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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, 1998
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 value $.01 per share New York Stock Exchange
Series B Cumulative Preferred Stock,
par value $.01 per share New York Stock Exchange
Series C Cumulative Redeemable
Preferred Stock, par value $.01 per share New York Stock 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. Yes [X] No __
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 ($22.625 per share),
as reported on the New York Stock Exchange, on March 1, 1999) was approximately
$380,000,000 (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 1, 1999, was 18,916,423 shares, of which approximately 2,143,525 were held
by affiliates.
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<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- --------- ----
<S> <C> <C>
PART I
1. Business.............................
2. Properties...........................
3. Legal Proceedings....................
4. Submission of Matters to Vote of
Security Holders...................
<CAPTION>
PART II
<S> <C> <C>
5. Market for Registrant's Common Equity
and Related Stockholder Matters....
6. Selected Financial Data..............
7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................
7.A. Quantitative and Qualitative
Disclosures About Market Risk......
8. Financial Statements and
Supplementary Data.................
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure...............
<CAPTION>
PART III
<S> <C> <C>
10. Directors and Executive Officers of
the Registrant.....................
11. Executive Compensation...............
12. Security Ownership of Certain
Beneficial Owners and Management...
13. Certain Relationships and Related
Transactions.......................
<CAPTION>
PART IV
<S> <C> <C>
14. Exhibits, Financial Statement
Schedule and Reports on Form 8-K...
</TABLE>
i
<PAGE>
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
("UPREIT") real estate investment trust, ("REIT") which, as of December 31,
1998, owns and operates 129 apartment communities containing 33,831 apartment
units in 13 states, primarily in the Southeast, Midwest and Texas (the
"Communities"). The Company currently has 3,489 apartment units in various
stages of construction, development and pre-development in 10 new communities
and 3 additions to existing communities
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 107 apartment
communities containing 28,251 apartment units, including 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 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"), whose name was later changed to
Flournoy Development Corporation, to own and operate the third-party
construction, brokerage and management activities formerly conducted by FDC. The
operations of FSC include the management of 42 properties with 5,131 apartment
units owned by third party investors, and the development and construction of
properties for the Company and for third parties. The Company believes that this
structure is permitted under the terms of the Internal Revenue Code and is the
most economically beneficial structure for these activities from a shareholder's
perspective.
The Company's business is conducted principally through the Mid-America
Apartments, L.P. (the "Operating Partnership"). The Company is the sole
general partner of the Operating Partnership, holding, as of December 31, 1998,
193,271 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, 1998, held 16,122,085 Common Units, or 83.4%
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 an effective shelf registration statement
relating to the resale of the Common Stock issuable in exchange for the Common
Units by the holders thereof. As of December 31, 1998, such former owners held
2,301,963 Common Units. In subsequent transactions and acquisitions of
properties, including in the FDC Merger, an additional 709,817 Common Units have
been issued, resulting in a total of 3,011,780 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 9 wholly
owned qualified REIT subsidiaries, owns 103 Communities. The Company also has
established Mid-America Capital Partners, L.P., a single-purpose limited
partnership formed in 1997 to own 26 apartment communities containing 5,949
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.
1
<PAGE>
OPERATING PHILOSOPHY
DIVERSIFIED MARKET FOCUS. The Company focuses on owning, operating,
developing, constructing and acquiring apartment communities mainly throughout
the southeast, mid west and Texas. 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.
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
and regional management 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 established regional training facilities to develop and
improve the skills of on-site personnel. Management believes that this
commitment to training and excellence in associates ultimately translates to
higher customer satisfaction. Also, management undertakes resident surveys and
focus groups, in order to measure customer satisfaction.
DECENTRALIZED OPERATIONAL STRUCTURE. The Company's operational structure
is organized on a decentralized 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 and Chief Operating Officer. 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 operating cash flow and earnings per share to
maximize shareholder value through a balanced strategy of internal and external
growth.
OPERATING 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 seeks higher net
rental revenues by enhancing and maintaining the competitiveness of the
Communities and 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:
o 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;
o 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;
o ensuring that, through monthly inspections of all Communities by senior
management and prompt attention to maintenance and recurring capital
needs as well as defined preventive maintenance programs conducted
quarterly at each property, the Communities are properly maintained;
o 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;
o investing heavily in training programs for its property level
personnel;
o compensating employees through performance-based compensation and stock
ownership programs; and
o maintaining a hands-on management style and "flat" organizational
structure that emphasizes senior management's continued close contact
with the market and employees.
2
<PAGE>
DEVELOPMENT AND ACQUISITION GROWTH STRATEGY. The Company's growth strategy
also includes developing and acquiring additional apartment units that meet the
Company's disciplined capital investment and return criteria, and when
apartments no longer meet the Company's long-term strategic objectives or
investment criteria, to dispose of those Communities. Since the Initial
Offering, the Company has grown by 28,251 apartment units, an increase of
approximately 500% over the number of apartment units immediately prior to the
Initial Offering.
DEVELOPMENT STRATEGY. The Company's present emphasis is development
instead of acquisitions because of the higher long term investment returns
generated by development. Through the November 1997 FDC Merger, the Company
acquired a fully integrated developer and builder of multifamily apartments with
over 31 years of experience. Utilizing internal development capabilities adds
properties to the portfolio at a lower overall cost because the Company captures
the profit normally paid to an external contractor. As a result of the increased
yield on these internally developed properties, the Company has significantly
expanded its commitment to new development. The Company has established higher
investment return criteria for new development than for acquisitions and
generally expects that its development program will produce higher quality
assets and generate substantially higher stabilized returns on investment than
most acquisition opportunities.
In 1998 the Company completed the development of the following 950
apartment units which are currently in various stages of lease-up:
o 288 unit Paddock Club in Mandarin, Florida
o 154 unit Enclave at Whisperwood in Columbus, Georgia
o 192 unit Phase II expansion of the Paddock Club at Huntsville, Alabama
o 316 unit Terraces at Fieldstone in Conyers, Georgia
Including the recently announced development projects discussed in "Recent
Developments" below, the Company currently has a total of 3,489 apartment units
in various stages of development, construction, and pre-development, of which
1,570 are scheduled to be completed in 1999 with the remainder in 2000 and 2001.
The Company is continuously seeking opportunities for development in markets
which meet its disciplined investment strategy and return criteria. The Company
has several additional projects, totaling approximately 1,850 planned apartment
units, in various stages of feasibility study, and it anticipates that several
of these additional apartment communities will be approved for development later
in 1999, which will require additional funding in 1999, 2000 and 2001. The
Company anticipates a total capital investment in this development pipeline of
approximately $125 million in 1999 and approximately $120 million in 2000. These
projects are expected to be funded by the Company's line of credit ("Credit
Line"), selective property dispositions and possible joint venture
transactions.
ACQUISITION STRATEGY. An additional strategy of the Company is to acquire
apartment communities that meet its investment criteria and long-term strategic
objectives. Through the Company's UPREIT structure, the Company has the ability
to acquire apartment communities through the issuance of Operating Partnership
Units in tax-deferred exchanges with owners of such properties. Typically, the
Company seeks to acquire well-constructed communities with acquisition prices
below estimated replacement cost and with the potential to achieve rental rate
and occupancy increases, as well as operating expense reductions through the
application of the Company's intense management focus. Currently the Company
believes development of additional apartments is more attractive and produces
higher investment returns than the acquisition of properties. Most apartment
communities that the Company has identified as available for acquisition do not
meet the Company's investment objectives, and the present status of capital
markets have raised the threshold for yields. The Company does not anticipate
any significant investment in acquisition properties in 1999.
3
<PAGE>
The following apartment communities (the "Completed Acquisitions")
containing an aggregate of 2,129 apartment units were acquired during 1998
(dollars in millions):
<TABLE>
<CAPTION>
NUMBER DATE OF CONTRACT
PROPERTY LOCATION OF UNITS ACQUISITION PRICE(1) CONSIDERATION(2)
- ------------------------------------- ----------------------- --------- ------------ --------- ----------------
<S> <C> <C> <C> <C> <C>
Walden Run........................... McDonough, GA 240 2/5/98 $13.4 Cash
Abbington Place...................... Huntsville, AL 152 2/26/98 5.1 Cash
Eagle Ridge.......................... Birmingham, AL 200 5/6/98 8.4 Cash and Units
Georgetown Grove..................... Savannah, GA 220 5/29/98 12.8 Cash
Courtyards at Campbell............... Dallas, TX 231 7/21/98 9.8 Cash
Deer Run............................. Dallas, TX 304 7/21/98 12.5 Cash
Highwood............................. Plano, TX 196 7/21/98 8.6 Cash
Northwood............................ Arlington, TX 270 7/21/98 7.4 Cash
Links at Carrollwood................. Tampa, FL 204 10/19/98 8.0 Units
Island Retreat....................... St. Simons, GA 112 11/25/98 5.1 Units
--------- ---------
2,129 $91.1
========= =========
</TABLE>
- ------------
(1) Excluding additional customary closing costs, including expenses and
commissions.
(2) "Units" refers to Common units in the Company's Operating Partnership.
COMPETITION
All of the Company's Communities are located in 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 markets provide
housing alternatives to potential residents of apartment communities.
RECENT DEVELOPMENTS
JOINT VENTURE AGREEMENT
In March 1999 the Company entered into an agreement to form a joint venture
(the "Joint Venture") with Blackstone Real Estate Acquisitions, LLC, a
subsidiary of an investment management firm located in New York City, to own and
operate apartment communities. The Company simultaneously sold 6 apartment
communities to the newly formed Joint Venture for approximately $65 million
cash. The Company will retain a 33 percent ownership interest in the Joint
Venture and will continue to manage the properties for a fee. The Company
invested approximately $4.0 million in the Joint Venture and loaned the Joint
Venture $3.0 million at an interest rate of 10% for the life of the entity. The
net proceeds from the transaction will be used to pay down the Company's Credit
Line. The agreement provides that income and cash flows generated by the Joint
Venture be allocated based on the respective ownership interest. The Company
will account for its investment in the Joint Venture using the equity method of
accounting. The Company plans to sell an additional 4 apartment communities to
the Joint Venture later in the year. The proceeds of any such transaction are
expected to be used to pay down the Company's Credit Line.
4
<PAGE>
DEVELOPMENT
Subsequent to December 31, 1998, the Company's Board of Directors approved
the development of the following two new apartment communities totaling 674
units:
o 320-unit Kenwood Club at the Park located in Katy, Texas at an
estimated cost of $18,129,000 with an anticipated construction start in
April 1999
o 354-unit Sandstone Creek located in Overland Park, Kansas at an
estimated cost of $27,514,000 which is expected to commence
construction in late summer 1999
These projects are expected to be funded through the Company's Credit Line
and potential joint venture transactions.
DISTRIBUTION INCREASE
In January 1999, the Company raised its quarterly distribution to common
shareholders from $.55 per share to $.575 per share, effective with its
distribution paid on January 30, 1999.
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 72% 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, 1998 was 12.6 years.
The following table sets forth certain operating data regarding the company
for the periods indicated excluding development communities:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Apartment units at year end.......... 33,831 30,579 19,280
Average monthly rental per
apartment.......................... $582 $549 $529
Average occupancy for the year....... 94.5% 93.6% 95.4%
</TABLE>
The following table sets forth certain historical information on an
historical basis for the 129 Communities owned at December 31, 1998:
5
<PAGE>
The following table presents information concerning the properties at
December 31, 1998:
<TABLE>
<CAPTION>
APPROXIMATE AVERAGE
YEAR RENTABLE UNIT
YEAR MANAGEMENT NUMBER AREA SIZE
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eagle Ridge.......................... Birmingham, AL 1986 1998 200 181,400 907
Abbington Place...................... Huntsville, AL 1987 1998 152 162,792 1,071
Paddock Club -- Huntsville........... Huntsville, AL 1989 1997 200 211,576 1,058
Paddock Club -- Huntsville II........ Huntsville, AL 1998 1997 192 212,736 1,108
---------- ------------- -------------
744 768,528 1,033
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Calais Forest........................ Little Rock, AR 1987 1994 260 194,928 750
Napa Valley.......................... Little Rock, AR 1984 1996 240 183,216 763
Westside Creek I..................... Little Rock, AR 1984 1997 142 148,030 1,042
Westside Creek II.................... Little Rock, AR 1986 1997 166 156,646 944
Whispering Oaks...................... Little Rock, AR 1978 1994 206 192,422 934
---------- ------------- -------------
1,014 875,242 863
---------- ------------- -------------
Tiffany Oaks......................... Altamonte Springs, FL 1985 1996 288 234,224 813
Marsh Oaks........................... Atlantic Beach, FL 1986 1995 120 93,280 777
Paddock Club -- Brandon.............. Brandon, FL 1997 1997 308 358,600 1,164
Anatole.............................. Daytona Beach, FL 1986 1995 208 149,136 717
Cooper's Hawk........................ Jacksonville, FL 1987 1995 208 218,400 1,050
Hunter's Ridge at Deerwood........... Jacksonville, FL 1987 1997 336 294,888 878
Lakeside............................. Jacksonville, FL 1985 1996 416 344,192 827
Paddock Club -- Jacksonville I....... Jacksonville, FL 1989 1997 200 216,016 1,080
Paddock Club -- Jacksonville II...... Jacksonville, FL 1996 1997 120 132,280 1,102
Paddock Club -- Jacksonville III..... Jacksonville, FL 1997 1997 120 130,544 1,088
Paddock Club -- Mandarin............. Jacksonville, FL 1998 1998 288 330,336 1,147
St. Augustine........................ Jacksonville, FL 1987 1995 400 304,400 761
Woodbridge at the Lake............... Jacksonville, FL 1985 1994 188 166,000 883
Woodhollow........................... Jacksonville, FL 1986 1997 450 342,162 760
Paddock Club -- Lakeland I........... Lakeland, FL 1988 1997 200 217,704 1,089
Paddock Club -- Lakeland II.......... Lakeland, FL 1990 1997 264 283,365 1,073
Savannahs at James Landing........... Melbourne, FL 1990 1995 256 238,592 932
Paddock Park -- Ocala I.............. Ocala, FL 1986 1997 200 202,282 1,011
Paddock Park -- Ocala II............. Ocala, FL 1988 1997 280 290,496 1,037
Paddock Club -- Tallahassee I........ Tallahassee, FL 1990 1997 192 208,000 1,083
Paddock Club -- Tallahassee II....... Tallahassee, FL 1995 1997 112 124,720 1,114
Belmere.............................. Tampa, FL 1984 1994 210 202,440 964
Links at Carrollwood................. Tampa, FL 1980 1998 204 190,536 934
Sailwinds at Lake Magdalene.......... Tampa, FL 1975 1994 798 667,084 836
---------- ------------- -------------
6,366 5,939,677 933
---------- ------------- -------------
Hidden Oaks I........................ Albany, GA 1979 1997 128 132,096 1,032
Hidden Oaks II....................... Albany, GA 1980 1997 112 114,624 1,023
Regency Club......................... Albany, GA 1983 1997 100 80,200 802
High Ridge........................... Athens, GA 1987 1997 160 186,608 1,166
<CAPTION>
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1998
RENT PER OCCUPANCY --------------------------------------------
UNIT AT % AT MORTGAGE
DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST MATURITY
PROPERTY 1998 1998 (000'S) RATE DATE
- ------------------------------------- ------------- ------------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Eagle Ridge.......................... $ 583 97.50% $ 6,402 8.250% 07/01/28
Abbington Place...................... $ 532 93.42% -- (2) -- (2) -- (2)
Paddock Club -- Huntsville........... $ 601 89.00% -- (2) -- (2) -- (2)
Paddock Club -- Huntsville II........ $ 682 93.75% -- (2) -- (2) -- (2)
------------- ------------- ---------
$ 603 93.4% $ 6,402
------------- ------------- ---------
Calais Forest........................ $ 567 90.38% $ 5,610 8.915% 12/01/99
Napa Valley.......................... $ 550 87.50% -- (7) -- (7) -- (7)
Westside Creek I..................... $ 609 91.23% -- (7) -- (7) -- (7)
Westside Creek II.................... $ 609 91.23% $ 4,918 8.760% 10/01/06
Whispering Oaks...................... $ 523 92.72% $ 3,000 8.915% 12/01/99
------------- ------------- ---------
$ 567 90.4% $13,528
------------- ------------- ---------
Tiffany Oaks......................... $ 589 97.92% -- (7) -- (7) -- (7)
Marsh Oaks........................... $ 544 100.00% -- (7) -- (7) -- (7)
Paddock Club -- Brandon.............. $ 775 99.03% -- (2) -- (2) -- (2)
Anatole.............................. $ 565 97.60% $ 7,000 5.625% &(2) 12/01/27 & (2)
Cooper's Hawk........................ $ 598 96.63% -- (5) -- (5) -- (5)
Hunter's Ridge at Deerwood........... $ 598 94.64% -- (10) -- (10) -- (10)
Lakeside............................. $ 580 94.47% -- (7) -- (7) -- (7)
Paddock Club -- Jacksonville I....... $ 712 95.00% -- (8) -- (8) -- (8)
Paddock Club -- Jacksonville II...... $ 712 95.00% -- (8) -- (8) -- (8)
Paddock Club -- Jacksonville III..... $ 755 95.00% -- (8) -- (8) -- (8)
Paddock Club -- Mandarin............. $ 744 95.83% -- (2) -- (2) -- (2)
St. Augustine........................ $ 539 95.00% -- (5) -- (5) -- (5)
Woodbridge at the Lake............... $ 604 96.81% $ 3,600 -- (1) -- (1)
Woodhollow........................... $ 583 93.56% $ 9,973 7.500% 09/01/02
Paddock Club -- Lakeland I........... $ 679 94.39% -- (8) -- (8) -- (8)
Paddock Club -- Lakeland II.......... $ 679 94.39% -- (8) -- (8) -- (8)
Savannahs at James Landing........... $ 594 92.19% -- (5) -- (5) -- (5)
Paddock Park -- Ocala I.............. $ 656 95.41% $ 6,805 6.500% 10/01/08
Paddock Park -- Ocala II............. $ 656 95.41% -- (2) -- (2) -- (2)
Paddock Club -- Tallahassee I........ $ 671 95.40% -- (2) -- (2) -- (2)
Paddock Club -- Tallahassee II....... $ 671 95.40% $ 4,710 8.500% 04/01/36
Belmere.............................. $ 624 97.14% -- (7) -- (7) -- (7)
Links at Carrollwood................. $ 649 81.37% $ 5,793 8.750 02/01/03
Sailwinds at Lake Magdalene.......... $ 550 95.49% $15,950 8.915% 12/01/99
------------- ------------- ---------
$ 624 95.1% $53,831
------------- ------------- ---------
Hidden Oaks I........................ $ 448 86.66%
Hidden Oaks II....................... $ 448 86.66% $ 2,429 8.000% 02/01/21
Regency Club......................... $ 391 72.00% -- (7) -- (7) -- (7)
High Ridge........................... $ 756 98.13%
</TABLE>
6
<PAGE>
The following table presents information concerning the properties at
December 31, 1998:
<TABLE>
<CAPTION>
APPROXIMATE AVERAGE
YEAR RENTABLE UNIT
YEAR MANAGEMENT NUMBER AREA SIZE
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shenandoah Ridge..................... Augusta, GA 1975/1984 1994 272 222,800 819
Bradford Pointe (Sterling Ridge)..... Augusta, GA 1986 1997 192 156,232 814
Westbury Creek....................... Augusta, GA 1984 1997 120 106,998 892
Fountain Lake........................ Brunswick, GA 1983 1997 100 118,046 1,180
Island Retreat....................... St. Simons Island, GA 1978 1998 112 129,584 1,157
Park Walk............................ College Park, GA 1985 1997 124 112,776 909
Enclave at Whisperwood............... Columbus, GA 1998 1998 154 189,728 1,232
2000 Wynnton......................... Columbus, GA 1983 1997 72 66,056 917
Riverwind............................ Columbus, GA 1983 1997 44 40,304 916
Whisperwood.......................... Columbus, GA 1980-86 1997 506 610,876 1,207
Whisperwood Spa & Club............... Columbus, GA 1988 1997 348 380,044 1,092
Willow Creek......................... Columbus, GA 1968-78 1997 285 246,668 866
Hollybrook........................... Dalton, GA 1972 1994 158 188,640 1,194
Whispering Pines I................... LaGrange, GA 1982 1997 120 123,904 1,033
Whispering Pines II.................. LaGrange, GA 1984 1997 96 98,572 1,027
Westbury Springs..................... Lilburn, GA 1983 1997 150 137,744 918
Walden Run........................... McDonough, GA 1997 1998 240 271,200 1,130
Austin Chase......................... Macon, GA 1996 1997 256 293,016 1,144
The Vistas........................... Macon, GA 1985 1997 144 153,792 1,068
Georgetown Grove..................... Savannah, GA 1997 1998 220 239,800 1,090
Wildwood I........................... Thomasville, GA 1980 1997 120 123,904 1,033
Wildwood II.......................... Thomasville, GA 1984 1997 96 101,152 1,054
Hidden Lake I........................ Union City, GA 1985 1997 160 171,192 1,070
Hidden Lake II....................... Union City, GA 1987 1997 160 154,000 963
Three Oaks I......................... Valdosta, GA 1983 1997 120 123,904 1,033
Three Oaks II........................ Valdosta, GA 1984 1997 120 129,200 1,077
Southland Station I.................. Warner Robins, GA 1987 1997 160 186,704 1,167
Southland Station II................. Warner Robins, GA 1990 1997 144 168,704 1,172
Terraces at Towne Lake............... Woodstock, GA 1997 1997 264 286,968 1,087
---------- ------------- -------------
5,557 5,846,036 1,052
---------- ------------- -------------
Fairways at Hartland................. Bowling Green, KY 1996 1997 240 251,180 1,047
Paddock Club Florence................ Florence, KY 1994 1997 200 207,036 1,035
Lakepointe........................... Lexington, KY 1986 1994 118 90,614 768
Mansion, The......................... Lexington, KY 1987 1994 184 138,720 754
Village, The......................... Lexington, KY 1989 1994 252 182,716 725
Stonemill Village.................... Louisville, KY 1985 1994 384 324,008 844
---------- ------------- -------------
1,378 1,194,274 867
---------- ------------- -------------
Canyon Creek......................... St. Louis, MO 1987 1994 320 312,592 977
---------- ------------- -------------
<CAPTION>
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1998
RENT PER OCCUPANCY ---------------------------------------------
UNIT AT % AT MORTGAGE
DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST MATURITY
PROPERTY 1998 1998 (000'S) RATE DATE
- ------------------------------------- ------------- ------------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shenandoah Ridge..................... $ 457 94.12% -- (7) -- (7) -- (7)
Bradford Pointe (Sterling Ridge)..... $ 537 93.75% $ 4,760 5.10% & (2) 06/01/28 & (2)
Westbury Creek....................... $ 558 94.17% $ 3,167 7.594% 11/01/24
Fountain Lake........................ $ 765 87.00% $ 2,969 7.750% 03/01/03
Island Retreat....................... $ 699 85.71% $ 3,453 7.215% 03/01/03
Park Walk............................ $ 641 97.58% $ 3,392 6.370% 11/01/25
Enclave at Whisperwood............... $ 744 96.75% -- (2) -- (2) -- (2)
2000 Wynnton......................... $ 442 97.22% -- -- --
Riverwind............................ $ 455 97.73% -- -- --
Whisperwood.......................... $ 604 95.08% -- (2) -- (2) -- (2)
Whisperwood Spa & Club............... $ 604 95.08% -- (2) -- (2) -- (2)
Willow Creek......................... $ 485 91.23% -- (7) -- (7) -- (7)
Hollybrook........................... $ 595 95.57% $ 2,520 8.915% 12/01/99
Whispering Pines I................... $ 556 91.20% $ 2,737 7.750% 01/01/23
Whispering Pines II.................. $ 556 91.20% $ 2,523 6.150% 12/01/24
Westbury Springs..................... $ 642 99.33% $ 4,249 7.500% 07/01/23
Walden Run........................... $ 712 97.92% -- (2) -- (2) -- (2)
Austin Chase......................... $ 667 99.22% -- (10) -- (10) -- (10)
The Vistas........................... $ 593 91.67% $ 4,074 6.230% 03/01/28
Georgetown Grove..................... $ 710 98.64% $10,505 7.750% 07/01/37
Wildwood I........................... $ 504 94.90% $ 2,074 7.500% 12/01/20
Wildwood II.......................... $ 504 94.90% $ 2,016 6.573% 07/01/24
Hidden Lake I........................ $ 649 94.06% $ 4,521 6.340% 12/01/26
Hidden Lake II....................... $ 649 94.06% -- (7) -- (7) -- (7)
Three Oaks I......................... $ 532 95.00% $ 2,849 7.500% 02/01/22
Three Oaks II........................ $ 532 95.00% $ 2,933 6.259% 07/01/24
Southland Station I.................. $ 622 97.69% -- (7) -- (7) -- (7)
Southland Station II................. $ 622 97.69% -- -- --
Terraces at Towne Lake............... $ 796 95.45% $15,191 8.250% 01/10/37
------------- ------------- ---------
$ 604 94.3% $76,362
------------- ------------- ---------
Fairways at Hartland................. $ 568 89.58% $ 4,627 8.875% 05/01/00
