lakes Apartments Ltd.
Paddock Club Brandon, A Limited Partnership
Paddock Club Wildewood, A Limited Partnership
Paddock Club Columbia Phase II, A Limited Partnership
Paddock Club Florence, A Limited Partnership
Paddock Club Greenville, A Limited Partnership
Paddock Club Huntsville, A Limited Partnership
Paddock Club Jacksonville, A Limited Partnership
Paddock Club Jacksonville, Phase II, A Limited Partnership
Paddock Club Lakeland, A Limited Partnership
Paddock Club Lakeland Phase II, A Limited Partnership
Paddock Club Tallahassee, A Limited Partnership
Paddock Club Tallahassee Phase II, A Limited Partnership
Paddock Park Ocala II, A Limited Partnership
Southland Station Phase II, A Limited Partnership
Three Oaks Ltd.
Three Oaks Apartments Phase II Ltd.
Towne Lake Hills Apartments, A Limited Partnership
Westbury Creek Ltd.
Whispering Pines Ltd.
Whispering Pines Phase II, Ltd.
Whisperwood Associates, A Limited Partnership
Whisperwood Spa and Club, A Limited Partnership
Wildwood Apartments Ltd
Wildwood Apartments Phase II Ltd.
Windridge Apartments Ltd.
EXHIBIT 23.1
Accountants' Consent
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We consent to incorporation by reference in the registration
statement (No. 33-91416) on Form S-8 and the registration
statements (Nos. 33-95734, 33-96852, 333-3274, 333-20221 and
333-34775) on Form S-3 of Mid-America Apartment Communities,
Inc. of our report dated March 27, 1998 to the consolidated
balance sheets of Mid-America Apartment Communities, Inc. as
of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended
December 31, 1997 and our report dated March 27, 1998 to the
financial statement schedule of Mid-America Apartment
Communities, Inc., which reports are herein included in the
1997 Annual Report on Form 10-K of Mid-America Apartment
Communities, Inc. Our reports refer to the Company's change
in its accounting method to capitalize replacement purchases
for major appliances and carpet in 1996.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
March 30, 1998