Paddock Club Florence................ $ 740 93.50% $ 9,673 7.250% 02/01/36
Lakepointe........................... $ 539 93.22% -- (7) -- (7) -- (7)
Mansion, The......................... $ 548 91.85% $ 4,140 8.915% 12/01/99
Village, The......................... $ 583 92.06% -- (7) -- (7) -- (7)
Stonemill Village.................... $ 565 89.32% -- (4) -- (4) -- (4)
------------- ------------- ---------
$ 590 91.1% $18,440
------------- ------------- ---------
Canyon Creek......................... $ 546 94.69% -- (4) -- (4) -- (4)
------------- ------------- ---------
</TABLE>
7
<PAGE>
The following table presents information concerning the properties at
December 31, 1998:
<TABLE>
<CAPTION>
APPROXIMATE AVERAGE
YEAR RENTABLE UNIT
YEAR MANAGEMENT NUMBER AREA SIZE
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Riverhills........................... Grenada, MS 1972 1985 96 81,942 854
Advantages, The...................... Jackson, MS 1984 1991 252 199,136 790
Crosswinds........................... Jackson, MS 1988/1989 1996 360 443,200 1,231
Lakeshore Landing.................... Jackson, MS 1974 1994 196 171,156 873
Pear Orchard......................... Jackson, MS 1985 1994 389 338,400 870
Pine Trails.......................... Jackson, MS 1978 1988 120 98,560 821
Reflection Pointe.................... Jackson, MS 1986 1988 296 254,856 861
Somerset Place....................... Jackson, MS 1981 1995 144 126,848 881
Woodridge............................ Jackson, MS 1987 1988 192 175,034 912
---------- ------------- -------------
2,045 1,889,132 924
---------- ------------- -------------
Hermitage at Beechtree............... Cary, NC 1988 1997 194 169,776 875
Woodstream........................... Greensboro, NC 1983 1994 304 217,186 714
Corners, The......................... Winston-Salem, NC 1982 1993 240 173,496 723
---------- ------------- -------------
738 560,458 759
---------- ------------- -------------
Fairways at Royal Oak................ Cincinnati, OH 1988 1994 214 214,477 1,002
---------- ------------- -------------
Colony at South Park................. Aiken, SC 1989/91 1997 184 174,800 950
Woodwinds............................ Aiken, SC 1988 1997 144 165,188 1,147
Tanglewood........................... Anderson, SC 1980 1994 168 146,600 873
The Fairways......................... Columbia, SC 1992 1994 240 213,720 891
Paddock Club -- Columbia I........... Columbia, SC 1989 1997 200 218,872 1,094
Paddock Club -- Columbia II.......... Columbia, SC 1995 1997 136 144,720 1,064
Highland Ridge....................... Greenville, SC 1984 1995 168 144,000 857
Howell Commons....................... Greenville, SC 1986/88 1997 348 292,840 841
Paddock Club -- Greenville........... Greenville, SC 1996 1997 208 212,104 1,020
Park Haywood......................... Greenville, SC 1983 1993 208 156,776 754
Spring Creek......................... Greenville, SC 1984 1995 208 182,000 875
Runaway Bay.......................... Mt. Pleasant, SC 1988 1995 208 177,840 855
Park Place........................... Spartanburg, SC 1987 1997 184 195,312 1,061
---------- ------------- -------------
2,604 2,424,772 931
---------- ------------- -------------
Hamilton Pointe...................... Chattanooga, TN 1989 1992 362 256,716 711
Hidden Creek......................... Chattanooga, TN 1987 1988 300 259,152 864
Steeplechase......................... Chattanooga, TN 1986 1991 108 98,602 913
Windridge............................ Chattanooga, TN 1984 1997 174 238,704 1,372
Oaks, The............................ Jackson, TN 1978 1993 100 87,512 875
Post House Jackson................... Jackson, TN 1987 1989 150 163,640 1,091
Post House North..................... Jackson, TN 1987 1989 144 144,724 1,005
Williamsburg Village................. Jackson, TN 1987 1994 148 121,412 820
Woods at Post House.................. Jackson, TN 1995 1995 122 118,922 975
Cedar Mill........................... Memphis, TN 1973/1986 1982/1994 276 297,794 1,079
<CAPTION>
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1998
RENT PER OCCUPANCY -----------------------------------------------
UNIT AT % AT MORTGAGE
DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST MATURITY
PROPERTY 1998 1998 (000'S) RATE DATE
- ------------------------------------- ------------- ------------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Riverhills........................... $ 395 97.92% $ 819 7.000% 05/01/13
Advantages, The...................... $ 457 95.24% -- (4) -- (4) -- (4)
Crosswinds........................... $ 612 88.06% -- (7) -- (7) -- (7)
Lakeshore Landing.................... $ 522 93.37% -- (4) -- (4) -- (4)
Pear Orchard......................... $ 568 90.49% -- (7) -- (7) -- (7)
Pine Trails.......................... $ 531 87.50% $ 1,315 7.000% 04/01/15
Reflection Pointe.................... $ 589 90.20% $ 5,882 5.35% & (2) 12/01/27 &(2)
Somerset Place....................... $ 504 93.06% -- (7) -- (7) -- (7)
Woodridge............................ $ 523 96.35% $ 4,735 6.5000% 10/01/27
------------- ------------- ---------
$ 542 91.8% $12,751
------------- ------------- ---------
Hermitage at Beechtree............... $ 671 95.36% -- (7) -- (7) -- (7)
Woodstream........................... $ 439 98.68% -- (2) -- (2) -- (2)
Corners, The......................... $ 554 96.67% $ 4,198 7.850% 06/15/03
------------- ------------- ---------
$ 578 97.2% $ 4,198
------------- ------------- ---------
Fairways at Royal Oak................ $ 601 90.19% -- (7) -- (7) -- (7)
------------- ------------- ---------
Colony at South Park................. $ 577 98.90% -- (2) -- (2) -- (2)
Woodwinds............................ $ 599 97.22% $ 3,500 8.840% 06/01/05
Tanglewood........................... $ 531 94.05% $ 2,496 7.600% 11/15/02
The Fairways......................... $ 604 93.75% $ 7,605 8.500% 03/01/33
Paddock Club -- Columbia I........... $ 736 88.69% -- (2) -- (2) -- (2)
Paddock Club -- Columbia II.......... $ 736 88.69% -- (2) -- (2) -- (2)
Highland Ridge....................... $ 479 93.45% -- (3) -- (3) -- (3)
Howell Commons....................... $ 505 92.82% -- (7) -- (7) -- (7)
Paddock Club -- Greenville........... $ 699 92.79% -- (2) -- (2) -- (2)
Park Haywood......................... $ 500 91.35% -- (7) -- (7) -- (7)
Spring Creek......................... $ 515 95.67% -- (3) -- (3) -- (3)
Runaway Bay.......................... $ 681 96.15% -- (3) -- (3) -- (3)
Park Place........................... $ 594 92.93% -- (7) -- (7) -- (7)
------------- ------------- ---------
$ 591 93.5% $13,601
------------- ------------- ---------
Hamilton Pointe...................... $ 462 94.20% -- (4) -- (4) -- (4)
Hidden Creek......................... $ 491 86.33% -- (4) -- (4) -- (4)
Steeplechase......................... $ 550 94.44% -- (7) -- (7) -- (7)
Windridge............................ $ 675 97.70% $ 5,477 6.314% 12/01/24
Oaks, The............................ $ 501 94.00% -- (4) -- (4) -- (4)
Post House Jackson................... $ 578 88.67% $ 5,098 8.170% 10/01/27
Post House North..................... $ 605 95.14% $ 3,585 5.750% 09/01/25
Williamsburg Village................. $ 539 93.92% -- (7) -- (7) -- (7)
Woods at Post House.................. $ 633 96.72% $ 5,285 7.250% 09/01/35
Cedar Mill........................... $ 564 95.29% -- (4) & (9) -- (4) & (9) -- (4) & (9)
</TABLE>
8
<PAGE>
The following table presents information concerning the properties at
December 31, 1998:
<TABLE>
<CAPTION>
APPROXIMATE AVERAGE
YEAR RENTABLE UNIT
YEAR MANAGEMENT NUMBER AREA SIZE
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.) (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clearbrook Village................... Memphis, TN 1974 1987 176 150,400 855
Crossings............................ Memphis, TN 1974 1991 80 89,968 1,125
EastView............................. Memphis, TN 1974 1984 432 356,480 825
Glen Eagles.......................... Memphis, TN 1975 1990 184 189,560 1,030
Greenbrook........................... Memphis, TN 1986 1988 1,031 934,490 906
Hickory Farm......................... Memphis, TN 1985 1994 200 150,256 751
Kirby Station........................ Memphis, TN 1978 1994 371 310,173 836
Lincoln on the Green................. Memphis, TN 1988 1994 384 293,664 765
Lincoln on the Green II.............. Memphis, TN 1997 1997 234 241,280 1,031
McKellar Woods....................... Memphis, TN 1976 1988 624 589,776 945
Park Estate.......................... Memphis, TN 1974 1977 82 95,751 1,182
Reserve at Dexter Lake............... Memphis, TN 1998 1998 96 99,936 1,041
River Trace I........................ Memphis, TN 1981 1977 244 205,780 843
River Trace II....................... Memphis, TN 1985 1977 196 194,864 994
Savannah Creek....................... Memphis, TN(6) 1989 1996 205 237,200 1,162
Sutton Place......................... Memphis, TN(6) 1991 1996 253 267,600 1,062
Winchester Square.................... Memphis, TN 1973 1977 252 301,409 1,196
Brentwood Downs...................... Nashville, TN 1986 1994 286 220,166 770
Park at Hermitage.................... Nashville, TN 1987 1995 440 392,480 892
---------- ------------- -------------
7,654 7,108,411 929
---------- ------------- -------------
Northwood............................ Arlington, TX 1980 1998 270 224,100 830
Balcones Woods....................... Austin, TX 1983 1997 384 313,756 817
Stassney Woods....................... Austin, TX 1985 1995 288 248,832 864
Travis Station....................... Austin, TX 1987 1995 304 249,888 822
Woods................................ Austin, TX 1977 1997 278 213,970 770
Celery Stalk......................... Dallas, TX 1978 1994 410 552,220 1,347
Courtyards at Campbell............... Dallas, TX 1986 1998 231 167,475 725
Deer Run............................. Dallas, TX 1985 1998 304 206,720 680
Lodge at Timberglen.................. Dallas, TX 1984 1994 260 226,124 870
MacArthur Ridge...................... Irving, TX 1991 1994 248 210,393 848
Westborough.......................... Katy, TX 1984 1994 274 197,264 720
Lane at Towne Crossing............... Mesquite, TX 1983 1994 384 277,616 723
Highwood............................. Plano, TX 1983 1996 196 156,800 800
Cypresswood Court.................... Spring, TX 1984 1994 208 160,672 772
Green Tree Place..................... Woodlands, TX 1984 1994 200 152,168 761
---------- ------------- -------------
4,239 3,557,998 839
---------- ------------- -------------
Township............................. Hampton, VA 1987 1995 296 248,048 838
---------- ------------- -------------
TOTAL COMPLETED PROPERTIES........... 33,597 30,109,309 896
========== ============= =============
<CAPTION>
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1998
RENT PER OCCUPANCY ---------------------------------------------
UNIT AT % AT MORTGAGE
DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST MATURITY
PROPERTY 1998 1998 (000'S) RATE DATE
- ------------------------------------- ------------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Clearbrook Village................... $ 515 97.16% $ 1,091 9.000% 05/01/08
Crossings............................ $ 639 95.00% -- (4) -- (4) -- (4)
EastView............................. $ 495 98.38% $ 2,827 8.630% 12/01/99
Glen Eagles.......................... $ 557 97.28% -- (4) -- (4) -- (4)
Greenbrook........................... $ 520 94.57% -- (9) -- (9) -- (9)
Hickory Farm......................... $ 525 100.00% -- (4) -- (4) -- (4)
Kirby Station........................ $ 571 96.23% -- (7) -- (7) -- (7)
Lincoln on the Green................. $ 603 91.41% -- (8) -- (8) -- (8)
Lincoln on the Green II.............. $ 753 86.75% -- -- --
McKellar Woods....................... $ 465 93.59% -- (9) -- (9) -- (9)
Park Estate.......................... $ 690 100.00% -- (9) -- (9) -- (9)
Reserve at Dexter Lake............... $ 787 39.58% -- (2) -- (2) -- (2)
River Trace I........................ $ 537 95.00% $ 5,743 6.380% 02/01/22
River Trace II....................... $ 537 95.00% $ 5,664 6.380% 02/01/26
Savannah Creek....................... $ 606 96.10% -- (7) -- (7) -- (7)
Sutton Place......................... $ 593 93.28% -- (7) -- (7) -- (7)
Winchester Square.................... $ 576 94.05% -- (4) -- (4) -- (4)
Brentwood Downs...................... $ 655 93.01% $ 6,678 8.91% 12/01/99
Park at Hermitage.................... $ 595 94.77% $ 7,985 5.790% 02/01/19
------------- ------------- ---------
$ 558 93.7% $49,433
------------- ------------- ---------
Northwood............................ $ 553 94.81% -- (2) -- (2) -- (2)
Balcones Woods....................... $ 673 96.09% $ 8,804 7.630% 11/01/03
Stassney Woods....................... $ 597 97.57% $ 4,715 6.600% 10/01/19
Travis Station....................... $ 554 97.04% $ 4,165 6,600% 04/01/19
Woods................................ $ 702 96.40% -- (2) -- (2) -- (2)
Celery Stalk......................... $ 650 93.17% $ 8,460 9.006% 12/01/04
Courtyards at Campbell............... $ 667 96.10% -- (2) -- (2) -- (2)
Deer Run............................. $ 602 94.08% -- (2) -- (2) -- (2)
Lodge at Timberglen.................. $ 611 94.23% $ 4,740 9.006% 12/01/04
MacArthur Ridge...................... $ 708 97.58% -- (2) -- (2) -- (2)
Westborough.......................... $ 507 94.89% $ 3,958 9.006% 12/01/04
Lane at Towne Crossing............... $ 532 94.01% -- (2) -- (2) -- (2)
Highwood............................. $ 690 87.76% -- (2) -- (2) -- (2)
Cypresswood Court.................... $ 535 96.15% $ 3,330 9.006% 12/01/04
Green Tree Place..................... $ 591 97.50% $ 3,180 9.006% 12/01/04
------------- ------------- ---------
$ 611 95.2% 41,352
------------- ------------- ---------
Township............................. $ 581 91.55% $10,800 5.10% & (2) 02/01/28 & (2)
------------- ------------- ---------
TOTAL COMPLETED PROPERTIES........... $ 597 94.1% 300,698
============= ============= =========
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
DEVELOPMENT PROPERTIES:
Paddock Club -- Gainsville........... Gainsville, FL 1998 -- 180 199,800 1,110
Paddock Club -- Panama City.......... Panama City, FL 1998 -- 54 60,372 1,118
Terraces at Fieldstone............... Conyers, GA 1998 -- 316 351,076 1,111
Terraces at Towne Lake II............ Woodstock, GA 1997 -- 112 121,744 1,087
Reserve at Dexter Lake............... Memphis, TN -- 1998 96 99,936 1,041
---------- ------------- -------------
Total Development Properties......... 758 832,928 1,099
---------- ------------- -------------
TOTAL PROPERTIES..................... 33,831 31,672,637 936
========== ============= =============
<CAPTION>
DEVELOPMENT PROPERTIES:
Paddock Club -- Gainsville........... $ 822 46.67%
Paddock Club -- Panama City.......... $ 682 22.22%
Terraces at Fieldstone............... $ 808 55.06%
Terraces at Towne Lake II............ $ 810 22.32%
Reserve at Dexter Lake............... $ 787 39.58%
------------- -------------
Total Development Properties......... $ 800 43.9%
------------- -------------
TOTAL PROPERTIES..................... $ 595 93.0%
============= =============
</TABLE>
- ------------
(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 $117 million
and a variable interest rate of 7.00% at December 31, 1998.
(3) These three properties are encumbered by a $10.1 million mortgage securing
a tax-exempt bond amortizing over 25 years with an average interest rate of
6.09%.
(4) These twelve properties are encumbered by a $43.4 million mortgage with an
interest rate of 8.65%, maturing July 01, 2001.
(5) These three properties are encumbered by a $16.4 million mortgage securing
a tax-exempt bond amortizing over 25 years with an average interest rate of
5.75%.
(6) These two properties are located in Desoto County, MS, a suburb of Memphis,
TN. The Company considers the properties a part of the Memphis, TN market.
(7) These 26 communities are encumbered by a $142 million loan with a maturity
of March 3, 2003 and an average interest rate of 6.376%.
(8) These six properties are encumbered by a $47.5 million mortgage with a
maturity of December 15, 2004 and an interest rate of 7.04%.
(9) These 4 properties, and one commercial building, are encumbered by a $35.8
million mortgage with a maturity of April 1, 2005.
(10) These two properties are encumbered by a $14 million mortgage securing a
tax-exempt bond amortizing over 25 years with an average interest rate of
5.281%.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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 business, financial condition,
liquidity or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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 15, 1999, the
reported last sale price of the Company's common stock on the NYSE was $22.9375
per share and there were approximately 1,710 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.
<TABLE>
<CAPTION>
SALES PRICES
-------------------- DIVIDENDS
HIGH LOW DECLARED
--------- --------- ----------
<S> <C> <C> <C>
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
1998:
First Quarter........................ $ 29.875 $ 27.500 $ .55
Second Quarter....................... 29.063 25.625 .55
Third Quarter........................ 28.000 22.938 .55
Fourth Quarter....................... 26.000 22.625 .575
</TABLE>
The Company's current annual distribution rate with respect to the Common
Stock is $2.30 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, the Series B Preferred Stock issued in
November 1997, the Series C Preferred Stock issued in June 1998, and the Series
E Preferred Stock issued in December 1998 at annual rates of $2.375, $2.21875,
$2.34375 and $2.375 per share, respectively. No distribution may be made on the
Common Stock unless all accrued distributions have been made with respect each
series of 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, Series B, Series C, and Series E
Preferred Stock.
In 1997, the Company implemented the Dividend Reinvestment and Stock
Purchase Plan (the "DRSPP") under which holders of Common Stock (and Series A,
Series B, Series C and Series E 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.
In 1999, the Company implemented the Direct Stock Purchase and Distribution
Reinvestment Plan (the "DSPDRP") which is has terms substantially similar to
the above DRSPP, except for certain additional benefits offered relating to
purchase of the Company's common shares. This plan is intended to replace the
DRSPP, and its participants will be automatically enrolled in the new plan.
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.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on an historical
basis for the Company. 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.
MID-AMERICA APARTMENT COMMUNITIES, INC.
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996 1995 1994(1)
----------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues....................... $ 215,543 $ 139,116 $ 111,882 $ 94,963 $ 51,207
Expenses:
Property expenses................ 79,917 52,404 42,570 37,954 19,484
General and administrative....... 11,960 6,602 6,154 4,851 3,613
Interest......................... 45,704 28,943 25,766 22,684 10,233
Depreciation and amortization.... 46,021 27,737 21,443 16,574 8,803
Amortization of deferred
financing costs................. 2,348 888 661 593 296
Gain on disposition of properties.... 408 -- 2,185 -- --
----------- ----------- --------- --------- --------
Income before minority interest in
operating partnership income and
extraordinary item................. 30,001 22,542 17,473 12,307 8,778
Extraordinary item................... (990) (8,622) -- -- 485
----------- ----------- --------- --------- --------
Net income........................... 26,757 11,227 14,260 9,810 6,944
Preferred dividends.................. 11,430 5,252 990 -- --
----------- ----------- --------- --------- --------
Net income available for common
shareholders....................... $ 15,327 $ 5,975 $ 13,270 $ 9,810 $ 6,944
=========== =========== ========= ========= ========
PER SHARE DATA:
Basic and diluted:
Before extraordinary item........ $ 0.87 $ 1.05 $ 1.21 $ 1.00 $ 0.94
Extraordinary item............... (0.05) (0.62) -- -- 0.07
----------- ----------- --------- --------- --------
Net income available per common
share........................... $ 0.82 $ 0.43 $ 1.21 $ 1.00 $ 1.01
=========== =========== ========= ========= ========
Dividends declared................... $ 2.225 $ 2.155 $ 2.065 $ 2.01 $ 1.71
BALANCE SHEET DATA:
Real estate owned, at cost........... $ 1,434,733 $ 1,211,693 $ 641,893 $ 578,788 $434,460
Real estate owned, net............... $ 1,315,368 $ 1,134,704 $ 592,335 $ 549,284 $421,074
Total assets......................... $ 1,366,427 $ 1,193,870 $ 611,199 $ 565,267 $439,233
Total debt........................... $ 753,427 $ 632,213 $ 315,239 $ 307,939 $232,766
Minority interest.................... $ 61,441 $ 62,865 $ 39,238 $ 41,049 $ 43,709
Shareholders' equity................. $ 517,299 $ 461,300 $ 241,384 $ 202,278 $152,385
Weighted average common shares
(000's):
Basic............................ 18,725 13,892 10,938 9,772 6,484
Diluted.......................... 18,770 13,955 10,983 9,814 6,526
OTHER DATA (AT END OF PERIOD):
Market capitalization (shares and
units)............................. $ 670,123 $ 710,175 $ 436,739 $ 331,238 $295,300
Ratio of total debt to total
capitalization(2).................. 52.9% 47.1% 41.9% 48.2% 44.1%
Number of properties owned........... 129 116 73 70 54
Number of apartment units owned...... 33,831 30,579 19,280 18,219 14,333
</TABLE>
- ------------
(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) Total capitalization is total debt and market capitalization of preferred
shares, common shares and partnership units.
11
<PAGE>
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, 1998,
1997, and 1996. This discussion should be read in conjunction with all of the
financial statements included in this Annual Report on Form 10-K.
The total number of apartment units owned at December 31, 1998 was 33,831
in 129 communities, compared to the 30,579 units in 116 communities owned at
December 31, 1997 and 19,280 in 73 communities owned at December 31, 1996. The
average monthly rental per apartment unit increased to $582 for December 31,
1998 from $549 for December 31, 1997 and $529 for December 31, 1996. Overall
occupancy at December 31, 1998, 1997 and 1996 was 94.1%, 94.3% and 95.8%,
respectively.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") increased during 1998 by $19,097,000 or 43%
to $63,993,000 verses $44,896,000 for 1997. FFO for 1996 was $35,586,000. The
following is a reconciliation of net income available for common shareholders'
to FFO.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net income available for common
shareholders'...................... $ 15,327 $ 5,975 $ 13,270
Plus depreciation and amortization of
real estate assets................. 45,776 27,542 21,288
Plus extraordinary items, net of
minority interest.................. 990 8,622 --
Plus minority interest in operating
partnership........................ 2,254 2,693 3,213
Less gain on sale of real estate..... 408 -- 2,185
Plus other non-recurring items....... 54 64 --
--------- --------- ---------
FFO............................. $ 63,993 $ 44,896 $ 35,586
========= ========= =========
</TABLE>
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, certain non-recurring items 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. 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.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED
DECEMBER 31, 1997
During 1998 the Company acquired 10 apartment communities containing 2,129
apartment units and completed development of 1,335 total apartment units in 6
new communities and 4 existing communities. Also, the Company sold one community
containing 212 units.
Total revenues for 1998 increased by $76,427,000, due primarily to (i)
$7,735,000 from the 10 communities acquired in 1998, (ii) $49,386,000 from the
30 completed communities acquired through the FDC Merger, (iii) $10,717,000 from
a full years operation of the 12 communities acquired in 1997, (iv) $5,410,000
from new development communities completed in late 1997 and 1998, and (v)
$3,116,000 from communities owned throughout both periods. The remaining net
increase is mainly related to a full year of FSC management and development
activities.
Property operating expenses include costs for property personnel, building
repairs and maintenance, real estate taxes and insurance, utilities, landscaping
and other property related costs. Property operating expenses for 1998 increased
by $27,513,000, due primarily to (i) $3,201,000 from the 10 Communities acquired
in 1998, (ii) $17,480,000 from the 30 completed Communities acquired through the
FDC Merger, (iii) $3,715,000 from a full years operation of the 12 Communities
acquired in 1997, (iv) $2,013,000 from new development communities completed in
1997 and 1998, and (v) $1,348,000 from communities owned throughout both
periods. As a percentage of rental revenues, property operating expenses
decreased from 38.6% in 1997 to 37.9% in 1998. Personnel costs increased as a
percentage of rental revenues from 10.8% in 1997 to 11.4% in 1998, due primarily
to increased staffing to support the additional apartment units acquired in the
FDC Merger and to produce a smooth lease-up of newly developed apartment units.
As new development units are delivered, they require management, leasing, and
maintenance staff to complete lease-up on schedule and to provide customer
service. The ratio of personnel costs to revenues improves as a development
community achieves stabilized occupancy. In 1998 repair and maintenance costs
decreased to 4.8% of rental revenues as compared to 5.0% in 1997 which is
primarily the current benefits of the Company's long standing commitment to
spend adequate capital toward maintaining properties as well as the addition of
the development units to the portfolio which require less repair and
maintenance. Also in 1998, utilities costs decreased to 4.5% of rental revenue
as compared to 4.7% for the same period in 1997 mainly due to continued savings
from the Company's program to submeter units for water usage.
12
<PAGE>
General and administrative expense increased $5,358,000 for 1998 compared
to 1997. This increase is mainly attributable to the increase in the number of
employees due to the FDC Merger and the addition or expansion of certain
functions to improve productivity and the quality of the Company's management.
These additions are a one-time increase related to the acquisition and
integration of FDC and preparation for continued future growth.
Depreciation and amortization expense increased $18,284,000 from 1997 to
1998 due primarily to additional depreciation expense of (i) $1,549,000 from the
10 Communities acquired in 1998, (ii) $10,050,000 from the 30 completed
Communities acquired through the FDC Merger, (iii) $2,583,000 from a full year
operation of the 12 Communities acquired in 1997, (iv) $998,000 from development
communities completed in 1997 and 1998, and (v) $2,055,000 from the communities
owned throughout both periods. Also, amortization of deferred financing costs
was $2,348,000 and $888,000 for 1998 and 1997, respectively. The majority of the
increase is due to additional financing costs related to the restructuring of
the Credit Line and the Bonds issued by the Company's special purpose
subsidiary. Amortization of costs in excess of fair value of net assets acquired
was $1,474,000 and $309,000, for 1998 and 1997, respectively, which are included
in depreciation and amortization in the accompanying consolidated statement of
operations.
Interest expense increased $16,761,000 during 1998 due primarily to
additional funding required for apartment acquisitions, development projects,
and the FDC Merger. The Company reduced its average borrowing cost to 7.11% at
December 31, 1998 as compared to 7.41% on December 31, 1997. The average
maturity on the Company's debt was 10.9 years and 10.2 years at December 31,
1998 and 1997, respectively.
For the year ended December 31, 1998 the Company recorded a gain on
disposition of assets of $408,000 related to the sale of Redford Park
Apartments, which also resulted in a loss on early extinguishment of the related
debt. The Company recorded a total extraordinary loss of $990,000, net of
minority interest, for 1998 related to the repayment of the mortgage for Redford
Park Apartments and certain other debt.
As a result of the foregoing, income before minority interest and
extraordinary item for the year ended December 31, 1998 increased $7,459,000
over the same period a year earlier.
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, the Company acquired 30 communities containing
8,641 apartment units including 950 apartment units under development. The total
number of apartment units owned at December 31, 1997 was 30,579 in 116 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 $27,234,000, due primarily to (i)
$12,743,000 from the 12 Communities acquired in 1997, (ii) $5,342,000 from the
30 completed Communities acquired through the FDC Merger, (iii) $6,759,000 from
a full years operation of the six Communities acquired in 1996, (iv) $2,113,000
from the Communities owned throughout both periods, and (v) $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 $9,834,000, due primarily
to (i) $4,929,000 from the 12 Communities acquired in 1997, (ii) $1,938,000 from
the 30 completed Communities acquired through the FDC Merger, (iii) $2,298,000
from a full years operation of the six Communities acquired in 1996, (iv)
$583,000 from the Communities owned throughout both periods, and (v) $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 5.6% of rental
revenue to 4.7% of rental 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 1997 compared to
1996 and decreased from 5.6% of rental revenue to 4.8% of rental revenue for the
year ended December 31, 1997 compared to the same period a year earlier.
Depreciation and amortization expense increased primarily due to (i)
$2,503,000 from the 12 Communities acquired in 1997, (ii) $1,247,000 from the 30
completed Communities acquired through the FDC Merger, (iii) $1,493,000 from a
full years operation of the six Communities acquired in 1996, (iv) $1,224,000
from additional capital expenditures on Communities owned throughout both
periods, and (v) $54,000 from The Woods at Post House and Lincoln on the Green
phase II. Amortization of deferred financing costs and cost in excess of fair
value of net assets acquired for 1997 were $888,000 and $309,000, respectively.
Interest expense increased $3,177,000 during 1997 due primarily to
apartment acquisitions and the FDC Merger. The Company reduced its average
borrowing cost to 7.41% at December 31, 1997 as compared to 7.92% at 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
$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 and extraordinary item for the year ended
December 31, 1997 increased $5,069,000 over the same period a year earlier.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from $44,918,000 for
the year ended December 31, 1997 to $80,405,000 for the year ended December 31,
1998. The increase in net cash flow was primarily due to increased earnings and
cash flow from the apartments units acquired and developed during 1998 and the
latter portion of 1997.
Net cash used in investing activities increased from $138,263,000 for the
year ended December 31, 1997 to $198,607,000 for the year ended December 31,
1998. The increase was primarily related to an additional $91,870,000 spending
on development and construction of apartment communities, as compared to the
same period last year. The Company currently has under development, construction
or pre-development 3,489 new apartment units in 10 new communities and 3
additions to existing communities. Of this total, 502 units have been completed
and are in initial lease-up, and an additional 1,570 are planned to be completed
during 1999.
The following table summarizes the Company's communities in various stages
of lease-up, construction, development, and pre-development as of December 31,
1998 (Dollars in 000's):
<TABLE>
<CAPTION>
ANTICIPATED ANTICIPATED
TOTAL BUDGETED COSTS TO FINISH INITIAL
LOCATION UNITS COST DATE DATE OCCUPANCY
--------------------- ------ --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
COMPLETED COMMUNITIES
IN LEASE-UP:
Paddock Club III..................... Jacksonville, FL 120 $ 6,347 $ 6,347 3Q 1997 3Q 1997
Lincoln on the Green II.............. Memphis, TN 234 13,890 13,890 4Q 1997 3Q 1997
Paddock Club Mandarin................ Mandarin, FL 288 16,448 16,448 2Q 1998 4Q 1997
Enclave at Whisperwood............... Columbus, GA 154 8,681 8,647 2Q 1998 1Q 1998
Paddock Club Huntsville.............. Huntsville, AL 192 10,938 10,938 1Q 1998 1Q 1998
Terraces at Fieldstone............... Conyers, GA 316 17,458 16,878 2Q 1998 2Q 1998
------ --------- ---------
1,304 $ 73,762 $ 73,148
====== ========= =========
DEVELOPMENT COMMUNITIES
IN LEASE-UP:
Paddock Club Gainesville............. Gainesville, FL 264 17,713 15,838 1Q 1999 3Q 1998
Reserve at Dexter Lake............... Memphis, TN 252 17,029 14,818 2Q 1999 4Q 1998
Terraces at Towne Lake II............ Cherokee County, GA 238 14,165 10,987 1Q 1999 4Q 1998
Paddock Club Montgomery.............. Montgomery, AL 208 13,814 9,693 2Q 1999 1Q 1999
Paddock Club Panama City............. Panama City, FL 254 15,486 11,667 2Q 1999 4Q 1998
Paddock Club Brandon II.............. Brandon, FL 132 8,313 6,541 1Q 1999 1Q 1999
------ --------- ---------
1,348 86,520 69,544
------ --------- ---------
UNDER CONSTRUCTION
Paddock Club Murfreesboro............ Murfreesboro, TN 240 15,281 4,220 4Q 1998 2Q 1999
Grand Reserve Lexington.............. Lexington, KY 370 29,963 3,432 3Q 2000 3Q 1999
------ --------- ---------
610 45,244 7,652
------ --------- ---------
IN PRE-DEVELOPMENT
St. Augustine at the Lake II......... Jacksonville, FL 124 7,247 461 4Q 1999 3Q 1999
Grande View.......................... Nashville, TN 433 33,328 3,364 4Q 2000 1Q 2000
Sandstone Creek...................... Overland Park, KS 354 27,514 -- 4Q 2000 1Q 2000
Kenwood Club......................... Katy, TX 320 18,210 -- 3Q 2000 1Q 2000
Paddock Club Melbourne............... Melbourne, FL 300 18,536 -- 3Q 2000 4Q 1999
------ --------- ---------
1,531 104,835 3,825
------ --------- ---------
Total Development Communities........ 3,489 $236,599 $ 81,021
====== ========= =========
<CAPTION>
ANTICIPATED
STABILIZA-
TION
------------
<S> <C>
COMPLETED COMMUNITIES
IN LEASE-UP:
Paddock Club III..................... 2Q 1998
Lincoln on the Green II.............. 3Q 1998
Paddock Club Mandarin................ 1Q 1999
Enclave at Whisperwood............... 3Q 1998
Paddock Club Huntsville.............. 4Q 1998
Terraces at Fieldstone............... 4Q 1999
DEVELOPMENT COMMUNITIES
IN LEASE-UP:
Paddock Club Gainesville............. 4Q 1999
Reserve at Dexter Lake............... 4Q 1999
Terraces at Towne Lake II............ 4Q 1999
Paddock Club Montgomery.............. 4Q 1999
Paddock Club Panama City............. 4Q 1999
Paddock Club Brandon II.............. 4Q 1999
UNDER CONSTRUCTION
Paddock Club Murfreesboro............ 3Q 2000
Grand Reserve Lexington.............. 2Q 2001
IN PRE-DEVELOPMENT
St. Augustine at the Lake II......... 2Q 2000
Grande View.......................... 3Q 2001
Sandstone Creek...................... 2Q 2001
Kenwood Club......................... 2Q 2001
Paddock Club Melbourne............... 4Q 2000
Total Development Communities........
</TABLE>
14
<PAGE>
Capital improvements to existing properties totaled $32,336,000 for the
year ended December 31, 1998, compared to $20,205,000 for 1997. The increase is
mainly due to the increased number of units from acquisitions and development.
Actual capital expenditures for property improvements during 1998 are summarized
below (in 000's):
<TABLE>
<CAPTION>
Recurring capital at stabilized
properties......................... 8,585
<S> <C>
Revenue enhancing projects at
stabilized properties.............. 10,098
Capital improvements to
pre-stabilized properties.......... 13,653
---------
32,336
=========
</TABLE>
Net cash provided by financing activities increased from $104,097,000
during the year ended December 31, 1997 to $110,634,000 1998. During 1998,
$71,789,000 additional borrowing was provided under the Credit Line which was
primarily used to fund acquisition and development of apartment communities. On
March 6, 1998, the Company issued $142 million aggregate principal amount of
6.376% Bonds due 2003 (the Bonds). The net proceeds from the sale of the Bonds
were utilized to repay the related bridge notes payable and utilized to fund the
costs of the offering. Additionally, the Company refinanced $29 million of
various rate notes payable with a new $36 million seven year amortizing note
payable at 7.0%, and acquired a new short-term note payable for $25 million at
6.4% which was used to pay down the Credit Line. The Company also refunded
$4,760,000 of bonds secured by Sterling Ridge Apartments and $14,040,000 of
bonds secured by Hunters Ridge of Deerwood apartments.
During 1998, the Company received total net proceeds from equity
transactions of $82.4 million, comprised mainly of $48.0 million from the
issuance of its Series C Preferred shares, $24.7 million from a private
placement of its Series E Preferred shares and $9.6 million from the issuance of
common shares and units. This was a decrease from the total proceeds of $212.4
million received in 1997, comprised of $165.7 million from issuance of common
shares and units and $46.6 million from issuance of the Series B Preferred
shares. Additionally, total distributions for dividends on common shares, units
and preferred shares increased to $58.6 million in 1998 from $39.8 million in
1997 primarily related to the additional common shares issued in November 1997
and the additional dividends related to the Series B and Series C Preferred
shares that were outstanding during 1998.
At December 31, 1998, the Company had $117.0 million outstanding on the
Credit Line. At December 31, 1998, the Company had $174.0 million (including the
Credit Line) of floating rate debt at an average interest rate of 6.6%; all
other debt was fixed rate term debt at an average interest rate of 7.3%. In
March 1998, the Company increased its credit limit under the Credit Line from
$110 million to $200 million. 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. 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 $191.9 million as of March 31, 1999.
The weighted average interest rate and weighted average maturity at
December 31, 1998 for the $753.4 million of notes payable were 7.11% and 10.9
years, respectively.
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.
The Company expects to meet its long term liquidity requirements, such as
scheduled mortgage debt maturities, property developments and 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, sale of assets, potential joint
venture transactions 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 ISSUE
In older computer programs, to conserve storage space, only two digits were
used to identify the year. This set up has created a date sequence problem. The
computer may not know that 00 comes after 99, moreover it may not know if
15
<PAGE>
00 is 1900 or 2000 ("Y2K"). The business risk of this problem is that
calculations or processes that are date dependent may not yield the correct
answer or work at all.
Software vendors have certified all of the mission critical applications;
these vendors provide the software used for financial, network, property
management and telephone systems used by the Company. The Company does not own
any in-house development programs that require replacing or re-writing of code.
The Company has performed a thorough assessment of its personal computers
and desktop software. All mission critical desktop hardware and software are
believed to be compliant. Remediation of non-compliant hardware and software
(none of which is mission-critical) will be completed by June 1999.
The Company estimates that the total Y2K project cost is nominal, as
systems have been upgraded and become Y2K compliant as part of its normal course
of business. The Company believes that its Y2K initiatives are adequate to
address reasonably likely Y2K issues.
Management believes that hardware and software upgrades made over the last
few years will reduce the possibility of interruptions to the operation.
However, the Company is dependent on the utilities infrastructure within the
United States. In the Company's view, the worst case scenario would be that the
Company might experience disruption in its operations if any of the third-party
suppliers reported a system failure.
The Y2K contingency plan is the final phase of the project. The Company
maintains contingency plans in the normal course of business designed to be
deployed in the event of various potential business interruptions. Although the
Company believes that its contingency plans and Y2K project will reduce the risk
of significant operations disruption, due to general uncertainty over Y2K
readiness of the Company's third-party suppliers, the Company is unable to
determine at this time whether the consequences of the Y2K system failures will
have a material impact.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity," was issued effective for years beginning after June 15,
1999. This new statement is not expected to have a material impact on the
Company's consolidated financial statements. The Company plans to adopt this
accounting standard in 2000.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K, including documents incorporated herein by
reference, contains 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
acquisition and development of apartment communities, future expenditures for
development projects, capital expenditures, and rehabilitation costs on the
apartment communities. Future events and actual results, financial and
otherwise, may differ materially from the results discussed in the
forward-looking statements. In particular, among the factors that could cause
actual results to differ materially are continued qualification as a real estate
investment trust, general business and economic conditions, competition,
interest rates, accessibility of debt and equity capital markets and other risks
inherent in the real estate business including resident defaults, potential
liability relating to environmental matters and illiquidity of real estate
investments. 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is to changes in interest rates
obtainable on its secured and unsecured borrowings. At December 31, 1998, 53% of
the Company's total capitalization consisted of borrowings. The Company's
interest rate risk objective is to limit the impact of interest rate
fluctuations on earnings and cash flows and to lower its overall borrowing
costs. To achieve this objective, the Company manages its exposure to
fluctuations in market interest rates for its borrowings through the use of
fixed rate debt instruments to the extent that reasonably favorable rates are
obtainable with such arrangements and may enter into derivative financial
instruments such as interest rate swaps, caps and treasury locks to mitigate its
interest rate risk on a related financial instrument or to effectively lock the
interest rate on a portion of its variable debt. The Company does not enter into
derivative or interest rate transactions for speculative purposes. Approximately
77% of the Company's outstanding debt was subject to fixed rates with a weighted
average of 7.3% at December 31, 1998. An additional 3% of the Company's
outstanding debt at December 31, 1998 was effectively locked at an interest rate
of 5.82% through an interest rate swap agreement for a notional amount of $25
million. The Company regularly reviews interest rate exposure on its outstanding
borrowings in an effort to minimize the risk of interest rate fluctuations. The
Company does not have any other material market-sensitive financial instruments.
16
<PAGE>
The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For debt
obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates. Weighted average variable
rates are based on rates in effect at the reporting date (Dollars in 000's).
<TABLE>
<CAPTION>
TOTAL FAIR
1999 2000 2001 2002 2003 THEREAFTER VALUE
--------- ---------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long-term Debt Fixed Rate............ $ 42,778 $ 5,165 $ 48,933 $ 17,083 $ 159,586 $ 305,845 $ 582,400
Average interest rate................ 7.28% 7.11% 6.8% 6.94% 6.90% 7.10%
Variable Rate........................ $ 25,000 $ 117,013 -- -- -- $ 32,024 $ 174,037
Average interest rate................ 6.62% 6.61% 5.32% 5.32% 5.32% --
</TABLE>
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-25 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
on any matter of accounting principles or practices or financial statement
disclosure.
17
<PAGE>
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 $862,000
cash, 22,246 UPREIT 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 UPREIT
units in connection 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:
<TABLE>
<S> <C> <C>
1. Independent Auditors' Report......... F-1
Consolidated Balance Sheets as of
December 31, 1998 and 1997......... F-2
Consolidated Statements of Operations
for the years ended December 31,
1998, 1997 and 1996................ F-3
Consolidated Statements of
Shareholders' Equity for the years
ended December 31, 1998, 1997 and
1996............................... F-5
Consolidated Statements of Cash Flows
for the years ended December 31,
1998, 1997 and 1996................ F-6
Notes to Consolidated Financial
Statements for the years ended
December 31, 1998, 1997 and 1996... F-7
2. Financial Statement Schedule required
to be filed by item 8 and Paragraph
(d) of this item 14:
Schedule III -- Real Estate
Investments and Accumulated
Depreciation as of
December 31, 1998.................. F-24
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.
3.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS EXHIBIT DESCRIPTION
- -------------------------------------------------------------
<C> <S>
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** 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
3.4+ -- 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
3.5*** -- 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
3.6+ -- 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
3.7+ -- Bylaws of Mid-America Apartment
Communities, Inc.
3.8++ -- Mid-America Apartment Communities,
Inc. Articles of Amendment to the
Amended and Restated Charter dated
June 25, 1998, as filed with the
Tennessee Secretary of State in June
1998
3.9 -- Mid-America Apartment Communities,
Inc. Articles of Amendment to the
Amended and Restated Charter in
December 1998, as filed with the
Tennessee Secretary of State in
December 1998
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+++ -- Form of 9.375% Series C Cumulative
Preferred Stock Certificate
4.5 -- Form of 9.5% Series E Cumulative
Preferred Stock Certificate
4.6 -- Shareholders' Rights Plan dated March
1, 1999
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 -- Revolving Credit Agreement between
the Registrant and AmSouth Bank of
Alabama
10.5+ -- Note Purchase Agreement of the
Operating Partnership and the
Registrant and Prudential Insurance
Company of America
10.6+ -- Amendment 1 to 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 LLP
27.1 -- Financial Data Schedule
</TABLE>
22
<PAGE>
- ------------
* 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.
+ Filed as an exhibit to the 1997 Annual Report of the Registrant on Form
10-K for the year ended December 31, 1997
++ Filed as Exhibit 4.3 to the Registrant's Registration Statement on Form
8-A filed with the Commission on June 25, 1998
+++ Filed as Exhibit 4.2 to the Registrant's Registration Statement on Form
8-A filed with the Commission on June 25, 1998
(b) Reports on Form 8-K
The following report was filed on Form 8-K by the registrant during the
fourth quarter of 1998:
<TABLE>
<CAPTION>
DATE OF
FORM EVENTS REPORTED REPORT
- ------------------------------------------ --------
<C> <S> <C>
8-K acquisition Announcement of an apartment 10/19/98
8-K acquisition Announcement of an apartment 11/25/98
8-K Plan Announcement of Shareholder Rights 12/21/98
</TABLE>
(c)Exhibits:
See Item 14(a)(3) above.
(d)Financial Statement Schedules:
See Item 14(a)(2) above.
23
<PAGE>
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.
<TABLE>
<S> <C>
MID-AMERICA APARTMENT
COMMUNITIES, INC.
Date: March 29, 1999 /s/GEORGE E. CATES
GEORGE E. CATES
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
</TABLE>
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 29, 1999 /s/GEORGE E. CATES
GEORGE E. CATES
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Date: March 29, 1999 /s/SIMON R.C. WADSWORTH
SIMON R.C. WADSWORTH
EXECUTIVE VICE PRESIDENT
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: March 29, 1999 /s/H. ERIC BOLTON
H. ERIC BOLTON
PRESIDENT AND CHIEF OPERATING OFFICER
Date:
JOHN F. FLOURNOY
VICE-CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE
OFFICER, FLOURNOY DEVELOPMENT COMPANY
Date: March 29, 1999 /s/ROBERT F. FOGELMAN
ROBERT F. FOGELMAN
DIRECTOR
Date: March 29, 1999 /s/JOHN S. GRINALDS
JOHN S. GRINALDS
DIRECTOR
Date: March 29, 1999 /s/O. MASON HAWKINS
O. MASON HAWKINS
DIRECTOR
Date: March 29, 1999 /s/RALPH HORN
RALPH HORN
DIRECTOR
Date: March 29, 1999 /s/MICHAEL S. STARNES
MICHAEL S. STARNES
DIRECTOR
24
<PAGE>
INDEPENDENT AUDITOR'S 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, 1998 and 1997 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, 1998. In connection with our audits of the
consolidated financial statements, we have also audited the accompanying
financial statement schedule III. These financial statements and the financial
statement schedule are the responsibility of the management of the Company. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 consolidated financial statements referred to above
present fairly, in all material respects the financial position of the Company
as of December 31, 1998 and 1997, and the results of the operations and cash
flows for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule when considered in relationship to the
basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG LLP
Memphis, Tennessee
February 26, 1999
F-1
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS:
REAL ESTATE ASSETS:
Land............................ $ 124,912 $ 109,800
Buildings and improvements...... 1,184,611 1,027,853
Furniture, fixtures and
equipment...................... 26,779 21,886
Construction in progress........ 75,776 33,717
------------ ------------
1,412,078 1,193,256
Less accumulated depreciation... (117,773) (76,129)
------------ ------------
1,294,305 1,117,127
Land held for future
development.................... 11,781 8,849
Commercial properties, net...... 9,282 8,728
------------ ------------
REAL ESTATE ASSETS, NET.... 1,315,368 1,134,704
Cash and cash equivalents............ 7,237 14,805
Restricted cash...................... 9,282 13,397
Deferred financing costs, net........ 10,359 5,700
Other assets......................... 24,181 25,264
------------ ------------
TOTAL ASSETS............... $ 1,366,427 $ 1,193,870
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Notes payable................... $ 753,427 $ 632,213
Accounts payable................ 10,384 10,098
Accrued expenses and other
liabilities.................... 18,959 22,885
Security deposits............... 4,917 4,509
------------ ------------
TOTAL LIABILITIES.......... 787,687 669,705
MINORITY INTEREST.................... 61,441 62,865
Shareholders' equity:
Preferred stock, $.01 par value,
20,000,000 shares authorized,
$25 per share liquidation
preference:
2,000,000 shares at 9.5%
Series A Cumulative.... 20 20
1,938,830 shares at 8.875%
Series B Cumulative.... 19 19
2,000,000 shares at 9.375%
Series C Cumulative.... 20 --
1,000,000 shares at 9.5%
Series E Cumulative.... 10 --
Common stock, $.01 par value
(authorized 50,000,000 shares;
issued and outstanding
18,879,691 and 18,476,046
shares December 31, 1998 and
1997, respectively)............ 189 185
Additional paid-in capital........... 583,154 500,492
Other................................ (2,237) (1,045)
Accumulated deficit............. (63,876) (38,371)
------------ ------------
TOTAL SHAREHOLDERS'
EQUITY................. 517,299 461,300
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY... $ 1,366,427 $ 1,193,870
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental.......................... $ 210,591 $ 135,673 $ 110,090
Other........................... 3,111 3,279 1,792
Management and development
income, net................... 1,841 164 --
---------- ---------- ----------
Total revenues.................. 215,543 139,116 111,882
Expenses:
Personnel....................... 24,053 14,623 11,702
Building repairs and
maintenance................... 10,030 6,811 5,305
Real estate taxes and
insurance..................... 22,459 14,465 11,642
Utilities....................... 9,376 6,341 6,148
Landscaping..................... 5,009 3,684 2,910
Other operating................. 8,990 6,480 4,863
Depreciation and amortization... 46,021 27,737 21,443
General and administrative...... 11,960 6,602 6,154
Interest........................ 45,704 28,943 25,766
Amortization of deferred
financing costs............... 2,348 888 661
---------- ---------- ----------
Total expenses.................. 185,950 116,574 96,594
---------- ---------- ----------
Income before gain on disposition of
properties, minority interest in
operating partnership income and
extraordinary item................. 29,593 22,542 15,288
Gain on disposition of properties.... 408 -- 2,185
---------- ---------- ----------
Income before minority interest in
operating partnership income and
extraordinary item................. 30,001 22,542 17,473
Minority interest in operating
partnership income................. 2,254 2,693 3,213
---------- ---------- ----------
Income before extraordinary item..... 27,747 19,849 14,260
Extraordinary item -- loss on debt
extinguishment, net of minority
interest........................... (990) (8,622) --
---------- ---------- ----------
Net income........................... 26,757 11,227 14,260
Dividends on preferred shares........ 11,430 5,252 990
Net income available for common
shareholders....................... $ 15,327 $ 5,975 $ 13,270
========== ========== ==========
Net income available per common
share:
Basic (in thousands):
Average common shares
outstanding................... 18,725 13,892 10,938
========== ========== ==========
BASIC EARNINGS PER SHARE:
Net income available per
common share before
extraordinary item......... $ 0.87 $ 1.05 $ 1.21
Extraordinary item, net....... (0.05) (0.62) --
---------- ---------- ----------
Net income available per
common share............... $ 0.82 $ 0.43 $ 1.21
========== ========== ==========
Diluted (in thousands):
Average common shares
outstanding................... 18,725 13,892 10,938
Effect of dilutive stock
options....................... 45 63 45
---------- ---------- ----------
Average dilutive common shares
outstanding................... 18,770 13,955 10,983
========== ========== ==========
DILUTED EARNINGS PER SHARE:
Net income available per
common share before
extraordinary item......... $ 0.87 $ 1.05 $ 1.21
Extraordinary item, net....... (0.05) (0.62) --
---------- ---------- ----------
Net income available per
common share............... $ 0.82 $ 0.43 $ 1.21
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DISTRIBUTIONS
------------------- ------------------- PAID-IN IN EXCESS OF
SHARES AMOUNT SHARES AMOUNT CAPITAL OTHER NET INCOME
--------- ------- --------- ------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1995............ -- $-- 10,937 $ 109 $ 208,670 $ (381) $ (6,120)
Issuance of common shares............ -- -- 11 -- 277 -- --
Issuance of Series A preferred
shares............................. 2,000 20 -- -- 47,748 -- --
Exercise of stock options............ -- -- -- -- (2) -- --
Shares issued in exchange for
units.............................. -- -- 1 -- (4) -- --
Amortization of unearned
compensation....................... -- -- -- -- -- 121 --
Dividends on common stock
($2.04 per share).................. -- -- -- -- -- -- (22,324)
Dividends on preferred stock......... -- -- -- -- -- -- (990)
Net income........................... -- -- -- -- -- -- 14,260
--------- ------- --------- ------- ----------- --------- ------------
BALANCE DECEMBER 31, 1996............ 2,000 20 10,949 109 256,689 (260) (15,174)
Issuance of common shares............ -- -- 5,911 59 163,531 -- --
Issuance of Series B preferred
shares............................. 1,939 19 -- -- 46,616 -- --
Exercise of stock options............ -- -- 9 -- (31) -- --
Notes receivable issued for shares
and units (Note 8)................. -- -- -- -- -- (906) --
Shares issued in exchange for
units.............................. -- -- 60 1 973 -- --
Shares issued in FDC Merger.......... -- -- 1,550 16 44,374 -- --
Adjustment for minority interest of
Unitholders resulting from:
Common Stock Offerings........... -- -- -- -- (10,008) -- --
FDC Merger....................... -- -- -- -- (834) -- --
Other............................ -- -- -- -- (818) -- --
Amortization of unearned
compensation....................... -- -- -- -- -- 121 --
Dividends on common stock
($2.14 per share).................. -- -- -- -- -- -- (29,172)
Dividends on preferred stock......... -- -- -- -- -- -- (5,252)
Net income........................... -- -- -- -- -- -- 11,227
--------- ------- --------- ------- ----------- --------- ------------
BALANCE DECEMBER 31, 1997............ 3,939 39 18,479 185 500,492 (1,045) (38,371)
Issuance of common shares............ -- -- 308 4 7,953 -- --
Issuance of Series C preferred
shares............................. 2,000 20 -- -- 48,060 -- --
Issuance of Series E preferred
shares............................. 1,000 10 -- -- 24,735 -- --
Exercise of stock options............ -- -- 5 -- 129 -- --
Notes receivable issued for shares
and units (Note 8)................. -- -- -- -- (1,458) --
Payments received on notes receivable
(Note 8)........................... -- -- -- -- 145 --
Shares issued in exchange for
units.............................. -- -- 86 1,785 -- --
Amortization of unearned
compensation....................... -- -- -- -- -- 121 --
Dividends on common stock
($2.20 per share).................. -- -- -- -- -- -- (40,832)
Dividends on preferred stock......... -- -- -- -- -- -- (11,430)
Net income........................... -- -- -- -- -- -- 26,757
--------- ------- --------- ------- ----------- --------- ------------
BALANCE DECEMBER 31, 1998............ 6,939 $69 18,878 $ 189 $ 583,154 $ (2,237) $(63,876)
========= ======= ========= ======= =========== ========= ============
<CAPTION>
TOTAL
---------
<S> <C>
BALANCE DECEMBER 31, 1995............ $ 202,278
Issuance of common shares............ 277
Issuance of Series A preferred
shares............................. 47,768
Exercise of stock options............ (2)
Shares issued in exchange for
units.............................. (4)
Amortization of unearned
compensation....................... 121
Dividends on common stock
($2.04 per share).................. (22,324)
Dividends on preferred stock......... (990)
Net income........................... 14,260
---------
BALANCE DECEMBER 31, 1996............ 241,384
Issuance of common shares............ 163,590
Issuance of Series B preferred
shares............................. 46,635
Exercise of stock options............ (31)
Notes receivable issued for shares
and units (Note 8)................. (906)
Shares issued in exchange for
units.............................. 974
Shares issued in FDC Merger.......... 44,390
Adjustment for minority interest of
Unitholders resulting from:
Common Stock Offerings........... (10,008)
FDC Merger....................... (834)
Other............................ (818)
Amortization of unearned
compensation....................... 121
Dividends on common stock
($2.14 per share).................. (29,172)
Dividends on preferred stock......... (5,252)
Net income........................... 11,227
---------
BALANCE DECEMBER 31, 1997............ 461,300
Issuance of common shares............ 7,957
Issuance of Series C preferred
shares............................. 48,080
Issuance of Series E preferred
shares............................. 24,745
Exercise of stock options............ 129
Notes receivable issued for shares
and units (Note 8)................. (1,458)
Payments received on notes receivable
(Note 8)........................... 145
Shares issued in exchange for
units.............................. 1,785
Amortization of unearned
compensation....................... 121
Dividends on common stock
($2.20 per share).................. (40,832)
Dividends on preferred stock......... (11,430)
Net income........................... 26,757
---------
BALANCE DECEMBER 31, 1998............ $ 517,299
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 26,757 $ 11,227 $ 14,260
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization... 48,369 28,746 22,243
Amortization of unearned stock
compensation.................. 121 121 --
Minority interest in operating
partnership income............ 2,254 2,693 3,213
Extraordinary item.............. 990 8,622 --
Gain on disposition of
properties.................... (408) -- (2,185)
Changes in assets and
liabilities:
Restricted cash............. 4,115 (1,214) (1,420)
Other assets................ 1,044 (1,341) (95)
Accounts payable............ 786 140 6
Accrued expenses and other
liabilities............... (4,031) (4,550) 2,036
Security deposits........... 408 474 (40)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.................... 80,405 44,918 38,018
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate
assets........................ (63,732) (76,287) (66,258)
Proceeds from disposition of
real estate assets............ 5,424 -- 17,096
Improvements to properties...... (32,336) (20,205) (18,437)
Construction of units in
progress and future
development................... (107,963) (16,093) (2,837)
Net cash paid in business
combination................... -- (25,678) --
--------- --------- ---------
NET CASH USED IN INVESTING
ACTIVITIES.................... (198,607) (138,263) (70,436)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in credit line....... 71,789 14,820 12,358
Proceeds from notes payable..... 232,799 187,500 17,049
Principal payments on notes
payable....................... (210,571) (267,003) (14,427)
Payment of deferred financing
costs......................... (7,097) (3,813) (1,256)
Proceeds from issuances of
common shares and units....... 9,586 165,737 271
Proceeds from issuance of
preferred shares.............. 72,825 46,635 47,768
Redemption of unitholder
interests..................... (150) (8) (36)
Distributions to unitholders.... (6,285) (5,347) (4,988)
Dividends paid on common
shares........................ (40,832) (29,172) (22,324)
Dividends paid on preferred
shares........................ (11,430) (5,252) (990)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES.................... 110,634 104,097 33,425
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS.......... (7,568) 10,752 1,007
--------- --------- ---------
Cash and cash equivalents, beginning of
period................................ 14,805 4,053 3,046
--------- --------- ---------
Cash and cash equivalents, end of
period................................ $ 7,237 $ 14,805 $ 4,053
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid....................... $ 45,607 $ 27,468 $ 25,262
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Increase in basis of properties
acquired in connection with
business combination.............. -- $ 58,359 --
Assumption (transfer) of debt
related to property
acquisitions...................... $ 26,231 $ 63,690 $ (7,680)
Conversion of units for common
shares............................ $ 1,785 $ 974 --
Issuance of units related to
property acquisitions............. $ 1,911 $ 880 --
Issuance of advances in exchange for
common shares and units........... $ 1,458 $ 906 --
Interest expense capitalized........ $ 4,265 $ 388 $ 91
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND FORMATION OF THE COMPANY
Mid-America Apartment Communities, Inc. ("Mid-America") is a
self-administrated and self-managed real estate investment trust which owns,
develops, constructs, acquires and operates multifamily apartment communities
mainly in the southeast and the midwest United States and Texas. The company
owns and operates 129 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
special purpose entity established in 1997 to issue first mortgage bonds. In
addition to owning and operating apartment communities, the company conducts
third party property management, construction and development activities through
its service corporation, Flournoy Development Corporation.
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Mid-America,
the Operating Partnership, and other subsidiaries (the "Company"). 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 ("Operating Partnership
Units") Mid-America is the sole general partner of the Operating Partnership.
Net income is allocated to the minority interest 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 interest and Mid-America. Such transactions and the
proceeds are treated as capital transactions and result in an allocation between
shareholders' equity and minority interest 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
Operating Partnership Unit that were equivalent to the economic rights in
respect of each share of common stock. The holder of each unit may redeem their
units in exchange for one share of common stock or cash, at the option of the
Company. 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 Operating
Partnership Units that would otherwise be the net income of the Mid-America.
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 1998 was allocated 15.6% to holders of Operating
Partnership Units and 84.4% to Mid-America. Operating Partnership net income for
1997 was allocated 17.9% to holders of Operating Partnership Units and 82.1% to
Mid-America.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
F-6
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company leases multifamily 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 Section 42 Housing Tax Credit multifamily properties and
conventional properties. Property management revenue is recorded on the accrual
method of accounting as 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.
The Company receives development and construction fees related to the
development of third party properties. Development fees and construction income
are recognized as earned as the property is developed and certain operating and
financing performance conditions are met.
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. 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.
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.
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 of
occupancy, rent and expense increases, which involves numerous assumptions and
judgments as to future events over a period of many years. At December 31, 1998
the Company does not hold any assets which management believes meet the
impairment criteria.
Development projects and the related carrying costs, including interest,
property taxes, insurance and allocated development overhead during the
construction period, are capitalized and reported on the accompanying balance
sheet as "construction in progress" during the construction period. Upon
completion and certification for occupancy of individual units within a
development, amounts representing the
F-7
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
completed unit's portion of total estimated development costs for the project
are transferred to land, buildings and furniture, fixtures and equipment as real
estate held for investment.
Capitalization of interest, property taxes, insurance and allocated
development overhead costs ceases upon the transfer, and the assets are
depreciated over their estimated useful lives. Total interest capitalized during
1998, 1997 and 1996 was $4,265,000, $388,000 and $91,000 respectively.
REAL ESTATE HELD FOR FUTURE DEVELOPMENT
Real estate held for future development consists primarily of sites
intended for future multifamily developments and is stated at the lower of cost
or fair value less its cost to sell.
DEFERRED COSTS AND OTHER 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. 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
established standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Although the
Company adopted this standard in 1998, none of the items identified for
presentation under the statement are currently applicable to the Company.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity," was issued effective for years beginning after June 15,
1999. The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. This new accounting
statement is not expected to have a material impact on the Company's
consolidated financial statements.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with 1998
presentation. The reclassification had no effect on net income available for
common shareholders.
2. BUSINESS COMBINATION
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
Class A common units of the Operating Partnership, 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. No Contingent Value Shares were issued during 1998. The
operating results of FDC are included in the accompanying statement of
operations commencing November 25, 1997.
F-8
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assets acquired and liabilities assumed in connection with the merger
were recorded at their respective fair values as follows:
<TABLE>
<S> <C>
Fair value of assets acquired,
primarily real estate assets....... $ 411,397,000
Liabilities assumed.................. 335,326,000
---------------
Net assets acquired............. $ 76,071,000
===============
</TABLE>
The following unaudited summarized pro forma consolidated financial
information has been prepared as if the FDC Merger, various other insignificant
acquisitions 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 period presented. The Company had no significant property
acquisitions during 1998. 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, 1997,
or to project results for any future period. The amounts presented for the year
ended December 31, 1997 are in thousands except for share amounts (unaudited):
<TABLE>
<S> <C>
Total revenues....................... $ 195,748
===============
Net income before extraordinary
item............................... $ 22,104
Extraordinary item, net of minority
interest........................... (7,866)
Dividends on preferred shares........ (9,052)
---------------
Net income available for common
shareholders.................. $ 5,186
===============
Per common share amounts:
Basic and diluted net income before
extraordinary item per common
share.............................. $ 0.71
Basic and diluted net income
available per common share......... $ 0.28
</TABLE>
3. BORROWINGS
During 1998, the Company increased the borrowing limit of its Credit Line
from $110 million to $200 million. The Credit Line is secured by certain of the
properties, bears interest at LIBOR plus 1.35% (7.0% at December 31, 1998),
expires in November 1999, and has various restrictive financial covenants. The
Company had $117.0 million and $45.2 million outstanding under the Credit Line
as of December 31, 1998 and 1997, respectively.
The Company had approximately $612.0 million and $447.0 million at December
31, 1998 and 1997, respectively, outstanding under various mortgage notes and
bonds payable secured by real estate assets and certain restricted cash
accounts.
At December 31, 1997, the Company, through one of its subsidiaries, had
indebtedness of $140 million to Morgan Stanley Capital Inc. pursuant to a
short-term promissory note (the "Bridge Loan"). The Bridge Loan was secured by
26 properties owned by the subsidiary.
On March 26, 1998, the Company, issued $142 million aggregate principal
amount of 6.376% Bonds due 2003 (the "Bonds"). The net proceeds from the sale
of the Bonds were applied to the Bride Loan and utilized to fund costs of the
issuance. The Bonds are secured by a first priority deed of trust, security
agreement and assignment of rents and leases in respect of the 26 mortgaged
properties, with a net book value of $210.9 million at December 31, 1998.
During 1998, the Company refinanced approximately $29.1 million of various
notes payable with a $36.2 million, seven year amortizing note payable at 7.0%
and acquired a new short-term note payable for $25.0 million with a fixed rate
of 6.4% which was used to pay down the Credit Line. The Company also
F-9
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
refunded $4.8 million of bonds secured by its Sterling Ridge Apartments. The new
30 year bonds have a variable interest rate of 5.1% at December 31, 1998, as
compared to the previous fixed rate of 8.75%. Additionally, the Company refunded
$14.0 million of bonds secured by its Hunters Ridge Apartments. The Company
incurred costs of $449,000, net of minority interest, for these combined
transactions which is included in "Extraordinary item -- loss on early
extinguishment of debt" in the accompanying financial statements along with
$455,000 related to extinguishment of debt due to the sale of real estate and
$86,000 related to refinancing of the Bridge Loan mentioned above.
In anticipation of the March 6, 1998 Bond issuance discussed above, the
Company entered four separate forward interest rate lock agreements in 1997 with
notional amounts aggregating $140 million, the effect of which was to lock the
interest rate on $140 million of the Bonds at an average rate of 6.62%. On March
6, 1998 the Company realized a $1.4 million loss on the interest rate contracts.
The realized loss resulting from the change in the market value of these
contracts is being amortized into interest expense over the life of the related
debt issuance.
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.
As of December 31, 1998, the Company estimated that the weighted average
interest rate on the Company's debt was 7.11% with an average maturity of 10.9
years.
The following tables summarize the Company's indebtedness at December 31,
1998.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
------------------------------------------------
ACTUAL AVERAGE
INTEREST RATES INTEREST RATE MATURITY 1998 1997
-------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN
MILLIONS)
Fixed Rate:
Taxable......................... 6.376-10.625% 7.508% 1999-2037 $ 481.5 $ 479.0
Tax-exempt...................... 5.281-7.594% 6.089% 2008-2028 97.9 90.0
--------- ---------
$ 579.4 $ 569.0
Variable Rate:
Taxable......................... 6.375-7.0% 6.890% 1999-2000 $ 142.0 $ 46.6
Tax-exempt...................... 5.10-5.625% 5.31% 2025-2028 32.0 16.6
--------- ---------
$ 174.0 $ 63.2
--------- ---------
$ 753.4 $ 632.2
========= =========
</TABLE>
Scheduled principal repayments on the borrowings at December 31, 1998 are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR AMORTIZATION BALLOON PAYMENTS TOTAL
- ------------------------------------- ------------ ---------------- ----------
<S> <C> <C> <C>
1999................................. $ 4,980 $ 37,898 $ 42,878
2000................................. 5,275 -- 5,275
2001................................. 5,532 43,400 48,932
2002................................. 5,780 11,303 17,083
2003................................. 5,466 154,120 159,586
Thereafter........................... 189,015 290,658 479,673
------------ ---------------- ----------
$216,048 $537,379 $ 753,427
============ ================ ==========
</TABLE>
F-10
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's indebtedness includes various restrictive financial
covenants. The Company believes that it was in compliance with these covenants
as of December 31, 1998.
4. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, restricted cash, accounts payable, accrued
expenses and other liabilities and security deposits are carried at amounts
which reasonably approximate their fair value due to their short term nature.
Fixed rate notes payable at December 31, 1998 and 1997 total $579.4 million
and $569.0 million, respectively, and have an estimated fair value of $582.4
million and $559.9 million (excluding prepayment penalties) based upon interest
rates available for the issuance of debt with similar terms and remaining
maturities as of December 31, 1998 and 1997. These notes were subject to
prepayment penalties in the event of repayment prior to maturity, which were not
considered in determining their estimated fair value. The carrying value of
variable rate notes payable in December 31, 1998 and 1997 total $174.0 million
and $63.2 million, respectively, and reasonably approximates their fair value
because the related variable interest rates reasonably approximate market rates.
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,
1998 and 1997. Approximately $32.0 million in 1998 and $16.6 million in 1997 of
these mortgages are non-taxable and have lower rates than would be expected for
taxable notes with similar terms.
The Company has an interest rate swap agreement for $25 million notional
amount which was outstanding as of December 31, 1998. The effective rate on the
contract reasonably approximated market rates at December 31, 1998.
The fair value estimates presented herein are based on information
available to management as of December 31, 1998 and 1997. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revaluated 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 leases an aircraft to facilitate transportation between its
properties. In 1998, the Company entered a new five year aircraft lease which
generally provides for the Company to pay maintenance, insurance, and certain
other operating costs of the leased property. The agreement has been accounted
for as an operating lease. The Company incurred lease expense relating to
aircraft lease agreements for the years ended December 31, 1998, 1997, and 1996
of $138,000, $187,000, 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
F-11
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 1997 and 1996 and
the estimated taxability for 1998.
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Per common share
Ordinary income................. $1.28 $1.16 $1.50
Capital gains................... -- -- .02
Return of capital............... .92 .98 .52
----- ----- -----
Total...................... $2.20 $2.14 $2.04
===== ===== =====
</TABLE>
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 cumulative annual
distribution of $2.375 per share, payable monthly. The Company issued 2,000,000
Series A Preferred shares 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 cumulative annual
distribution of $2.21875 per share, payable monthly. In November 1997 the
Company issued 1,938,830 Series B Preferred shares and received net proceeds of
$46.6 million.
SERIES C PREFERRED STOCK
Series C Cumulative Redeemable Preferred Stock ("Series C Preferred
Stock") has a $25.00 per share liquidation preference and a preferential
cumulative annual distribution of $2.34375 per share, payable quarterly. In June
1998 the Company issued 2,000,000 Series C Preferred shares and received net
proceeds of $48.1 million.
SERIES D PREFERRED STOCK -- SHAREHOLDERS RIGHTS PLAN
During December 1998, the Board of Directors authorized a Shareholders
Rights Plan (the "Rights Plan"). In implementing the Rights Plan, the Board
declared a distribution of one right for each of the Company's outstanding
common shares which would become exercisable only if a person or group (the
"Acquiring Person") becomes the beneficial owner of 10% or more of the common
shares or announces a tender or exchange offer that would result in ownership of
10% of the Company's common shares. The rights will trade with the Company's
common stock until exercisable. Each holder of a right, other than the Acquiring
Person, is in that event entitled to purchase one common share of the Company
for each right at one half of the then current price.
SERIES E PREFERRED STOCK
Series E Cumulative Preferred Stock ("Series E Preferred Stock") has a
$25.00 per share liquidation preference and a preferential cumulative annual
distribution of $2.375 per share, payable monthly. In December 1998 the Company
issued 1,000,000 Series E Preferred shares in a direct placement with a
F-12
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
private investor. The Company received net proceeds of $24.7 million. After five
years, the securities may be required by the purchaser to be redeemed by the
Company in cash or common stock, at the Company's option, at the then market
price.
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 Operating Partnership Units.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has 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, Series C
Preferred Stock, Series E 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. Common Stock shares totaling 62,175 and 24,785 were acquired by
shareholders pursuant to the DRSPP during 1998 and 1997, respectively. As
described in Note 12, in January 1999 the Company adopted the Direct Stock
Purchase and Dividend Reinvestment Plan (the "DSPDRP") which will replace the
current DRSPP plan.
EARNINGS PER SHARE
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 oustanding
plus the shares resulting from the assumed exercise of all dilutive outstanding
options using the treasury stock method.
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations for the years ended December 31, 1998,
1997 and 1996 is presented on the Consolidated Statement of Operations.
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 fact that the
conditions for issuance of the shares have been satisfied. Also, the Series E
Preferred Shares, which are convertible five years from the date of issuance,
and approximately 750,000 options to acquire common shares are not included in
the calculation because the assumed conversion would be anti-dilutive.
8. EMPLOYEE BENEFIT PLANS
401(K) SAVINGS PLAN
The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is 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 $318,200, $154,300 and
$118,700 in 1998, 1997 and 1996, 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
F-13
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
should be the same as the earning assets in the Company's 401(k) Savings Plan.
The company's match to this plan in 1998, 1997 and 1996 was $19,100, $18,600 and
$23,600, 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 1998, 1997 and 1996, the ESPP purchased 5,242, 2,758 and 3,176 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 1998, 1997 and 1996, the
Company contributed $448,300, $344,000 and $276,000, respectively, to the ESOP
which purchased an additional 17,156, 11,921 and 8,208 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"). During the first quarter of
1997, the Company amended the Plan to increase the shares authorized 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.
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. In 1997
the Company granted options to certain executive 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 and are presented as a reduction of
shareholders' equity in the accompanying consolidated balance sheets. 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 advances. The bonuses are limited to 15% of the aggregate purchase
price of the common shares and units.
During March 1998, the Company issued 50,000 shares of common stock at the
then market price of $28.0625 and 100,000 Operating Partnership Units to certain
executive officers of the Company at the then current market price of $28.125
per share. The Company received approximately $3,583,000 cash and advanced the
employees approximately $632,000 secured by the common stock and Operating
Partnership Units of the Company. The advances bear interest at 5.59% per annum,
have annual principal payments of
F-14
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $126,000 and are presented as a reduction of shareholders' equity
in the accompanying consolidated balance sheets.
During May 1998, the Company issued an additional 100,000 shares of common
stock to certain executive officers of the Company at the then market price of
$27.25. The Company received approximately $2,316,250 cash and advanced the
employees approximately $408,750 secured by the common stock of the Company. The
advances bear interest at 5.68% per annum, and are presented as a reduction of
shareholders' equity in the accompanying consolidated balance sheets.
In addition, the Company has agreed to pay a bonus to the executive
officers mentioned above for as long as they remain employed by the Company in
an amount equal to the debt service on the advances from the Company. The
advances will become due and payable and the bonus agreement will terminate if
the employees voluntarily terminate their employment with the Company.
Additionally throughout 1998 and 1997, the Company issued 69,000 shares of
common stock to certain other officers of the Company at the market price on the
date of issuance which ranges from $25.38 to $27.25 per share. The Company
received approximately $900,000 cash and advanced the employees approximately
$900,000. The advances bear interest at 7.5% and 8.25% per annum, are secured by
the stock of the Company and are presented as a reduction of shareholders'
equity in the accompanying consolidated balance sheets. The Company has agreed
to pay an annual bonus for five years to these officers amounting to 3% of the
original purchase price of the shares. The advances will become due and payable
if the employees terminate their employment with the Company.
At December 31, 1998 and 1997, the total outstanding principal balance on
the employee advances was approximately $2,219,000 and $906,000 respectively,
and is presented as a reduction of the Company's statements of shareholders'
equity.
A summary of changes in Options to acquire shares of Common Stock and
Operating Partnership Units, including grants and exercises pursuant to the
LESOP provision, for the three years ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
---------- ----------------
<S> <C> <C>
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
Granted......................... 663,250 28.78
Exercised....................... (338,581) 28.28
Forfeited....................... (52,850) 27.81
----------
Outstanding at December 31, 1998..... 795,319 26.87
==========
Options exercisable:
December 31, 1996............... 84,050 $20.82
December 31, 1997............... 140,500 21.71
December 31, 1998............... 208,769 23.19
</TABLE>
F-15
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Exercise prices for options outstanding as of December 31, 1998 ranged from
$19.75 to $29.50. The weighted average remaining contractual life of those
options is 8.1 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
of stock options granted in 1998 and 1997, excluding the shares issued under the
LESOP provision, to net income per common share were $0.01 and $0.01,
respectively. There was no impact to earnings per share in 1996.
9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company occasionally
utilizes derivative financial instruments as hedges in anticipation of future
debt transactions to manage well-defined interest rate risk or as protection to
hedge the interest rate risk of the Company's variable rate debt by locking the
effective rate on portions of the outstanding line of credit (the "Credit
Line").
In 1998 the Company entered an Interest Rate Swap Agreement which expires
on August 15, 2003 that effectively locks the interest rate the Company pays on
a portion of its Credit Line. As of December 31, 1998, $25 million notional
amount was outstanding on this agreement with a fixed interest rate paid by the
Company of 5.28%.
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. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", in 1998. At December 31, 1998, the Company
owned and operated 129 multifamily apartment communities in 13 different states
from which it derives all significant sources of earnings and operating cash
flows. The Company's operational structure is organized on a decentralized
basis, with individual property managers having overall responsibility and
authority regarding the operations of their respective properties. Each property
manager individually monitors local and area trends in rental rates, occupancy
percentages, and operating costs. Property managers are given the on-site
responsibility and discretion to react to such trends in the best interest of
the Company. The Company's chief operating decision maker evaluates the
performance of each individual property based on its contribution to net
operating income in order to ensure that the individual property continues to
meet the Company's return criteria and long term investment goals. The Company
defines each of its multifamily communities as an individual operating segment.
It has also determined that all of its communities have similar economic
characteristics and also meet the other criteria which permit the communities to
be aggregated into one reportable segment, which is acquisition, development,
and operation of the multifamily communities owned.
F-16
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The revenues, net operating income, assets and real estate investment
capital expenditures for the aggregated multifamily segment are summarized as
follows for the years ended as of December 31, 1998, 1997, and 1996 (in 000's):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Multifamily rental revenues.......... $ 210,591 $ 135,673 $ 110,090
Other multifamily revenues........... 2,248 1,426 1,595
Reconciling items to consolidated
revenues:
Management and development income,
net................................ 1,841 164 --
Interest income and other revenues... 863 1,853 197
---------- ---------- ----------
Total segment revenues........ $ 215,543 $ 139,116 $ 111,882
========== ========== ==========
Multifamily net operating income..... 132,922 84,695 69,115
Reconciling items to net income:
Management and development
income, net................... 1,841 164 --
Interest income and other
revenues...................... 863 1,853 197
Interest expense................ (45,704) (28,943) (25,766)
General and administrative
expenses...................... (11,960) (6,602) (6,154)
Depreciation and amortization... (46,021) (27,737) (21,443)
Amortization of deferred
financing costs............... (2,348) (888) (661)
Gain/(Loss) from disposition of
properties.................... 408 -- 2,185
Extraordinary items, net........ (990) (8,622) --
Minority interest............... (2,254) (2,693) (3,213)
Dividends on Preferred Shares... (11,430) (5,252) (990)
---------- ---------- ----------
Net income available for
common shareholders........ $ 15,327 $ 5,975 $ 13,270
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Multifamily real estate assets....... $ 1,412,078 $ 1,193,256
Accumulated
depreciation -- multifamily
assets............................. (117,773) (76,129)
------------ ------------
1,294,305 1,117,127
Land held for future development..... 11,781 8,849
Commercial properties, net........... 9,282 8,728
Cash and Restricted Cash............. 16,519 28,202
Other assets......................... 34,540 30,964
------------ ------------
Total Assets.................... $ 1,366,427 $ 1,193,870
============ ============
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Total expenditures for property
additions.......................... $ 32,336 $ 20,205 $ 18,437
========= ========= =========
</TABLE>
F-17
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED)
DECLARATION OF DIVIDEND
The Company declared a 1998 fourth quarter common stock dividend of $.575
per share to be paid January 29, 1999 to holders of record on January 22, 1999.
DEVELOPMENT ACTIVITIES
Since December 31, 1998, the Company has announced plans to develop four
apartment communities, two of which were recently approved by the Board of
Directors, representing a total investment of $99 million over the next two
years. The development communities include Sandstone Creek, in Overland Park,
Kansas (354 units) expected to commence in late summer of 1999; Kenwood Club, in
Katy Texas (320 units) expected to commence in April; Paddock Club, in
Melbourne, Florida (300 units) expected to commence in April of 1999; and Grande
View, in Nashville, Tennessee (433 units) already under construction.
DIRECT STOCK PURCHASE AND DISTRIBUTION REINVESTMENT PLAN
In January 1999 the Company adopted the DSPDRP pursuant to which the
Company's shareholders have the ability to reinvest all or part of distribution
from Mid-America common stock, preferred stock or limited partnership interests
in Mid-America Apartments, L.P. Also the plan provides the opportunity for
shareholders to buy additional shares through an optional cash investment. This
plan is intended to replace the current DRSPP, and participants of the current
plan will be automatically enrolled in the new plan.
JOINT VENTURE AGREEMENT
In March 1999 the Company entered into an agreement to form a joint venture
(the "Joint Venture") with Blackstone Real Estate Acquisitions, LLC, a
subsidiary of an investment management firm located in New York City, to own and
operate apartment communities. The Company simultaneously sold 6 apartments
communities to the newly formed Joint Venture for approximately $65 million in
cash. The Company will retain a 33 percent ownership in the Joint Venture and
will continue to manage the properties for a fee. The Company invested
approximately $4.0 million in the Joint Venture and loaned the Joint Venture
approximately $3.0 million at an interest rate of 10% for the life of the
entity. The net proceeds from the transaction will be used to pay down the
Company's Credit Line. The agreement provides that income and cash flows
generated by the Joint Venture be allocated based on respective ownership
percentages. The Company will account for its investment in the joint venture
using the equity method of accounting. The Company plans to sell an additional 4
apartment communities to the Joint Venture later in the year. The proceeds of
any such transaction are expected to be used to pay down the Company's Credit
Line.
F-18
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. 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, 1998
-------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Total revenues....................... $ 50,982 $51,113 $ 54,363 $59,085
Income before minority interest in
operating partnership income and
extraordinary item................. $ 7,467 $ 7,459 $ 7,764 $ 7,311
Minority interest in operating
partnership income................. $ 421 $ 746 $ 610 $ 477
Extraordinary item, net of minority
interest........................... $ (371) $ (619) $ -- $ --
Net income (loss) available for
common shareholders................ $ 4,412 $ 3,818 $ 3,719 $ 3,378
Per share:
Basic and diluted per share:
Net income available per common
shares
Before extraordinary item....... $ 0.26 $ 0.24 $ 0.20 $ 0.18
Extraordinary item.............. $ (0.02) $ (0.04) $ -- $ --
--------- ------- --------- -------
Net income available per common
share......................... $ 0.24 $ 0.20 $ 0.20 $ 0.18
========= ======= ========= =======
Dividend declared.................... $ 0.55 $ 0.55 $ 0.55 $ 0.575
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------
FIRST(1) SECOND(1) THIRD(1) FOURTH(1)
--------- ------- --------- -------
<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 shareholder................. $ 2,990 $ 3,622 $ 3,278 $(3,915)
Per share:
Basic and diluted per share:
Net income available per common
shares
Before extraordinary item....... $ 0.26 $ 0.27 $ 0.24 $ 0.27
Extraordinary item.............. $ -- $ -- $ -- $ (0.50)
--------- ------- --------- -------
Net income available per common
share......................... $ 0.26 $ 0.27 $ 0.24 $ (0.23)
========= ======= ========= =======
Dividend declared.................... $ 0.535 $ 0.535 $ 0.535 $ 0.55
</TABLE>
- ------------
(1) 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 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.
F-19
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1998(5)
-------------------- ------------------ ------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ------------------ ------------- -------- --------- ------ --------- ------
The Advantages....................... Jackson, MS -- (1) $ 422 $ 3,727 $ 0 $ 834 $ 422
<S> <C> <C> <C> <C> <C> <C> <C>
McKellar Woods....................... Memphis, TN -- (8) 737 13,200 0 1,661 737
Pine Trails.......................... Clinton, MS $ 1,315 178 2,728 0 625 178
Reflection Pointe.................... Jackson, MS $ 5,882 710 8,770 140 2,313 850
Riverhills........................... Grenada, MS $ 819 153 2,092 0 275 153
Woodridge............................ Jackson, MS $ 4,735 471 5,522 0 369 471
Greenbrook........................... Memphis, TN -- (8) 2,100 24,468 25 6,034 2,125
Hamilton Pointe...................... Chattanooga, TN -- (1) 686 6,281 0 993 686
Hidden Creek......................... Chattanooga, TN -- (1) 895 8,098 0 1,218 895
Steeplechase......................... Hixson, TN -- (9) 217 1,957 0 1,174 217
Cedar Mill(7)........................ Memphis, TN -- (1 &(8) 475 6,546 0 1,323 475
Clearbrook Village................... Memphis, TN $ 1,091 260 3,658 0 612 260
Crossings............................ Memphis, TN -- (1) 554 2,216 0 551 554
Eastview............................. Memphis, TN $ 2,827 700 9,646 0 1,390 700
Gleneagles........................... Memphis, TN -- (1) 443 3,983 0 1,467 443
The Park Estate...................... Memphis, TN -- (8) 178 1,141 0 857 178
Winchester Square.................... Memphis, TN -- (1) 350 7,279 0 958 350
Post House North..................... Jackson, TN $ 3,585 381 4,299 0 716 381
Post House Jackson................... Jackson, TN $ 5,098 443 5,078 0 552 443
The Oaks............................. Jackson, TN -- (1) 177 1,594 0 640 177
The Corners.......................... Winston-Salem, NC $ 4,198 685 6,165 0 566 685
Park Haywood......................... Greenville, SC -- (9) 325 2,925 35 2,459 360
Hickory Farm......................... Memphis, TN -- (1) 580 5,220 0 465 580
Lakeshore Landing.................... Jackson, MS -- (1) 480 4,320 0 627 480
Woodstream........................... Greensboro, NC -- (2) 953 8,599 0 758 953
Stonemill Village.................... Louisville, KY -- (1) 1,169 10,518 0 1,239 1,169
Canyon Creek......................... St. Louis, MO -- (1) 880 7,923 220 1,691 1,100
Whispering Oaks...................... Little Rock, AR $ 3,000 506 4,551 0 1,552 506
Pear Orchard......................... Jackson, MS -- (9) 1,352 12,168 0 1,228 1,352
Celery Stalk......................... Dallas, TX $ 8,460 1,463 13,165 0 1,925 1,463
Lane at Towne Crossing............... Mesquite, TX -- (2) 1,038 9,338 0 1,187 1,038
Hollybrook........................... Dalton, GA $ 2,520 405 3,646 0 916 405
Green Tree Place..................... Woodlands, TX $ 3,180 539 4,850 0 623 539
MacArthur Ridge...................... Irving, TX -- (2) 1,131 10,183 0 612 1,131
Lincoln on the Green................. Memphis, TN -- (10) 1,498 13,484 0 854 1,498
Brentwood Downs...................... Nashville, TN $ 6,678 1,193 10,739 0 664 1,193
Shenandoah Ridge..................... Augusta, GA -- (9) 650 5,850 0 1,820 650
Westborough Crossing................. Katy, TX $ 3,958 677 6,091 0 681 677
Sailwinds at Lake Magdalene.......... Tampa, FL $ 15,950 2,212 19,909 0 7,748 2,212
<CAPTION>
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(6)
- ------------------------------------- --------- --------- ------------ --------- ------------- -------------
The Advantages....................... $ 4,561 $ 4,983 (1,273) 3,710 1984 5 - 40
<S> <C> <C> <C> <C> <C> <C>
McKellar Woods....................... 14,861 15,598 (2,768) 12,830 1976 5 - 40
Pine Trails.......................... 3,353 3,531 (1,209) 2,322 1978 5 - 40
Reflection Pointe.................... 11,083 11,933 (1,657) 10,276 1986 5 - 40
Riverhills........................... 2,367 2,520 (563) 1,957 1972 5 - 40
Woodridge............................ 5,891 6,362 (926) 5,436 1987 5 - 40
Greenbrook........................... 30,502 32,627 (5,132) 27,495 1986 5 - 40
Hamilton Pointe...................... 7,274 7,960 (1,315) 6,645 1989 5 - 40
Hidden Creek......................... 9,316 10,211 (2,743) 7,468 1987 5 - 40
Steeplechase......................... 3,131 3,348 (693) 2,655 1986 5 - 40
Cedar Mill(7)........................ 7,869 8,344 (1,638) 6,706 1973/1986 5 - 40
Clearbrook Village................... 4,270 4,530 (761) 3,769 1974 5 - 40
Crossings............................ 2,767 3,321 (749) 2,572 1974 5 - 40
Eastview............................. 11,036 11,736 (2,225) 9,511 1974 5 - 40
Gleneagles........................... 5,450 5,893 (1,810) 4,083 1975 5 - 40
The Park Estate...................... 1,998 2,176 (897) 1,279 1974 5 - 40
Winchester Square.................... 8,237 8,587 (1,499) 7,088 1973 5 - 40
Post House North..................... 5,015 5,396 (778) 4,618 1987 5 - 40
Post House Jackson................... 5,630 6,073 (885) 5,188 1987 5 - 40
The Oaks............................. 2,234 2,411 (419) 1,992 1978 5 - 40
The Corners.......................... 6,731 7,416 (1,161) 6,255 1982 5 - 40
Park Haywood......................... 5,384 5,744 (789) 4,955 1983 5 - 40
Hickory Farm......................... 5,685 6,265 (1,002) 5,263 1985 5 - 40
Lakeshore Landing.................... 4,947 5,427 (870) 4,557 1974 5 - 40
Woodstream........................... 9,357 10,310 (1,567) 8,743 1983 5 - 40
Stonemill Village.................... 11,757 12,926 (2,041) 10,885 1985 5 - 40
Canyon Creek......................... 9,614 10,714 (1,585) 9,129 1987 5 - 40
Whispering Oaks...................... 6,103 6,609 (1,083) 5,526 1978 5 - 40
Pear Orchard......................... 13,396 14,748 (2,252) 12,496 1985 5 - 40
Celery Stalk......................... 15,090 16,553 (2,426) 14,127 1978 5 - 40
Lane at Towne Crossing............... 10,525 11,563 (1,788) 9,775 1983 5 - 40
Hollybrook........................... 4,562 4,967 (718) 4,249 1972 5 - 40
Green Tree Place..................... 5,473 6,012 (890) 5,122 1984 5 - 40
MacArthur Ridge...................... 10,795 11,926 (1,710) 10,216 1991 5 - 40
Lincoln on the Green................. 14,338 15,836 (2,236) 13,600 1988 5 - 40
Brentwood Downs...................... 11,403 12,596 (1,852) 10,744 1986 5 - 40
Shenandoah Ridge..................... 7,670 8,320 (1,276) 7,044 1982 5 - 40
Westborough Crossing................. 6,772 7,449 (1,083) 6,366 1984 5 - 40
Sailwinds at Lake Magdalene.......... 27,657 29,869 (4,734) 25,135 1975 5 - 40
</TABLE>
F-20
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1998(5)
-------------------- ------------------ ------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- --------------------- ------------- -------- --------- ------ --------- ------
Woodbridge at the Lake............... Jacksonville, FL $ 3,600 645 5,804 0 903 645
<S> <C> <C> <C> <C> <C> <C> <C>
Lakepointe........................... Lexington, KY -- (9) 411 3,699 0 622 411
The Mansion.......................... Lexington, KY $ 4,140 694 6,242 0 877 694
The Village.......................... Lexington, KY -- (9) 900 8,097 0 908 900
Cypresswood Court.................... Spring, TX $ 3,330 577 5,190 0 738 577
The Lodge at Timberglen.............. Dallas, TX $ 4,740 825 7,422 0 1,572 825
Calais Forest........................ Little Rock, AR $ 5,610 1,026 9,244 0 1,223 1,026
The Fairways......................... Columbia, SC $ 7,605 910 8,207 0 446 910
Kirby Station........................ Memphis, TN -- (9) 1,148 10,337 0 1,994 1,148
Belmere.............................. Tampa, FL -- (9) 851 7,667 0 1,036 851
Williamsburg Village................. Jackson, TN -- (9) 523 4,711 0 501 523
Fairways @ Royal Oak................. Cincinnati, OH -- (9) 814 7,335 0 796 814
Tanglewood........................... Anderson, SC $ 2,496 427 3,853 0 628 427
Woods at Post House.................. Jackson, TN $ 5,285 240 6,839 0 542 240
Somerset............................. Jackson, MS -- (9) 477 4,294 0 606 477
Highland Ridge....................... Greenville, SC -- (3) 482 4,337 0 406 482
Spring Creek......................... Greenville, SC -- (3) 597 5,374 0 420 597
St. Augustine........................ Jacksonville, FL -- (4) 2,858 6,475 0 1,765 2,858
Cooper's Hawk........................ Jacksonville, FL -- (4) 854 7,500 0 585 854
Marsh Oaks........................... Atlantic Beach, FL -- (9) 244 2,829 0 557 244
Park at Hermitage.................... Nashville, TN $ 7,985 1,524 14,800 0 1,338 1,524
Anatole.............................. Daytona Beach, FL $ 7,000 1,227 5,879 0 577 1,227
The Savannahs........................ Melbourne, FL -- (4) 582 7,868 0 976 582
Stassney Woods....................... Austin, TX $ 4,715 1,621 7,501 0 1,016 1,621
Travis Station....................... Austin, TX $ 4,165 2,282 6,169 0 857 2,282
Runaway Bay.......................... Mt. Pleasant, SC -- (3) 1,085 7,269 0 527 1,085
The Township......................... Hampton, VA $ 10,800 1,509 8,189 0 523 1,509
Lakeside............................. Jacksonville, FL -- (9) 1,431 12,883 288 2,287 1,719
Crosswinds........................... Jackson, MS -- (9) 1,535 13,826 0 935 1,535
Sutton Place......................... HornLake, MS -- (9) 894 8,053 0 678 894
Savannah Creek....................... Southaven, MS -- (9) 778 7,013 0 499 778
Napa Valley.......................... Little Rock, AR -- (9) 960 8,642 0 579 960
Tiffany Oaks......................... Altamonte Springs, FL -- (9) 1,024 9,219 0 692 1,024
Lincoln on the Green -- II........... Memphis, TN -- 0 6,999 0 6,974 0
Howell Commons....................... Greenville, SC -- (9) 1,304 11,740 0 508 1,304
Balcones Woods....................... Austin, TX $ 8,804 1,598 14,398 0 1,317 1,598
Westside Creek I..................... Little Rock, AR -- (9) 616 5,559 0 392 616
Fairways at Hartland................. Bowling Green, KY $ 4,627 1,038 9,342 0 620 1,038
Woodhollow........................... Jacksonville, FL $ 9,973 1,686 15,179 0 1,087 1,686
<CAPTION>
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(6)
- ------------------------------------- --------- --------- ------------ --------- ------------- -------------
Woodbridge at the Lake............... 6,707 7,352 (1,065) 6,287 1985 5 - 40
<S> <C> <C> <C> <C> <C> <C>
Lakepointe........................... 4,321 4,732 (694) 4,038 1986 5 - 40
The Mansion.......................... 7,119 7,813 (1,081) 6,732 1987 5 - 40
The Village.......................... 9,005 9,905 (1,442) 8,463 1989 5 - 40
Cypresswood Court.................... 5,928 6,505 (908) 5,597 1984 5 - 40
The Lodge at Timberglen.............. 8,994 9,819 (1,455) 8,364 1984 5 - 40
Calais Forest........................ 10,467 11,493 (1,606) 9,887 1987 5 - 40
The Fairways......................... 8,653 9,563 (1,288) 8,275 1992 5 - 40
Kirby Station........................ 12,331 13,479 (1,893) 11,586 1978 5 - 40
Belmere.............................. 8,703 9,554 (1,314) 8,240 1984 5 - 40
Williamsburg Village................. 5,212 5,735 (793) 4,942 1987 5 - 40
Fairways @ Royal Oak................. 8,131 8,945 (1,207) 7,738 1988 5 - 40
Tanglewood........................... 4,481 4,908 (657) 4,251 1980 5 - 40
Woods at Post House.................. 7,381 7,621 (1,371) 6,250 1995 5 - 40
Somerset............................. 4,900 5,377 (750) 4,627 1981 5 - 40
Highland Ridge....................... 4,743 5,225 (528) 4,697 1984 5 - 40
Spring Creek......................... 5,794 6,391 (663) 5,728 1984 5 - 40
St. Augustine........................ 8,240 11,098 (1,297) 9,801 1987 5 - 40
Cooper's Hawk........................ 8,085 8,939 (1,095) 7,844 1987 5 - 40
Marsh Oaks........................... 3,386 3,630 (468) 3,162 1986 5 - 40
Park at Hermitage.................... 16,138 17,662 (2,089) 15,573 1987 5 - 40
Anatole.............................. 6,456 7,683 (867) 6,816 1986 5 - 40
The Savannahs........................ 8,844 9,426 (1,163) 8,263 1990 5 - 40
Stassney Woods....................... 8,517 10,138 (1,140) 8,998 1985 5 - 40
Travis Station....................... 7,026 9,308 (910) 8,398 1987 5 - 40
Runaway Bay.......................... 7,796 8,881 (1,018) 7,863 1988 5 - 40
The Township......................... 8,712 10,221 (1,030) 9,191 1987 5 - 40
Lakeside............................. 15,170 16,889 (1,708) 15,181 1985 5 - 40
Crosswinds........................... 14,761 16,296 (1,319) 14,977 1988/1990 5 - 40
Sutton Place......................... 8,731 9,625 (782) 8,843 1991 5 - 40
Savannah Creek....................... 7,512 8,290 (665) 7,625 1989 5 - 40
Napa Valley.......................... 9,221 10,181 (722) 9,459 1984 5 - 40
Tiffany Oaks......................... 9,911 10,935 (724) 10,211 1985 5 - 40
Lincoln on the Green -- II........... 13,973 13,973 (680) 13,293 1997 5 - 40
Howell Commons....................... 12,248 13,552 (828) 12,724 1986/1988 5 - 40
Balcones Woods....................... 15,715 17,313 (1,001) 16,312 1983 5 - 40
Westside Creek I..................... 5,951 6,567 (372) 6,195 1984 5 - 40
Fairways at Hartland................. 9,962 11,000 (618) 10,382 1996 5 - 40
Woodhollow........................... 16,266 17,952 (1,048) 16,904 1986 5 - 40
</TABLE>
F-21
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1998(5)
-------------------- ------------------ ------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ------------------ ------------- -------- --------- ------ --------- ------
The Woods............................ Austin, TX -- (2) 1,012 9,120 0 1,121 1,012
<S> <C> <C> <C> <C> <C> <C> <C>
Hunters Ridge at Deerwood............ Jacksonville, FL -- (11) 1,533 13,835 0 159 1,533
Austin Chase......................... Macon, GA -- (11) 1,409 12,687 0 (503) 1,409
Westside Creek II.................... Little Rock, AR $ 4,918 654 5,904 0 230 654
Woodwinds............................ Aiken, SC $ 3,500 503 4,540 0 265 503
Hermitage at Beechtree............... Cary, NC -- (9) 900 8,099 0 539 900
Bradford Pointe (Sterling Ridge)..... Augusta, GA $ 4,760 772 6,949 0 301 772
Colony at SoutHPark.................. Aiken, SC -- (2) 757 6,820 0 337 757
Fountain Lake........................ Brunswick, GA $ 2,969 502 4,551 0 676 502
Hidden Lake I........................ Union City, GA $ 4,521 675 6,128 0 263 675
Hidden Lake II....................... Union City, GA -- (9) 621 5,587 0 154 621
Hidden Oaks I........................ Albany, GA -- 364 3,300 0 (333) 364
Hidden Oaks II....................... Albany, GA $ 2,429 306 2,774 0 (169) 306
High Ridge........................... Athens, GA -- (9) 884 7,958 0 170 884
Paddock Club Columbia I.............. Columbia, SC -- (2) 1,040 9,360 0 162 1,040
Paddock Club Huntsville.............. Huntsville, AL -- (2) 830 7,470 0 248 830
Paddock Club Jacksonville I.......... Jacksonville, FL -- (10) 963 8,739 0 133 963
Paddock Club Lakeland I.............. Lakeland, FL -- (10) 951 8,630 0 529 951
Paddock Club Lakeland II............. Lakeland, FL -- (10) 1,303 11,822 0 218 1,303
Paddock Club Tallahassee I........... Tallahassee, FL -- (2) 950 8,550 0 155 950
Paddock Park I....................... Ocala, FL $ 6,805 901 8,177 0 362 901
Paddock Park II...................... Ocala, FL -- (2) 1,383 12,547 0 372 1,383
Park Place........................... Spartanburg, SC -- (9) 723 6,504 0 482 723
Park Walk............................ College Park, GA $ 3,392 536 4,859 0 206 536
Regency Club......................... Albany, GA -- 198 1,795 0 (1,193) 198
River Trace I........................ Memphis, TN $ 5,743 881 7,996 0 388 881
River Trace II....................... Memphis, TN $ 5,664 741 6,727 0 254 741
Riverwind............................ Columbus, GA -- 108 979 0 179 108
Southland Station I.................. Warner Robins, GA -- (9) 777 6,992 0 383 777
Southland Station II................. Warner Robins, GA -- 693 6,292 0 87 693
Three Oaks I......................... Valdosta, GA $ 2,849 462 4,188 0 247 462
Three Oaks II........................ Valdosta, GA $ 2,933 460 4,170 0 170 460
The Vistas........................... Macon, GA $ 4,074 595 5,403 0 173 595
Westbury Creek....................... Augusta, GA $ 3,167 400 3,626 0 324 400
Westbury Springs..................... Lilburn, GA $ 4,249 665 6,038 0 311 665
Whispering Pines I................... LaGrange, GA $ 2,737 454 4,116 0 154 454
Whispering Pines II.................. LaGrange, GA $ 2,523 370 3,354 0 159 370
Whisperwood.......................... Columbus, GA -- (2) 2,330 20,970 0 890 2,330
Whisperwood Spa I.................... Columbus, GA -- (2) 1,510 13,590 0 234 1,510
<CAPTION>
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(6)
- ------------------------------------- --------- --------- ------------ --------- ------------- -------------
The Woods............................ 10,241 11,253 (567) 10,686 1977 5 - 40
<S> <C> <C> <C> <C> <C> <C>
Hunters Ridge at Deerwood............ 13,994 15,527 (102) 15,425 1987 5 - 40
Austin Chase......................... 12,184 13,593 (106) 13,487 1996 5 - 40
Westside Creek II.................... 6,134 6,788 (265) 6,523 1986 5 - 40
Woodwinds............................ 4,805 5,308 (208) 5,100 1988 5 - 40
Hermitage at Beechtree............... 8,638 9,538 (339) 9,199 1988 5 - 40
Bradford Pointe (Sterling Ridge)..... 7,250 8,022 (288) 7,734 1986 5 - 40
Colony at SoutHPark.................. 7,157 7,914 (268) 7,646 1989/1991 5 - 40
Fountain Lake........................ 5,227 5,729 (207) 5,522 1983 5 - 40
Hidden Lake I........................ 6,391 7,066 (240) 6,826 1985 5 - 40
Hidden Lake II....................... 5,741 6,362 (218) 6,144 1987 5 - 40
Hidden Oaks I........................ 2,967 3,331 (130) 3,201 1979 5 - 40
Hidden Oaks II....................... 2,605 2,911 (110) 2,801 1980 5 - 40
High Ridge........................... 8,128 9,012 (306) 8,706 1987 5 - 40
Paddock Club Columbia I.............. 9,522 10,562 (361) 10,201 1989 5 - 40
Paddock Club Huntsville.............. 7,718 8,548 (291) 8,257 1989 5 - 40
Paddock Club Jacksonville I.......... 8,872 9,835 (341) 9,494 1989 5 - 40
Paddock Club Lakeland I.............. 9,159 10,110 (344) 9,766 1988 5 - 40
Paddock Club Lakeland II............. 12,040 13,343 (457) 12,886 1990 5 - 40
Paddock Club Tallahassee I........... 8,705 9,655 (335) 9,320 1990 5 - 40
Paddock Park I....................... 8,539 9,440 (328) 9,112 1986 5 - 40
Paddock Park II...................... 12,919 14,302 (500) 13,802 1988 5 - 40
Park Place........................... 6,986 7,709 (259) 7,450 1987 5 - 40
Park Walk............................ 5,065 5,601 (190) 5,411 1985 5 - 40
Regency Club......................... 602 800 (73) 727 1983 5 - 40
River Trace I........................ 8,384 9,265 (315) 8,950 1981 5 - 40
River Trace II....................... 6,981 7,722 (265) 7,457 1985 5 - 40
Riverwind............................ 1,158 1,266 (40) 1,226 1983 5 - 40
Southland Station I.................. 7,375 8,152 (275) 7,877 1987 5 - 40
Southland Station II................. 6,379 7,072 (245) 6,827 1990 5 - 40
Three Oaks I......................... 4,435 4,897 (167) 4,730 1983 5 - 40
Three Oaks II........................ 4,340 4,800 (163) 4,637 1984 5 - 40
The Vistas........................... 5,576 6,171 (208) 5,963 1985 5 - 40
Westbury Creek....................... 3,950 4,350 (147) 4,203 1984 5 - 40
Westbury Springs..................... 6,349 7,014 (234) 6,780 1983 5 - 40
Whispering Pines I................... 4,270 4,724 (161) 4,563 1982 5 - 40
Whispering Pines II.................. 3,513 3,883 (131) 3,752 1984 5 - 40
Whisperwood.......................... 21,860 24,190 (821) 23,369 1981/1986 5 - 40
Whisperwood Spa I.................... 13,824 15,334 (530) 14,804 1988 5 - 40
</TABLE>
F-22
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1998(5)
------------------- ---------------- -------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- --------------------- ------------- ------- --------- ----- -------- -------
Wildwood I........................... Thomasville, GA $ 2,074 438 3,971 0 81 438
<S> <C> <C> <C> <C> <C> <C> <C>
Wildwood II.......................... Thomasville, GA $ 2,016 372 3,372 0 87 372
Willow Creek......................... Columbus, GA -- (9) 614 5,523 0 399 614
Windridge............................ Chattanooga, TN $ 5,477 817 7,416 0 169 817
2000 Wynnton......................... Columbus, GA -- 192 1,741 0 133 192
Paddock Club Tallahassee II.......... Tallahassee, FL $ 4,710 530 4,805 0 71 530
Paddock Club Jacksonville II......... Jacksonville, FL -- (10) 689 6,255 0 41 689
Paddock Club Columbia II............. Columbia, SC -- (2) 800 7,200 0 88 800
Paddock Club Florence................ Florence, KY $ 9,673 1,209 10,969 0 244 1,209
Paddock Club Greenville.............. Greenville, SC -- (2) 1,200 10,800 0 102 1,200
Paddock Club Brandon I............... Brandon, FL -- (2) 2,100 18,900 0 32 2,100
Terraces at Towne Lake I............. Woodstock, GA $ 15,191 1,689 15,321 0 19 1,689
Paddock Club Jacksonville III........ Jacksonville, FL -- (10) 642 5,756 0 113 642
Paddock Club Huntsville II........... Huntsville, AL -- (2) 909 10,152 0 8 909
Paddock Club Mandarin................ Jacksonville, FL -- (2) 1,410 14,967 0 54 1,410
Enclave at Whisperwood............... Columbus, GA -- (2) 450 8,162 0 11 450
Terraces at Fieldstone............... Conyers, GA -- (2) 1,284 15,655 0 6 1,284
Walden Run........................... McDonough, GA -- (2) 1,347 12,132 0 200 1,347
Abbington Place at SoutHPoint........ Huntsville, AL -- (2) 524 4,724 0 397 524
Eagle Ridge.......................... Birmingham, AL $ 6,402 851 7,667 0 132 851
Georgetown Grove..................... Savannah, GA $ 10,505 1,288 11,579 0 17 1,288
Courtyards at Campbell............... Dallas, TX -- (2) 988 8,893 0 65 988
Deer Run............................. Dallas, TX -- (2) 1,252 11,271 0 53 1,252
Highwood............................. Plano, TX -- (2) 864 7,783 0 71 864
Northwood Place...................... Arlington, TX -- (2) 746 6,716 0 129 746
Links at Carrollwood................. Tampa, FL $ 5,793 817 7,355 0 21 817
Island Retreat....................... St. Simons Island, GA $ 3,453 510 4,594 0 0 510
------------- ------- --------- ----- -------- -------
Total Completed Communities................................. $ 300,698 122,111 1,102,736 708 103,264 122,819
------------- ------- --------- ----- -------- -------
<CAPTION>
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(6)
- ------------------------------------- -------- -------- ------------ --------- ------------- -------------
Wildwood I........................... 4,052 4,490 (154) 4,336 1980 5 - 40
<S> <C> <C> <C> <C> <C> <C>
Wildwood II.......................... 3,459 3,831 (132) 3,699 1984 5 - 40
Willow Creek......................... 5,922 6,536 (221) 6,315 1971/1977 5 - 40
Windridge............................ 7,585 8,402 (290) 8,112 1984 5 - 40
2000 Wynnton......................... 1,874 2,066 (70) 1,996 1983 5 - 40
Paddock Club Tallahassee II.......... 4,876 5,406 (186) 5,220 1995 5 - 40
Paddock Club Jacksonville II......... 6,296 6,985 (240) 6,745 1996 5 - 40
Paddock Club Columbia II............. 7,288 8,088 (275) 7,813 1995 5 - 40
Paddock Club Florence................ 11,213 12,422 (425) 11,997 1994 5 - 40
Paddock Club Greenville.............. 10,902 12,102 (413) 11,689 1996 5 - 40
Paddock Club Brandon I............... 18,932 21,032 (722) 20,310 1997 5 - 40
Terraces at Towne Lake I............. 15,340 17,029 (584) 16,445 1997 5 - 40
Paddock Club Jacksonville III........ 5,869 6,511 (156) 6,355 1997 5 - 40
Paddock Club Huntsville II........... 10,160 11,069 (133) 10,936 1998 5 - 40
Paddock Club Mandarin................ 15,021 16,431 (202) 16,229 1998 5 - 40
Enclave at Whisperwood............... 8,173 8,623 (107) 8,516 1998 5 - 40
Terraces at Fieldstone............... 15,661 16,945 (75) 16,870 1998 5 - 40
Walden Run........................... 12,332 13,679 (396) 13,283 1997 5 - 40
Abbington Place at SoutHPoint........ 5,121 5,645 (144) 5,501 1987 5 - 40
Eagle Ridge.......................... 7,799 8,650 (182) 8,468 1986 5 - 40
Georgetown Grove..................... 11,596 12,884 (238) 12,646 1997 5 - 40
Courtyards at Campbell............... 8,958 9,946 (131) 9,815 1986 5 - 40
Deer Run............................. 11,324 12,576 (166) 12,410 1985 5 - 40
Highwood............................. 7,854 8,718 (115) 8,603 1983 5 - 40
Northwood Place...................... 6,845 7,591 (100) 7,491 1980 5 - 40
Links at Carrollwood................. 7,376 8,193 (63) 8,130 1980 5 - 40
Island Retreat....................... 4,594 5,104 (13) 5,091 1978 5 - 40
-------- -------- ------------ ---------
Total Completed Communities.......... 1,206,000 1,328,819 (117,730) 1,211,089
-------- -------- ------------ ---------
</TABLE>
F-23
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1998(5)
-------------------- ----------------- --------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ----------------- ------------- -------- --------- ------ -------- --------
CONSTRUCTION OF UNITS IN LEASE-UP:
<S> <C> <C> <C> <C> <C> <C> <C>
Reserve at Dexter Lake............... Memphis, TN -- (2) 519 4,671 9,907 519
Paddock Club Gainesville............. Gainesville, FL -- (2) 989 8,900 6,204 989
Terraces at Towne Lake II............ Woodstock, GA -- 400 3,600 7,177 400
Paddock Club Panama City............. Panama City, FL -- 185 1,668 9,996 185
------------- -------- --------- ------ -------- --------
Total Construction of units in lease-up................. $ 0 $ 2,093 $ 18,839 $ 0 $ 33,284 $ 2,093
CONSTRUCTION OF UNITS IN PROCESS:
Paddock Club Brandon II.............. Brandon, FL -- (2) 0 0 6,635 0
Paddock Club Montgomery I............ Montgomery, AL -- 0 0 9,840 0
Paddock Club Murfreesboro............ Murfreesboro, TN -- 0 0 4,279 0
Grand Reserve Lexington.............. Lexingon, KY -- 0 0 3,489 0
Grand View Nashville................. Nashville, TN -- 0 0 3,429 0
Paddock Club Melbourne............... Melbourne, FL -- 0 0 900 0
St. Augustine II..................... Jacksonville, FL -- 0 0 471 0
------------- -------- --------- ------ -------- --------
Total Construction of Units in process.................. $ 0 $ 0 $ 0 $ 0 $ 29,043 $ 0
------------- -------- --------- ------ -------- --------
Total Apartments........................................ $ 300,698 $124,204 $1,121,575 $ 708 $165,591 $124,912
------------- -------- --------- ------ -------- --------
Land held for future development..... Various -- 3,392 4,551 725 3,113 4,117
Commercial properties................ Various $ 1,441 300 2,636 7,938 300
------------- -------- --------- ------ -------- --------
Total other............................................. $ 1,441 3,692 7,187 725 11,051 4,417
------------- -------- --------- ------ -------- --------
Total Real Estate Assets................................ $ 302,139 $127,896 $1,128,762 $1,433 $176,642 $129,329
============= ======== ========= ====== ======== ========
<CAPTION>
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(6)
- ------------------------------------- --------- --------- ------------ --------- ------------- -------------
CONSTRUCTION OF UNITS IN LEASE-UP:
<S> <C> <C> <C> <C> <C> <C>
Reserve at Dexter Lake............... 14,578 15,097 0 15,097 1999 5 - 40
Paddock Club Gainesville............. 15,104 16,093 (43) 16,050 1999 5 - 40
Terraces at Towne Lake II............ 10,777 11,177 0 11,177 1999 N/A
Paddock Club Panama City............. 11,664 11,849 0 11,849 1999 N/A
--------- --------- ------------ ---------
Total Construction of units in lease- $ 52,123 $ 54,216 $ (43) $ 54,173
CONSTRUCTION OF UNITS IN PROCESS:
Paddock Club Brandon II.............. 6,635 6,635 0 6,635 -- N/A
Paddock Club Montgomery I............ 9,840 9,840 0 9,840 -- N/A
Paddock Club Murfreesboro............ 4,279 4,279 0 4,279 -- N/A
Grand Reserve Lexington.............. 3,489 3,489 0 3,489 -- N/A
Grand View Nashville................. 3,429 3,429 0 3,429 -- N/A
Paddock Club Melbourne............... 900 900 0 900 -- N/A
St. Augustine II..................... 471 471 0 471 -- N/A
--------- --------- ------------ ---------
Total Construction of Units in proces $ 29,043 $ 29,043 $ 0 $ 29,043
--------- --------- ------------ ---------
Total Apartments..................... $1,287,166 $1,412,078 ($ 117,773) $1,294,305
--------- --------- ------------ ---------
Land held for future development..... 7,664 11,781 0 11,781 N/A N/A
Commercial properties................ 10,574 10,874 (1,592) 9,282 Various 5 - 40
--------- --------- ------------ ---------
Total other.......................... 18,238 22,655 (1,592) 21,063
--------- --------- ------------ ---------
Total Real Estate Assets............. $1,305,404 $1,434,733 ($ 119,365) $1,315,368
========= ========= ============ =========
</TABLE>
- ------------
Note: This schedule excludes the 1998 disposition of Redford Park, Conroe,
TX.
(1) These twelve properties are encumbered by a $43.4 million note payable with
an interest rate of 8.65% at December 31, 1998, maturing July 1, 2001.
(2) Encumbered by the Credit Line, with an outstanding balance of $117 million
at December 31, 1998 and a variable interest rate of 7.00%.
(3) These three properties are encumbered by a $10.1 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 $16.4 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 $1,600
million at December 31, 1998. 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) These 4 properties, and one commercial building, are encumbered by a $35.8
million mortgage with a maturity of April 1, 2005.
(9) These 26 communities are encumbered by a $142 million loan with a maturity
of March 3, 2003 and an average interest rate of 6.376%.
(10) These six communities are encumbered by a $47.5 million note payable with a
maturity of December 15, 2004 and an interest rate of 7.04%.
(11) These two properties are encumbered by a $14 million mortgage securing a
tax-exempt bond amortizing over 25 years with an average interest rate of
5.281%.
F-24
<PAGE>
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,
---------------------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Real estate investments:
Balance at beginning of year.... $ 1,211,693 $ 641,893 $ 578,788
Acquisitions.................... 91,895 140,858 66,258
Improvements and development.... 136,933 36,298 20,634
Assets acquired from business
combination................... -- 392,644 --
Disposition of real estate
assets........................ (5,788) -- (23,787)
------------ ------------ -----------
Balance at end of year.......... $ 1,434,733 $ 1,211,693 $ 641,893
============ ============ ===========
Accumulated depreciation:
Balance at beginning of year.... $ 76,989 $ 49,558 $ 29,504
Depreciation.................... 41,556 27,431 21,249
Disposition of real estate
assets........................ (772) -- (1,195)
------------ ------------ -----------
Balance at end of year.......... $ 117,773 $ 76,989 $ 49,558
============ ============ ===========
</TABLE>
The Company's consolidated balance sheet at December 31, 1998 includes
accumulated depreciation of $1,592 in the caption "Commercial properties,
net".
See accompanying independent auditor's report.
F-25
EXHIBIT 3.9
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 SHARES OF PREFERRED STOCK
MID-AMERICA APARTMENT COMMUNITIES, INC., A TENNESSEE CORPORATION (THE
"COMPANY"), CERTIFIES TO THE TENNESSEE SECRETARY OF STATE THAT:
FIRST: PURSUANT TO THE AUTHORITY EXPRESSLY VESTED IN THE BOARD OF
DIRECTORS OF THE COMPANY BY SECTION 6 OF THE COMPANY'S AMENDED AND RESTATED
CHARTER (THE "CHARTER") AND SECTION 48-16-102 OF THE TENNESSEE CODE ANNOTATED,
THE BOARD OF DIRECTORS HAS, BY RESOLUTION, DULY DIVIDED AND CLASSIFIED 1,000,000
SHARES OF THE PREFERRED STOCK OF THE COMPANY INTO A SERIES DESIGNATED 9.5%
SERIES E CUMULATIVE REDEEMABLE PREFERRED STOCK (THE "SERIES E PREFERRED STOCK")
AND HAS PROVIDED FOR THE ISSUANCE OF THE SERIES E PREFERRED STOCK.
SECOND: SECTION 6 OF THE CHARTER IS HEREBY AMENDED BY ADDING THE
FOLLOWING:
1. DESIGNATION AND NUMBER. A series of Preferred Stock, designated the "9.5%
Series E Cumulative Redeemable Preferred Stock" (the "Series E Preferred
Stock"), is hereby established. The number of shares of the Series E Preferred
Stock shall be 1,000,000.
2. MATURITY. The Series E Preferred Stock has no stated maturity and will not be
subject to any sinking fund or mandatory redemption.
3. RANK. The Series E Preferred Stock will, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company, rank (i)
senior to all classes or series of Junior Stock (as defined below) (ii) on a
parity with all Parity Stock (as defined below); and (iii) junior to all
existing and future debt for money borrowed of the Company. The term "equity
securities" does not include convertible debt securities, which will rank senior
to the Series E Preferred Stock prior to conversion. While any shares of Series
E Preferred Stock are outstanding, the Company shall not issue or authorize the
issuance of any Senior Stock (as defined below) without the consent of the
holders of two-thirds of the outstanding shares of Series E Preferred Stock,
voting separately as a class.
<PAGE>
4. DIVIDENDS.
(a) Holders of shares of the Series E Preferred Stock are entitled to
receive, when and as declared by the Board of Directors (or a duly authorized
committee thereof), out of funds legally available for the payment of dividends,
preferential cumulative cash dividends at the Series E Dividend Rate (as defined
below). Dividends on the Series E Preferred Stock shall be cumulative, whether
or not declared, on a daily basis from the date of original issue and shall be
payable monthly (each such monthly period being herein called a "Dividend
Period") in arrears on or before the 15th day of each month, or, if not a
business day, the next succeeding business day (each, a "Dividend Payment
Date"). The first dividend, which will be paid on January 15, 1999, will be for
less than a full month. Such dividend and any dividend payable on the Series E
Preferred Stock for any partial Dividend Period will be computed on the basis of
a 360-day year consisting of twelve 30-day months. Dividends will be payable to
holders of record as they appear in the stock records of the Company at the
close of business on the applicable record date, which shall be the first day of
the calendar month in which the applicable Dividend Payment Date falls or on
such other date designated by the Board of Directors of the Company for the
payment of dividends that is not more than 30 nor less than 10 days prior to
such Dividend Payment Date (each, a "Dividend Record Date"). Notwithstanding
anything herein to the contrary, dividends on any dividend that is accrued and
unpaid on the Series E Preferred Stock shall accrue from the Dividend Payment
Date on which such dividend was payable.
(b) Dividends on account of arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date, not more than forty-five (45) days
prior to the payment thereof, as may be fixed by the Board of Directors.
(c) Holders of shares of the Series E Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, other than
as provided above or in Section 6. Any dividend payment made on shares of the
Series E Preferred Stock shall first be credited against the earliest accrued
but unpaid dividend due with respect to such shares which remains payable.
5. REDEMPTION.
(a) The Series E Preferred Stock is not redeemable by the Company other
than upon the request of a holder of Series E Preferred Stock as provided below.
(b) Any holder of Series E Preferred Stock may, at such holder's option
upon not less than 150 days' written notice (such notice, a "Redemption
Notice"), cause the Company to redeem such holder's shares of the Series E
Preferred Stock, in whole or in part, at any time or from time to time, for cash
at a redemption price (the "Redemption Price") per share equal to the amount
(including with respect to accrued and unpaid dividends) that would be payable
to the holder of such shares if the Company were liquidated, dissolved or wound
up (determined as provided below) on the date of redemption, less any dividend
payable as provided in the first sentence of Section 5(d) and actually paid on
the applicable Dividend Payment Date; PROVIDED, HOWEVER, that a Redemption
Notice may be sent by a holder of Series E Preferred Stock prior to August 1,
2003 only (i) in the event of a Change of Control (as defined below) or (ii)
<PAGE>
upon the occurrence and during the continuance of a Series E Event of
Non-Compliance (in which case the Company shall redeem such holder's shares in
accordance with the provisions hereof whether or not such Series E Event of
Non-Compliance exists at the date fixed for redemption in such Redemption
Notice). Any Redemption Notice shall be addressed to the secretary of the
Company at the Company's principal executive office, and shall state the name of
the applicable holder of Series E Preferred Stock, the address of such holder,
the number of shares to be redeemed (which shall be no less than 4,000 shares)
and the date fixed for redemption of such shares. Holders of Series E Preferred
Stock to be redeemed shall surrender such Series E Preferred Stock at a place
designated by the Company in writing at least ten days prior to the date fixed
for redemption and shall be entitled to the Redemption Price following such
surrender. If notice of redemption with respect to any shares of Series E
Preferred Stock has been given and if the funds or the full required number from
time to time of Set Aside Shares (as defined below) necessary for such
redemption have been set aside by the Company in irrevocable trust for the
benefit of the holders of any shares of Series E Preferred Stock to be redeemed
(and the Redemption Price (including cash proceeds described in the final
paragraph of Section 5(c), if applicable) with respect to such shares is in fact
paid to such holders on the applicable redemption date), then from and after
such redemption date dividends will cease to accrue on such shares of Series E
Preferred Stock, such shares of Series E Preferred Stock shall no longer be
deemed outstanding and all rights of the holders of such shares will terminate,
except the right to receive the Redemption Price.
(c) The Company may elect to redeem shares of Series E Preferred Stock
in shares of Common Stock of the Company in lieu of cash or to make such
redemption partially in Common Stock and partially in cash by giving notice of
such election not less than 90 days after receipt of an applicable Redemption
Notice to each holder of Series E Preferred Stock to which the Company desires
such election to apply; PROVIDED, HOWEVER, that any such election by the Company
shall apply equally to all shares of Series E Preferred Stock to be redeemed on
the same redemption date. Such election may be revoked (or modified to decrease
the proportion of Common Stock to be received by holders) by the Company,
notwithstanding any statement of such election in the notice to holders referred
to in the immediately preceding sentence, at any time prior to the applicable
redemption date, with or without notice of such revocation to the holders
hereof. The number of shares of Common Stock per share of Series E Preferred
Stock to be delivered to the holders of the shares of Series E Preferred Stock
Company shall be calculated as follows:
(1) the cash that would otherwise be payable by the Company to a
holder of a share of Series E Preferred Stock upon a cash redemption of such
shares,
divided by
(2) the Common Stock Price on the third business day prior to
the redemption date.
If the Company elects to redeem shares of Series E Preferred Stock in shares of
Common Stock, upon the request of holders of shares of the Series E Preferred
Stock which are the subject of redemption, which request is received by the
Company at least 30 calendar
<PAGE>
days prior to the applicable redemption date, the Company shall have the
obligation to register such shares of Common Stock for public offering and sale
under the Federal securities laws and such holders shall have the obligation to
cooperate with the Company with respect to such registration. The Company shall
select the underwriter for any public distribution of such shares of Common
Stock. Any underwriting agreement entered into in connection with such public
distribution shall provide for a "firm commitment" underwriting and shall
provide for a scheduled closing date not later than three business days
following the date fixed for redemption. The underwriting discount and all other
expenses of registration and sale shall be borne by the Company. If for any
reason the net proceeds from such public distribution of shares of Common Stock
received by such holders shall be less than 100% of the portion of the
Redemption Price for the shares of Series E Preferred Stock redeemed that is
paid for in Common Stock (the "Deficiency"), the Company shall pay to the
holders of such shares on a pro rata basis (i) an amount equal to the Deficiency
in cash or a sufficient number of additional shares of Common Stock which shall
be registered and sold as described above to pay the Deficiency in full and (ii)
interest on the Deficiency at the Series E Dividend Rate for the period from and
including the applicable redemption date to the date on which cash in the amount
of the Deficiency plus all accrued interest thereon pursuant to this clause (ii)
is finally paid in full to the holders of shares of Series E Preferred Stock to
which such Deficiency relates.
(d) If a redemption date falls after a Dividend Record Date and prior to
the corresponding Dividend Payment Date, each holder of Series E Preferred Stock
at the close of business on such Dividend Record Date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares before such Dividend Payment Date.
Otherwise, upon redemption of any share of Series E Preferred Stock and payment
or setting aside in irrevocable trust of the full Redemption Price, no further
dividend (including accrued and unpaid dividends) shall be payable with respect
to such shares.
6. CERTAIN PAYMENT RESTRICTIONS.
(a) Notwithstanding Sections 4 and 5, no dividends on shares of Series E
Preferred Stock shall be declared by the Board of Directors nor shall any
dividends or cash amounts payable by the Company in respect of shares of Series
E Preferred Stock being redeemed at the election of the holders thereof be paid
or set apart for payment by the Company at such time as the terms and provisions
of any agreement of the Company in effect on the date of original issuance of
the Series E Preferred Stock, including any such agreement relating to its
indebtedness (or any refinancings of such agreements), prohibits such
declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law. The Company shall use its best efforts (i) to
permit dividends on the Series E Preferred Stock to be paid and cash redemptions
of shares of the Series E Preferred Stock to be made without causing any such
breach or default and (ii) not to be subject to any such restriction or
prohibition of law.
(b) Notwithstanding the foregoing, dividends on the Series E Preferred
Stock will accrue whether or not the Company has earnings, whether or not there
are funds legally available for the payment of such dividends or the payment of
dividends would cause any breach or default and whether or not such dividends
are declared. Except as set forth in
<PAGE>
the immediately succeeding sentence, no dividends will be declared or paid or
set aside for payment on any Parity Stock or Junior Stock (other than a dividend
in shares of Junior Stock) for any period unless full cumulative dividends have
been or contemporaneously are likewise declared and paid or declared and a sum
sufficient for the payment thereof is set apart in irrevocable trust for the
benefit of the holders of Series E Preferred Stock for such payment on the
Series E Preferred Stock for all past Dividend Periods and the then current
Dividend Period. Notwithstanding the foregoing, the Company may from time to
time declare dividends on Parity Stock at times when dividends are not paid in
full (or a sum sufficient for such full payment is not so set apart in
irrevocable trust) upon the Series E Preferred Stock and the shares of any
series of Parity Stock, provided that all dividends declared upon the Series E
Preferred Stock and any series of Parity Stock shall be declared pro rata so
that the amount of dividends declared per share of Series E Preferred Stock and
the Parity Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series E Preferred Stock and the Parity Stock
(which shall not include any accrual in respect of unpaid dividends for prior
Dividend Periods for any Parity Stock which does not have a cumulative dividend)
bear to each other.
(c) No dividends (other than in shares of Junior Stock) shall be
declared or paid or set aside for payment nor shall any other distribution be
declared or made upon any Parity Stock or Junior Stock or any warrants, rights,
calls or options exercisable for or convertible into any Parity Stock or Junior
Stock, nor shall any shares of Parity Stock or Junior Stock or any warrants,
rights, calls or options exercisable for or convertible into any Parity Stock or
Junior Stock be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such shares) by the Company or by any Person (as defined
below) directly or indirectly controlled by the Company (except by conversion
into or exchange for Junior Stock for the purpose of preserving the Company's
qualification as a REIT), unless full cumulative dividends on the Series E
Preferred Stock likewise have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart in
irrevocable trust for the benefit of the holders of the Series E Preferred Stock
for payment for all past Dividend Periods and the then current Dividend Period.
(d) No dividends (other than in shares of Junior Stock) shall be
declared or paid or set aside for payment nor shall any other distribution be
declared or made upon any Junior Stock or any warrants, rights, calls or options
exercisable for or convertible into any Junior Stock, nor shall any shares of
Junior Stock or any warrants, rights, calls or options exercisable for or
convertible into any Junior Stock be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company or by any Person
directly or indirectly controlled by the Company (except by conversion into or
exchange for Junior Stock for the purpose of preserving the Company's
qualification as a REIT) on any date unless the full Redemption Price with
respect to all shares of Series E Preferred Stock as to which there has been
delivered a Redemption Notice on or before the earlier of (i) such date and (ii)
with respect to redemptions, purchases or other acquisitions of Junior Stock,
the date, if any, on which the applicable notice of redemption, purchase or
other acquisition of such Junior Stock was sent or received, as applicable, by
the
<PAGE>
Company (or applicable Person directly or indirectly controlled by the Company)
has been paid in full to or set aside in irrevocable trust (in cash or in shares
of Common Stock in accordance with Section 5(b) and 5(c)) for the benefit of the
applicable holder of Series E Preferred Stock; PROVIDED, HOWEVER, that the
Company may pay Regular Dividends that were declared prior to the date on which
the Company received an applicable Redemption Notice.
(e) No Parity Stock shall be redeemed, purchased, or otherwise acquired
for any consideration (nor shall any moneys be paid to or made available for a
sinking fund for the redemption of any such shares) by the Company or any Person
directly or indirectly controlled by the Company (except by conversion into or
exchange for Junior Stock for the purpose of preserving the Company's
qualification as a REIT) on any date unless the full Redemption Price with
respect to all shares of Series E Preferred Stock as to which there has been
delivered a Redemption Notice on or before the earlier of (i) such date and (ii)
the date, if any, on which the applicable notice of redemption, purchase or
other acquisition of such Parity Stock was sent or received, as applicable, by
the Company (or applicable Person directly or indirectly controlled by the
Company) has been paid to or set aside in irrevocable trust (in cash or in
shares of Common Stock in accordance with Section 5(b)and 5(c)) for the benefit
of the applicable holders of Series E Preferred Stock.
(f) Notwithstanding anything in Section 5 or this Section 6 to the
contrary, whenever the Company shall set aside shares of Common Stock in
irrevocable trust for the benefit of holders of Series E Preferred Stock, such
trust shall nevertheless terminate and such shares of Common Stock shall be
released to the Company if the Company (i) pays to or (ii) sets aside in
irrevocable trust for the benefit of the applicable holders, cash in the full
amount then required to be paid with respect to all shares of Series E Preferred
Stock with respect to which such set aside was originally required.
7. LIQUIDATION PREFERENCE.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of shares of Series E
Preferred Stock are entitled to be paid out of the assets of the Company legally
available for distribution to its shareholders a liquidation preference of $25
per share (the "Liquidation Preference"), plus an amount equal to any accrued
and unpaid dividends to the date of payment (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to the date
fixed for liquidation, dissolution or winding-up), before any distribution of
assets is made to holders of Junior Stock (including, without limitation, Common
Stock). The Company will promptly provide to the holders of Series E Preferred
Stock written notice of any event triggering the right to receive such
Liquidation Preference. After payment of the full amount of the Liquidation
Preference, plus any accrued and unpaid dividends to which they are entitled,
the holders of Series E Preferred Stock will have no right or claim to any of
the remaining assets of the Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the assets of the Company
are not sufficient to pay in full the liquidation preference payments payable to
the holders of outstanding shares of the Series E Preferred Stock and all other
Parity Stock, then the holders of all such shares shall share equally and
ratably in any such distribution of assets in proportion to the full liquidation
preference to which each is entitled until such liquidation preferences are paid
in full, and then in proportion to their respective amounts of accumulated but
unpaid dividends.
<PAGE>
(b) The consolidation or merger of the Company with or into any other
corporation, trust or entity or of any other corporation with or into the
Company, or the sale, lease or conveyance of all or substantially all of the
property or business of the Company, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company.
8. VOTING RIGHTS.
(a) Holders of the Series E Preferred Stock will not have any voting
rights, except as set forth below or as otherwise from time to time required by
law.
(b) In the event of any Series E Event of Non-Compliance, the number of
directors constituting the Board of Directors shall be adjusted by the number,
if any, necessary to permit, and the holders of the Series E Preferred Stock
will be entitled to vote separately as a class for the election of, a total of
two additional directors of the Company (the "Series E Directors") at a special
meeting called by the holders of record of at least 20% of the Series E
Preferred Stock or at the next annual meeting of shareholders, and at each
subsequent annual meeting until the first such meeting as of which no Series E
Event of Non-Compliance exists and as of which the dividend for the then current
Dividend Period shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment. A quorum for any such meeting shall
exist if at least a majority of the outstanding shares of Series E Preferred
Stock are represented in person or by proxy at such meeting. Such Series E
Directors shall be elected upon the affirmative vote of a plurality of the
shares of Series E Preferred Stock present and voting in person or by proxy at a
duly called and held meeting at which a quorum is present. If and when no Series
E Event of Non-Compliance exists and the dividend for the then current Dividend
Period on the Series E Preferred Stock shall have been paid in full or declared
and set aside for payment in full, the holders thereof shall be divested of the
foregoing voting rights (subject to revesting in the event of each and every
subsequent Series E Event of Non-Compliance) and the term of office of each
Series E Director so elected shall terminate. Any Series E Director may be
removed at any time with or without cause by, and shall not be removed otherwise
than by the vote of, the holders of record of a majority of the outstanding
shares of the Series E Preferred Stock when they have the voting rights
described above (voting separately as a class). So long as a Series E Event of
Non-Compliance shall continue, any vacancy in the office of a Series E Director
may be filled by written consent of the Series E Director remaining in office,
or if none remains in office, by a vote of the holders of record of a majority
of the outstanding shares of Series E Preferred Stock when they have the voting
rights described above (voting separately as a class). The Series E Directors
shall each be entitled to one vote per director on any matter.
(c) During the continuance of a Series E Event of Non-Compliance, the
Company shall not (and shall not allow any of its subsidiaries, including the
Operating Partnership, to), without the consent of the Series E Directors (or,
if there are no Series E Directors, the consent of holders of two-thirds of the
shares of the Series E Preferred Stock outstanding at the time, given in person
or by proxy, either in writing or at a meeting (voting separately as a class)):
(i) amend, alter or repeal the Charter (including the Series E Articles), the
By-Laws or the Partnership Agreement (as defined below), (ii) directly or
indirectly sell, lease, exchange, transfer or otherwise dispose of all or any
substantial part of the assets of the Company or the Operating Partnership (in
one or a series of transactions), (iii) merge or consolidate with or into any
other Person (in one or a series of transactions) or consummate any similar
transaction, (iv) create, issue or increase the amount of authorized shares of
any series of Preferred Stock or (v) incur any Indebtedness in excess of $1
million; PROVIDED, HOWEVER, that the Series E Directors or holders of the Series
E Preferred Stock, as applicable, shall be deemed to consent without any vote to
any event described in clause (iv) or clause (v) above if (A) the documents
governing any such transaction specifically provide that such portion of the
proceeds thereof as is necessary to pay in cash the full Redemption Price with
respect to all outstanding shares of Series E Preferred Stock on the date such
transaction occurs shall be paid directly to the holders of the Series E
Preferred Stock (without being first paid over to the Company) as of such date
(and such holders shall be deemed to have requested redemption of all
outstanding shares of the Series E Preferred Stock as of such date and the
Company shall be deemed to have agreed to such redemption and to have waived any
requirement of notice with respect thereto) and (B) such Redemption Price is in
fact paid in cash to such holders as of such date.
(d) So long as any shares of Series E Preferred Stock remain
outstanding, the Company will not, without the affirmative vote or consent of
the holders of at least two-thirds of the shares of the Series E Preferred Stock
outstanding at the time, given in person or by proxy, either in writing or at a
meeting (voting separately as a class), (i) liquidate, wind up or dissolve the
Company or the Operating Partnership or (ii) amend, alter or repeal the
provisions of the Charter (including the
<PAGE>
Series E Articles), the By-Laws or the Partnership Agreement, whether by merger,
consolidation or otherwise, in a manner that would adversely affect any right,
preference, privilege or voting power of the Series E Preferred Stock or the
holders thereof.
(e) The preceding voting provisions will not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series E Preferred Stock
shall have been redeemed as provided above.
9. CONVERSION. The Series E Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Company.
10. REPORTS. So long as any shares of Series E Preferred Stock are outstanding,
the Company will provide to the holders of Series E Preferred Stock copies of
the annual reports and of the information, documents and other reports that the
Company is required to file with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). For so long as any of the shares of the Series E Preferred
Stock are outstanding, the Company will, during any period in which it is not
subject to and in compliance with Section 13 or 15(d) of the Exchange Act,
provide to each holder and to each prospective purchaser (as designated by such
holder) of Series E Preferred Stock, any information required to be provided by
Rule 144A(d)(4) under the Securities Act of 1933, as amended.
<PAGE>
11. CERTAIN DEFINITIONS. In addition to the terms defined elsewhere herein, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa):
"Change of Control" shall be deemed to occur if (i) the sale,
conveyance, transfer or lease of all or substantially all the assets of the
Company or the Operating Partnership to any "person" or "group" (within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor
provisions to either of the foregoing, including any group acting for the
purpose of acquiring, holding or disposing of securities within the meaning of
Rule 13d-5(b)(i) under the Exchange Act) (other than any subsidiary of the
Company) shall have occurred; (ii) any "person" or "group" as aforesaid becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 20% of the total voting power of all classes of the voting stock of the
Company and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election or appointment by such
board or whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors then still in office who were
either 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 Board of Directors then in office.
"Common Stock Price" means the closing price of the Common Stock on the
New York Stock Exchange ("NYSE") Composite tape or, if the Common Stock is not
then listed for trading on the NYSE, the closing price of the Common Stock as
reported on the consolidated transaction reporting system for the principal
securities exchange on which the Common Stock is so listed or, if the Common
Stock is not so listed on any such exchange, the last quoted price in the
over-the-counter market as reported on the National Association of Securities
Dealers, Inc. Automated Quotation System or, if the Common Stock is not so
listed or so quoted, the higher of the then book value per share of Common Stock
and the then fair market value per share of Common Stock, determined by a
nationally recognized independent investment banking firm selected by the
Company.
"Indebtedness" means at any time (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person for
money borrowed, (ii) any obligation of such Person evidenced by bonds,
debentures, notes, guarantees or other similar instruments, including, without
limitation, any such obligations incurred in connection with the acquisition of
property, assets or businesses, excluding trade accounts payable made in the
ordinary course of business, (iii) any reimbursement obligation of such Person
with respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person, (iv) any obligation of such Person issued
or assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business, which in either case are not more than 60 days overdue or which are
being contested in good faith), (v) any capital lease obligation of such Person,
(vi) the notional amount of any interest hedging obligations or exchange rate
obligations of such person, (vii) any indebtedness
<PAGE>
attributable to any sale and leaseback transaction to which such person is a
party and (viii) any obligation of the type referred to in clauses (i) through
(viii) of this definition of another Person and all dividends and distributions
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor,
guarantor or otherwise.
"Junior Stock" means all Common Stock of the Company, and all equity
securities ranking junior to the Series E Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company, including the Company's Series D Junior Participating Preferred Stock.
"Operating Partnership" means Mid-America Apartments, L.P., a Tennessee
limited partnership.
"Partnership Agreement" means the Second Amended and Restated Agreement
of Limited Partnership of the Operating Partnership dated as of November 24,
1997.
"Parity Stock" means, collectively, (A)(1) the Company's 9.5% Series A
Cumulative Preferred Stock (the "Series A Preferred Stock"), (2) the Company's 8
7/8% Series B Cumulative Preferred Stock (the "Series B Preferred Stock") and
(3) the Company's 9.375% Series C Cumulative Preferred Stock (the "Series C
Preferred Stock") and (B) all equity securities issued by the Company at any
time or from time to time in accordance with the provisions hereof the terms of
which specifically provide that such equity securities rank on a parity with the
Series E Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or other form of
entity or any government or any agency or subdivision thereof.
"Regular Dividend" means (i) with respect to the Company's Common Stock,
the annual dividend announced by the Company's Board of Directors with respect
to the year of determination, to the extent that such dividend does not exceed
the announced dividend for the immediately preceding year by more than five
percent and (ii) with respect to any series or class of the Company's Preferred
Stock, the annual dividend set forth in the Articles of Amendment to the
Company's Amended and Restated Charter which originally divided and classified
such class or series of Preferred Stock.
"Senior Stock" means any class or series of equity securities issued by
the Company the terms of which specifically provide that such equity securities
rank senior to the Series E Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the Company.
"Series E Articles" means the Articles of Amendment to the Charter which
designated and fixed the terms, rights and preferences of the Series E Preferred
Stock
"Series E Dividend Amount" means the sum of (i) the Liquidation
Preference and (ii) all accrued and unpaid dividends with respect to the Series
E Preferred Stock; PROVIDED, HOWEVER, that no dividend with respect to the
Series E Preferred Stock will be
<PAGE>
considered unpaid, nor shall payment thereof be considered in arrears, if such
dividend is paid on the Dividend Payment Date on which it originally accrues.
"Series E Dividend Rate" means, with respect to each share of Series E
Preferred Stock, a rate of 9.5% per annum of the Series E Dividend Amount;
PROVIDED, HOWEVER, that upon the occurrence and during the continuance of any
Series E Event of Non-Compliance (as defined below), the Series E Dividend Rate
shall increase to 14.5% per annum of the Series E Dividend Amount. Such increase
in the Series E Dividend Rate shall be in addition to any other rights and
remedies the holders of the Series E Preferred Stock may have at law or in
equity upon the occurrence of a Series E Event of Non-Compliance.
"Series E Event of Non-Compliance" means the occurrence of any of the
following events: (i) all accrued dividends with respect to the Series E
Preferred Stock shall not be paid in full for any three consecutive Dividend
Payment Dates (after giving effect to any dividends paid on the third such
Dividend Payment Date), (ii) the Company for any reason, including the
applicability of Section 6 (Certain Payment Restrictions) hereof, shall not
redeem any share of Series E Preferred Stock on the date fixed for redemption
thereof in the applicable Redemption Notice or fulfill all its obligations under
Section 5(c), (iii) the Company shall breach any of its other material
obligations under the Series E Articles, (iv) the Company shall fail to pay at
the final stated maturity (giving effect to any extensions thereof) the
principal amount of any Indebtedness of the Company or any subsidiary of the
Company, or the final stated maturity of any such Indebtedness is accelerated,
if the aggregate principal amount of such Indebtedness, together with the
aggregate principal amount of any other such Indebtedness in default for failure
to pay principal at the final stated maturity (giving effect to any extensions
thereof) or that has been accelerated, aggregates $1 million or more at the time
of such default, in each case (with respect to this clause (iv) only), after a
30-day period during which such default shall not have been cured or such
acceleration rescinded, (v) the Company or the Operating Partnership files, or
has filed against it, a petition to have it declared bankrupt or calling for its
reorganization or arrangement under any law relating to bankruptcy or
insolvency, unless, in the case of a petition filed against the Company or the
Operating Partnership, as applicable, such petition is dismissed within sixty
days or (vi) the Company or the Operating Partnership applies for or consents to
the appointment of a receiver, trustee or conservator for any portion of its
property or such appointment is made without the consent of the Company or the
Operating Partnership, as applicable, and is not vacated within sixty days.
"Set Aside Shares" means, with respect to any shares of Series E
Preferred Stock to be redeemed by the holder thereof, a number of shares of
Common Stock equal to the cash Redemption Price set forth in the applicable
Redemption Notice divided by the average Common Stock Price over the three most
recent business days; PROVIDED, HOWEVER, that the number of Set Aside Shares
shall be readjusted (i) every thirty days after the initial determination
thereof with respect to any redemption of shares of Series Preferred Stock based
upon the average Common Stock Price over the three then most recent business
days and (ii) any time the Common Stock Price on any business day is five
percent or more below the Common Stock Price most recently determined for
purposes of calculating the number of Set Aside Shares with respect to such
redemption
<PAGE>
of Series E Preferred Stock, and upon any such recalculation pursuant to clause
(i) or clause (ii) of this definition the number of Set Aside Shares with
respect to such redemption of Series E Preferred Stock shall be adjusted upward
or downward (as applicable) by the Company within two business days thereafter
such that the product of the number of Set Aside Shares and the Common Stock
Price most recently determined with respect to such redemption of Series E
Preferred Stock is equal to the applicable Redemption Price.
THIRD: These Articles of Amendment shall be effective at the time they
are accepted for filing by the Tennessee Secretary of State.
FOURTH: These Articles of Amendment were duly adopted by unanimous
consent of the board of directors without shareholder action, such shareholder
action not being required, on December __, 1998.
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 __th day of December 1998.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By:
Name: Simon R. C. Wadsworth
Title: Chief Financial Officer
<FORM OF STOCK CERTIFICATE>
EXHIBIT 4.6
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
DATED AS OF
MARCH 1, 1999
BETWEEN
MID-AMERICA APARTMENT COMMUNITIES, INC.
AND
FIRST UNION NATIONAL BANK
AS RIGHTS AGENT
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE IDEFINITIONS.........................................................................1
1.1 Definitions......................................................................1
ARTICLE IITHE RIGHTS.........................................................................7
2.1 Summary of Rights...............................................................7
2.2 Legend on Common Stock Certificates.............................................7
2.3 Exercise of Rights; Separation of Rights........................................7
2.4 Adjustments to Exercise Price; Number of Rights.................................9
2.5 Date on Which Exercise is Effective............................................10
2.6 Execution, Authentication, Delivery and Dating of Rights Certificates..........10
2.7 Registration, Registration of Transfer and Exchange............................11
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates......................12
2.9 Persons Deemed Owners..........................................................12
2.10 Delivery and Cancellation of Certificates.....................................12
2.11 Agreement of Rights Holders...................................................13
ARTICLE IIIADJUSTMENTS TO THE RIGHTS INTHE EVENT OF CERTAIN TRANSACTIONS....................13
3.1 Flip-in........................................................................13
3.2 Flip-over......................................................................15
ARTICLE IVTHE RIGHTS AGENT..................................................................16
4.1 General........................................................................16
4.2 Merger or Consolidation or Change of Name of Rights Agent......................16
4.3 Duties of Rights Agent.........................................................17
4.4 Change of Rights Agent.........................................................19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VMISCELLANEOUS......................................................................20
5.1 Redemption.....................................................................20
5.2 Expiration.....................................................................20
5.3 Issuance of New Rights Certificates............................................20
5.4 Supplements and Amendments.....................................................21
5.5 Fractional Shares..............................................................21
5.6 Rights of Action...............................................................21
5.7 Holder of Rights Not Deemed a Shareholder......................................22
5.8 Notice of Proposed Actions.....................................................22
5.9 Notices........................................................................22
5.10 Suspension of Exercisability..................................................23
5.11 Costs of Enforcement..........................................................23
5.12 Successors....................................................................23
5.13 Benefits of this Agreement....................................................23
5.14 Determination and Actions by the Board of Directors, etc......................23
5.15 Descriptive Headings..........................................................24
5.16 Governing Law.................................................................24
5.17 Counterparts..................................................................24
5.18 Severability..................................................................24
</TABLE>
ii
<PAGE>
EXHIBIT A
Form of Rights Certificate (Together with Form of Election to Exercise)
EXHIBIT B
Articles of Amendment designating Series of Preferred Stock
iii
<PAGE>
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
SHAREHOLDER PROTECTION RIGHTS AGREEMENT (as amended from time to time,
this "Agreement"), dated as of March 1, 1999, between Mid-America Apartment
Communities, Inc., a Tennessee corporation (the "Company"), and First Union
National Bank, a national banking association, as Rights Agent (the "Rights
Agent", which term shall include any successor Rights Agent hereunder).
WITNESSETH:
WHEREAS, on November 25, 1998 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a distribution of
one right ("Right") in respect of each share of Common Stock (as hereinafter
defined) held of record as of the close of business on March ___, 1999 (the
"Record Time") and authorized the issuance of one Right in respect of each share
of Common Stock issued after the Record Time and prior to the Separation Time
(as hereinafter defined), each Right initially representing the right to
purchase upon the terms and subject to the conditions hereinafter set forth one
one-hundredth of a share of Series D Participating Preferred Stock of the
Company having the rights, powers and preferences set forth in the Articles of
Amendment attached as Exhibit B hereto;
WHEREAS, the Company desires to set forth certain terms and conditions
governing the Rights; and
WHEREAS, the Company desires to appoint the Rights Agent to act as
rights agent hereunder, in accordance with the terms and conditions hereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
I.1 DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings indicated:
"ACQUIRING PERSON" shall mean any Person who shall be a Beneficial Owner
of 10% or more of the outstanding shares of Common Stock, but shall not include
any Person (i) who is the Beneficial Owner of 10% or more of the outstanding
shares of Common Stock on the date of this Agreement or who shall become the
Beneficial Owner of 10% or more of the outstanding shares of Common Stock solely
as a result of an acquisition by the Company of shares of Common Stock, until
such time hereafter or thereafter as any of such Persons shall become the
Beneficial Owner
<PAGE>
(other than by means of a stock dividend or stock split) of any additional
shares of Common Stock, (ii) who becomes the Beneficial Owner of 10% or more of
the outstanding shares of Common Stock but who acquired Beneficial Ownership of
shares of Common Stock without any plan or intention to seek or affect control
of the Company, if such Person promptly enters into an irrevocable commitment to
divest, and thereafter promptly divests (without exercising or retaining any
power, including voting, with respect to such shares), sufficient shares of
Common Stock (or securities convertible into, exchangeable into or exercisable
for Common Stock) so that such Person ceases to be the Beneficial Owner of 10%
or more of the outstanding shares of Common Stock or (iii) who Beneficially Owns
shares of Common Stock consisting solely of one or more (A) shares of Common
Stock Beneficially Owned pursuant to the grant or exercise of an option granted
to such Person (an "Option Holder") by the Company in connection with an
agreement to merge with, or acquire, the Company entered into prior to a Flip-in
Date, (B) shares of Common Stock Beneficially Owned by such Option Holder or its
Affiliates or Associates at the time of grant of such option, (C) shares of
Common Stock acquired by Affiliates or Associates of such Option Holder after
the time of such grant which, in the aggregate, amount to less than 1% of the
outstanding shares of Common Stock and (D) shares of Common Stock which are held
by such Person in trust accounts, managed accounts and the like or otherwise
held in a fiduciary capacity, that are Beneficially Owned by third persons who
are not Affiliates or Associates of such Person or acting together with such
Person to hold such shares, or which are held by such Person in respect of a
debt previously contracted. In addition, the Company, any wholly-owned
Subsidiary of the Company and any employee stock ownership or other employee
benefit plan of the Company or a wholly-owned Subsidiary of the Company shall
not be an Acquiring Person.
"AFFILIATE" and "ASSOCIATE" shall have the respective meanings ascribed
to such terms in Rule 12b-2 under the Exchange Act, as such Rule is in effect on
the date of this Agreement.
"AGREEMENT" shall have the meaning set forth in the preamble.
A Person shall be deemed the "BENEFICIAL OWNER", and to have "BENEFICIAL
OWNERSHIP" of, and to "BENEFICIALLY OWN", any securities as to which such Person
or any of such Person's Affiliates or Associates is or may be deemed to be the
beneficial owner of pursuant to Rule 13d-3 and 13d-5 under the Exchange Act, as
such Rules are in effect on the date of this Agreement, as well as any
securities as to which such Person or any of such Person's Affiliates or
Associates has the right to become Beneficial Owner (whether such right is
exercisable immediately or only after the passage of time or the occurrence of
conditions) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner", or to have "Beneficial Ownership" of, or to
"Beneficially Own", any security (i) solely because such security has been
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such tendered security is accepted
for payment or exchange or (ii) solely because such Person or any of such
Person's Affiliates or Associates has or shares the power to vote or direct the
voting of such security pursuant to a revocable proxy given
2
<PAGE>
in response to a public proxy or consent solicitation made to more than ten
holders of shares of a class of stock of the Company registered under Section 12
of the Exchange Act and pursuant to, and in accordance with, the applicable
rules and regulations under the Exchange Act, except if such power (or the
arrangements relating thereto) is then reportable under Item 6 of Schedule 13D
under the Exchange Act (or any similar provision of a comparable or successor
report). Notwithstanding the foregoing, no officer or director of the Company
shall be deemed to Beneficially Own any securities of any other Person by virtue
of any actions such officer or director takes in such capacity. For purposes of
this Agreement, in determining the percentage of the outstanding shares of
Common Stock with respect to which a Person is the Beneficial Owner, all shares
as to which such Person is deemed the Beneficial Owner shall be deemed
outstanding.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in the city of Memphis, Tennessee are generally
authorized or obligated by law or executive order to close.
"CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m. Memphis time
on such date or, if such date is not a Business Day, 5:00 p.m. Memphis time on
the next succeeding Business Day.
"COMMON STOCK" shall mean the shares of Common Stock, par value $.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the preamble.
"ELECTION TO EXERCISE" shall have the meaning set forth in Section
2.3(d) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCHANGE RATIO" shall have the meaning set forth in Section 3.1(c)
hereof.
"EXCHANGE TIME" shall mean the time at which the right to exercise the
Rights shall terminate pursuant to Section 3.1(c) hereof.
"EXERCISE PRICE" shall mean, as of any date, the price at which a holder
may purchase the securities issuable upon exercise of one whole Right. Until
adjustment thereof in accordance with the terms hereof, the Exercise Price shall
equal $87.50.
"EXPANSION FACTOR" shall have the meaning set forth in Section 2.4(a)
hereof.
"EXPIRATION TIME" shall mean the earliest of (i) the Exchange Time, (ii)
the Redemption Time and (iii) the close of business on the tenth anniversary of
the date of the Record Time.
3
<PAGE>
"FLIP-IN DATE" shall mean the tenth business day after any Stock
Acquisition Date or such earlier or later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Flip-in
Date that would otherwise have occurred.
"FLIP-OVER ENTITY," for purposes of Section 3.2, shall mean (i) in the
case of a Flip-over Transaction or Event described in clause (i) of the
definition thereof, the Person issuing any securities into which shares of
Common Stock are being converted or exchanged and, if no such securities are
being issued, the other party to such Flip-over Transaction or Event and (ii) in
the case of a Flip-over Transaction or Event referred to in clause (ii) or (iii)
of the definition thereof, the Person receiving the greatest portion of the (A)
assets or (B) operating income or cash flow being transferred in such Flip-over
Transaction or Event, provided in all cases if such Person is a subsidiary of a
corporation, the parent corporation shall be the Flip-Over Entity.
"FLIP-OVER STOCK" shall mean the capital stock (or similar equity
interest) with the greatest voting power in respect of the election of directors
(or other persons similarly responsible for direction of the business and
affairs) of a Flip-Over Entity.
"FLIP-OVER TRANSACTION OR EVENT" shall mean a transaction or series of
transactions after a Flip-in Date in which, directly or indirectly, (i) the
Company shall consolidate or merge or participate in a share exchange with any
other Person if, at the time of the consolidation, merger or share exchange or
at the time the Company enters into any agreement with respect to any such
consolidation, merger or share exchange, the Acquiring Person Controls the Board
of Directors of the Company and either (A) any term of or arrangement concerning
the treatment of shares of capital stock in such consolidation, merger or share
exchange relating to the Acquiring Person is not identical to the terms and
arrangements relating to other holders of the Common Stock or (B) the Person
with whom the transaction or series of transactions occurs is the Acquiring
Person or an Affiliate or Associate of the Acquiring Person, (ii) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer) assets (A) aggregating more than 50% of the assets
(measured by either book value or fair market value) or (B) generating more than
50% of the operating income or cash flow, of the Company and its Subsidiaries
(taken as a whole) to any Person (other than the Company or one or more of its
wholly owned Subsidiaries) or to two or more such Persons who are Affiliates or
Associates or otherwise acting in concert, if, at the time of the entry by the
Company (or any such Subsidiary) into an agreement with respect to such sale or
transfer of assets, the Acquiring Person Controls the Board of Directors of the
Company, or (iii) any Acquiring Person shall (A) sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, to,
from, or with, as the case may be, the Company or any of its Subsidiaries, over
any period of 12 consecutive calendar months, assets (x) having an aggregate
fair market value of more than $5,000,000 or (y) on terms and conditions less
favorable to the Company than the Company would be able to obtain through
arm's-length negotiations with an unaffiliated third party, (B) receive any
compensation for services from the Company or any of its Subsidiaries, other
than compensation for full-time employment as a regular employee at rates in
accordance with the Company's (or its Subsidiaries') past practices, (C) receive
the benefit, directly or indirectly (except
4
<PAGE>
proportionately as a shareholder), over any period of 12 consecutive calendar
months, of any loans, advances, guarantees, pledges, insurance, reinsurance or
other financial assistance or any tax credits or other tax advantage provided by
the Company or any of its Subsidiaries involving an aggregate principal amount
in excess of $5,000,000 or an aggregate cost or transfer of benefits from the
Company or any of its Subsidiaries in excess of $5,000,000 or, in any case, on
terms and conditions less favorable to the Company than the Company would be
able to obtain through arm's-length negotiations with a third party, or (D)
increase by more than 1% its proportionate share of the outstanding shares of
any class of equity securities or securities convertible into any class of
equity securities of the Company or any of its Subsidiaries as a result of any
acquisition from the Company (with or without consideration), any
reclassification of securities (including any reverse stock split), or
recapitalization of the Company, any merger or consolidation of the Company or
any other transaction or series of transactions (whether or not with or into or
otherwise involving an Acquiring Person). For purposes of the foregoing
description, the term "Acquiring Person" shall include any Acquiring Person and
its Affiliates and Associates, counted together as a single Person. An Acquiring
Person shall be deemed to Control the Company's Board of Directors when,
following a Flip-in Date, the persons who were directors of the Company (or
persons nominated and/or appointed as directors by vote of a majority of such
persons) before the Stock Acquisition Date shall cease to constitute a majority
of the Company's Board of Directors.
"MARKET PRICE" per share of any securities on any date shall mean the
average of the daily closing prices per share of such securities (determined as
described below) on each of the 20 consecutive Trading Days through and
including the Trading Day immediately preceding such date; provided, however,
that if an event of a type analogous to any of the events described in Section
2.4 hereof shall have caused the closing prices used to determine the Market
Price on any Trading Days during such period of 20 Trading Days not to be fully
comparable with the closing price on such date, each such closing price so used
shall be appropriately adjusted in order to make it fully comparable with the
closing price on such date. The closing price per share of any securities on any
date shall be the last reported sale price, regular way, or, in case no such
sale takes place or is quoted on such date, the average of the closing bid and
asked prices, regular way, for each share of such securities, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange, Inc.
or, if the securities are not listed or admitted to trading on the New York
Stock Exchange, Inc., as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the securities are listed or admitted to trading
or, if the securities are not listed or admitted to trading on any national
securities exchange, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the securities are not listed or admitted to
trading on any national securities exchange or quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the securities selected by the Board of
Directors of the Company; provided, however, that if on any such date the
securities are not listed or admitted to trading on a national securities
exchange or traded in the over-the-counter market, the closing price per share
of such securities on such date shall mean
5
<PAGE>
the fair value per share of securities on such date as determined in good faith
by the Board of Directors of the Company, after consultation with a nationally
recognized investment banking firm, and set forth in a certificate delivered to
the Rights Agent.
"OPTION HOLDER" shall have the meaning set forth in the definition of
Acquiring Person.
"PERSON" shall mean any individual, firm, partnership, association,
group (as such term is used in Rule 13d-5 under the Securities Exchange Act of
1934, as such Rule is in effect on the date of this Agreement), corporation or
other entity.
"PREFERRED STOCK" shall mean the Series D Participating Preferred Stock,
$.01 par value per share of the Company created by Articles of Amendment in
substantially the form set forth in Exhibit B hereto appropriately completed.
"RECORD TIME" shall have the meaning set forth in the Recitals.
"REDEMPTION PRICE" shall mean an amount (calculated to the nearest one
one-hundredth of a cent) equal to the Exercise Price, as in effect at the
Redemption Time, divided by 8,750 (i.e., initially $0.01).
"REDEMPTION TIME" shall mean the time at which the right to exercise the
Rights shall terminate pursuant to Section 5.1 hereof.
"RIGHT" shall have the meaning set forth in the Recitals.
"RIGHTS AGENT" shall have the meaning set forth in the Preamble.
"RIGHTS CERTIFICATE" shall have the meaning set forth in Section 2.3(c)
hereof.
"RIGHTS REGISTER" shall have the meaning set forth in Section 2.7(a)
hereof.
"SEPARATION TIME" shall mean the close of business on the earlier of (i)
the tenth business day (or such later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Separation
Time that would otherwise have occurred) after the date on which any Person
commences a tender or exchange offer which, if consummated, would result in such
Person's becoming an Acquiring Person and (ii) the Flip-in Date; provided, that
if any tender or exchange offer referred to in clause (i) of this paragraph is
cancelled, terminated or otherwise withdrawn prior to the Separation Time
without the purchase of any shares of Common Stock pursuant thereto, such offer
shall be deemed, for purposes of this paragraph, never to have been made.
6
<PAGE>
"STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company (by any means) that a Person has become an Acquiring
Person.
"SUBSIDIARY" of any specified Person shall mean any corporation or other
entity of which a majority of the voting power of the equity securities or a
majority of the equity interest is Beneficially Owned, directly or indirectly,
by such Person.
"TRADING DAY," when used with respect to any securities, shall mean a
day on which the New York Stock Exchange, Inc. is open for the transaction of
business or, if such securities are not listed or admitted to trading on the New
York Stock Exchange, Inc., a day on which the principal national securities
exchange on which such securities are listed or admitted to trading is open for
the transaction of business or, if such securities are not listed or admitted to
trading on any national securities exchange but are reported on NASDAQ, a NASDAQ
business day or, if such securities are not reported on NASDAQ, a Business Day.
ARTICLE II
THE RIGHTS
II.1 SUMMARY OF RIGHTS. As soon as practicable after the Record Time,
the Company will mail a letter summarizing the terms of the Rights to each
holder of record of Common Stock as of the Record Time, at such holder's address
as shown by the records of the Company.
II.2 LEGEND ON COMMON STOCK CERTIFICATES. Certificates for the Common
Stock issued after the Record Time hereof but prior to the Separation Time shall
evidence one Right for each share of Common Stock represented thereby and shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
Until the Separation Time (as defined in the Rights Agreement referred
to below), this certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights Agreement, dated as of
March 1, 1999 (as such may be amended from time to time, the "Rights
Agreement"), between Mid-America Apartment Communities, Inc. (the
"Company") and First Union National Bank, as Rights Agent, the terms of
which are hereby incorporated herein by reference and a copy of which is
on file at the principal executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may be exchanged for shares of Common Stock or other
securities or assets of the Company, may expire, may become void (if
they are "Beneficially Owned" by an "Acquiring Person" or an Affiliate
or Associate thereof, as such terms are defined in the Rights Agreement,
or by any transferee of any of the foregoing) or may be evidenced by
separate certificates and may no longer be evidenced by this
certificate. The Company will mail or arrange for the mailing of a copy
of the Rights Agreement to the holder of this certificate without charge
within five days after the receipt of a written request therefor.
7
<PAGE>
Certificates representing shares of Common Stock that were issued and
outstanding at the Record Time shall evidence one Right for each share of Common
Stock evidenced thereby notwithstanding the absence of the foregoing legend.
II.3 EXERCISE OF RIGHTS; SEPARATION OF RIGHTS. (a) Subject to Sections
3.1, 5.1 and 5.10 and subject to adjustment as herein set forth, each Right will
entitle the holder thereof, after the Separation Time and prior to the
Expiration Time, to purchase, for the Exercise Price, one one-hundredth of a
share of Preferred Stock.
(b) Until the Separation Time, (i) no Right may be exercised and (ii)
each Right will be evidenced by the certificate for the associated share of
Common Stock (together, in the case of certificates issued prior to the Record
Time, with the letter mailed to the record holder thereof pursuant to Section
2.1) and will be transferable only together with, and will be transferred by a
transfer (whether with or without such letter) of, such associated share.
(c) Subject to the terms and conditions hereof, after the Separation
Time and prior to the Expiration Time, the Rights (i) may be exercised and (ii)
may be transferred independent of shares of Common Stock. Promptly following the
Separation Time, the Rights Agent will mail to each holder of record of Common
Stock as of the Separation Time (other than any Person whose Rights have become
void pursuant to Section 3.1(b)), at such holder's address as shown by the
records of the Company (the Company hereby agreeing to furnish copies of such
records to the Rights Agent for this purpose), (x) a certificate (a "Rights
Certificate") in substantially the form of Exhibit A hereto appropriately
completed, representing the number of Rights held by such holder at the
Separation Time and having such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any national securities
exchange or quotation system on which the Rights may from time to time be listed
or traded, or to conform to usage, and (y) a disclosure statement describing the
Rights.
(d) Subject to the terms and conditions hereof, Rights may be exercised
on any Business Day after the Separation Time and prior to the Expiration Time
by submitting to the Rights Agent the Rights Certificate evidencing such Rights
with an Election to Exercise (an "Election to Exercise") substantially in the
form attached to the Rights Certificate duly completed, accompanied by payment
in cash, or by certified or official bank check or money order payable to the
order of the Company, of a sum equal to the Exercise Price multiplied by the
number of Rights being exercised and a sum sufficient to cover any transfer tax
or charge which may be payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the issuance or delivery of
certificates for shares or depositary receipts (or both) in a name other than
that of the holder of the Rights being exercised.
8
<PAGE>
(e) Upon receipt of a Rights Certificate, with an Election to Exercise
accompanied by payment as set forth in Section 2.3(d), and subject to the terms
and conditions hereof, the Rights Agent will thereupon promptly (i) (A)
requisition from the Company's transfer agent stock certificates evidencing such
number of shares or other securities to be purchased (the Company hereby
irrevocably authorizing its transfer agents to comply with all such
requisitions) and (B) if the Company elects pursuant to Section 5.5 not to issue
certificates representing fractional shares, requisition from the depositary
selected by the Company depositary receipts representing the fractional shares
to be purchased or requisition from the Company the amount of cash to be paid in
lieu of fractional shares in accordance with Section 5.5 and (ii) after receipt
of such certificates, depositary receipts and/or cash, deliver the same to or
upon the order of the registered holder of such Rights Certificate, registered
(in the case of certificates or depositary receipts) in such name or names as
may be designated by such holder.
(f) In case the holder of any Rights shall exercise less than all the
Rights evidenced by such holder's Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holder's duly authorized assigns.
(g) The Company covenants and agrees that it will (i) take all such
action as may be necessary to ensure that all shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Exercise Price), be duly and validly authorized,
executed, issued and delivered and fully paid and nonassessable; (ii) take all
such action as may be necessary to comply with any applicable requirements of
the Securities Act of 1933 or the Exchange Act, and the rules and regulations
thereunder, and any other applicable law, rule or regulation, in connection with
the issuance of any shares upon exercise of Rights; and (iii) pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the original issuance or delivery of the Rights
Certificates or of any shares issued upon the exercise of Rights, provided, that
the Company shall not be required to pay any transfer tax or charge which may be
payable in respect of any transfer involved in the transfer or delivery of
Rights Certificates or the issuance or delivery of certificates for shares in a
name other than that of the holder of the Rights being transferred or exercised.
II.4 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS. (a) In the event
the Company shall at any time after the Record Time and prior to the Separation
Time (i) declare or pay a dividend on Common Stock payable in Common Stock, (ii)
subdivide the outstanding Common Stock or (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock, (x) the Exercise Price in
effect after such adjustment will be equal to the Exercise Price in effect
immediately prior to such adjustment divided by the number of shares of Common
Stock (the "Expansion Factor") that a holder of one share of Common Stock
immediately prior to such dividend, subdivision or combination would hold
thereafter as a result thereof and (y) each Right held prior to such adjustment
will become that number of Rights equal to the Expansion Factor, and the
adjusted number of Rights will be deemed to be distributed among the shares of
Common Stock with respect to which the original Rights were associated (if they
remain outstanding) and the shares
9
<PAGE>
issued in respect of such dividend, subdivision or combination, so that each
such share of Common Stock will have exactly one Right associated with it. Each
adjustment made pursuant to this paragraph shall be made as of the payment or
effective date for the applicable dividend, subdivision or combination.
In the event the Company shall at any time after the Record Time and
prior to the Separation Time issue any shares of Common Stock otherwise than in
a transaction referred to in the preceding paragraph, each such share of Common
Stock so issued shall automatically have one new Right associated with it, which
Right shall be evidenced by the certificate representing such share. To the
extent provided in Section 5.3, Rights shall be issued by the Company in respect
of shares of Common Stock that are issued or sold by the Company after the
Separation Time.
(b) In the event the Company shall at any time after the Record Time and
prior to the Separation Time issue or distribute any securities or assets in
respect of, in lieu of or in exchange for Common Stock (other than pursuant to a
regular periodic cash dividend or a dividend paid solely in Common Stock)
whether by dividend, in a reclassification or recapitalization (including any
such transaction involving a merger, consolidation or share exchange), or
otherwise, the Company shall make such adjustments, if any, in the Exercise
Price, number of Rights and/or securities or other property purchasable upon
exercise of Rights as the Board of Directors of the Company, in its sole
discretion, may deem to be appropriate under the circumstances in order to
adequately protect the interests of the holders of Rights generally, and the
Company and the Rights Agent shall amend this Agreement as necessary to provide
for such adjustments.
(c) Each adjustment to the Exercise Price made pursuant to this Section
2.4 shall be calculated to the nearest cent. Whenever an adjustment to the
Exercise Price is made pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment and (ii) promptly file
with the Rights Agent and with each transfer agent for the Common Stock a copy
of such certificate. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein and shall not be obligated or
responsible for calculating any adjustment nor shall it be deemed to have
knowledge of any such adjustment unless and until it shall have received such a
certificate.
(d) Rights certificates shall represent the securities purchasable
under the terms of this Agreement, including any adjustment or change in the
securities purchasable upon exercise of the Rights, even though such
certificates may continue to express the securities purchasable at the time of
issuance of the initial Rights Certificates.
II.5 DATE ON WHICH EXERCISE IS EFFECTIVE. Each person in whose name any
certificate for shares is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Exercise Price for such Rights (and any
applicable taxes and other governmental charges payable by the exercising holder
hereunder)
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was made; provided, however, that if the date of such surrender and payment is a
date upon which the stock transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the stock
transfer books of the Company are open.
II.6 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS
CERTIFICATES. (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, President or one
of its Executive Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Rights Certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such Rights
Certificates.
Promptly after the Separation Time, the Company will notify the Rights
Agent of such Separation Time and will deliver Rights Certificates executed by
the Company to the Rights Agent for counter-signature, and, subject to Section
3.1(b), the Rights Agent shall manually countersign and deliver such Rights
Certificates to the holders of the Rights pursuant to Section 2.3(c) hereof. No
Rights Certificate shall be valid for any purpose unless manually countersigned
by the Rights Agent.
(b) Each Rights Certificate shall be dated the date of countersignature
thereof.
II.7 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. (a) After the
Separation Time, the Company will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company will provide for the registration and transfer of Rights. The Rights
Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the
Rights Register for the Company and registering Rights and transfers of Rights
after the Separation Time as herein provided. In the event that the Rights Agent
shall cease to be the Rights Registrar, the Rights Agent will have the right to
examine the Rights Register at all reasonable times after the Separation Time.
After the Separation Time and prior to the Expiration Time, upon
surrender for registration of transfer or exchange of any Rights Certificate,
and subject to the provisions of Section 2.7(c) and (d), the Company will
execute, and the Rights Agent will countersign and deliver, in the name of the
holder or the designated transferee or transferees, as required pursuant to the
holder's instructions, one or more new Rights Certificates evidencing the same
aggregate number of Rights as did the Rights Certificate so surrendered.
(b) Except as otherwise provided in Section 3.1(b), all Rights issued
upon any registration of transfer or exchange of Rights Certificates shall be
the valid obligations of the Company, and such
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Rights shall be entitled to the same benefits under this Agreement as the Rights
surrendered upon such registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company or the Rights Agent, as the case
may be, duly executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any new Rights
Certificate under this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
(d) The Company shall not be required to register the transfer or
exchange of any Rights after such Rights have become void under Section 3.1(b),
been exchanged under Section 3.1(c) or been redeemed under Section 5.1.
II.8 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES. (a) If
any mutilated Rights Certificate is surrendered to the Rights Agent prior to the
Expiration Time, then, subject to Sections 3.1(b), 3.1(c) and 5.1, the Company
shall execute and the Rights Agent shall countersign and deliver in exchange
therefor a new Rights Certificate evidencing the same number of Rights as did
the Rights Certificate so surrendered.
(b) If there shall be delivered to the Company and the Rights Agent
prior to the Expiration Time (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such security or
indemnity as may be required by them to save each of them and any of their
agents harmless, then, subject to Sections 3.1(b), 3.1(c) and 5.1 and in the
absence of notice to the Company or the Rights Agent that such Rights
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon its request the Rights Agent shall countersign and deliver, in
lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate under
this Section 2.8, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Rights
Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.8 in
lieu of any destroyed, lost or stolen Rights Certificate shall evidence an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Rights Certificate shall be at any time enforceable by
anyone, and, subject to Section 3.1(b) shall be entitled to all the benefits of
this Agreement equally and proportionately with any and all other Rights duly
issued hereunder.
II.9 PERSONS DEEMED OWNERS. Prior to due presentment of a Rights
Certificate (or, prior to the Separation Time, the associated Common Stock
certificate) for registration of transfer, the
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Company, the Rights Agent and any agent of the Company or the Rights Agent may
deem and treat the person in whose name such Rights Certificate (or, prior to
the Separation Time, such Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby for all purposes
whatsoever, including the payment of the Redemption Price and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary. As
used in this Agreement, unless the context otherwise requires, the term "holder"
of any Rights shall mean the registered holder of such Rights (or, prior to the
Separation Time, the associated shares of Common Stock).
II.10 DELIVERY AND CANCELLATION OF CERTIFICATES. All Rights Certificates
surrendered upon exercise or for registration of transfer or exchange shall, if
surrendered to any person other than the Rights Agent, be delivered to the
Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent.
The Company may at any time deliver to the Rights Agent for cancellation any
Rights Certificates previously countersigned and delivered hereunder which the
Company may have acquired in any manner whatsoever, and all Rights Certificates
so delivered shall be promptly cancelled by the Rights Agent. No Rights
Certificates shall be countersigned in lieu of or in exchange for any Rights
Certificates cancelled as provided in this Section 2.10, except as expressly
permitted by this Agreement. The Rights Agent shall destroy all cancelled Rights
Certificates and deliver a certificate of destruction to the Company.
II.11 AGREEMENT OF RIGHTS HOLDERS. Every holder of Rights by accepting
the same consents and agrees with the Company and the Rights Agent and with
every other holder of Rights that:
(a) prior to the Separation Time, each Right will be transferable only
together with, and will be transferred by a transfer of, the associated share of
Common Stock;
(b) after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
(c) prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Stock certificate) for registration of
transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary;
(d) Rights beneficially owned by certain Persons will, under the
circumstances set forth in Section 3.1(b), become void; and
(e) this Agreement may be supplemented or amended from time to time
pursuant to Section 2.4(b) or 5.4 hereof.
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ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN
THE EVENT OF CERTAIN TRANSACTIONS
III.1 FLIP-IN. (a) In the event that prior to the Expiration Time a
Flip-in Date shall occur, except as provided in this Section 3.1, each Right
shall constitute the right to purchase from the Company, upon exercise thereof
in accordance with the terms hereof (but subject to Section 5.10), that number
of shares of Common Stock having an aggregate Market Price on the Stock
Acquisition Date equal to twice the Exercise Price for an amount in cash equal
to the Exercise Price (such right to be appropriately adjusted in order to
protect the interests of the holders of Rights generally in the event that on or
after such Stock Acquisition Date an event of a type analogous to any of the
events described in Section 2.4(a) or (b) shall have occurred with respect to
the Common Stock).
(b) Notwithstanding the foregoing, any Rights that are or were
Beneficially Owned on or after the Stock Acquisition Date by an Acquiring Person
or an Affiliate or Associate thereof or by any transferee, direct or indirect,
of any of the foregoing shall become void and any holder of such Rights
(including transferees) shall thereafter have no right to exercise or transfer
such Rights under any provision of this Agreement. If any Rights Certificate is
presented for assignment or exercise and the Person presenting the same will not
complete the certification set forth at the end of the form of assignment or
notice of election to exercise and provide such additional evidence of the
identity of the Beneficial Owner and its Affiliates and Associates (or former
Beneficial Owners and their Affiliates and Associates) as the Company shall
reasonably request, then the Company shall be entitled conclusively to deem the
Beneficial Owner thereof to be an Acquiring Person or an Affiliate or Associate
thereof or a transferee of any of the foregoing and accordingly will deem the
Rights evidenced thereby to be void and not transferable or exercisable.
(c) To the extent permitted by law, the Board of Directors of the
Company may, at its option, at any time after a Flip-in Date elect to exchange
all (but not less than all) the then outstanding Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 3.1(b)) for
shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted in order to protect the interests of holders of
Rights generally in the event that after the Separation Time an event of a type
analogous to any of the events described in Section 2.4(a) or (b) shall have
occurred with respect to the Common Stock (such exchange ratio, as adjusted from
time to time, being hereinafter referred to as the "Exchange Ratio").
Immediately upon the action of the Board of Directors of the Company
electing to exchange the Rights, without any further action and without any
notice, the right to exercise the Rights will terminate and each Right (other
than Rights that have become void pursuant to Section 3.1(b)) will thereafter
represent only the right to receive a number of shares of Common Stock equal to
the Exchange Ratio. Promptly after the action of the Board of Directors electing
to exchange the Rights, the Company shall give notice thereof (specifying the
steps to be taken to receive shares of Common Stock in exchange for Rights) to
the Rights Agent and the holders of the Rights (other than Rights
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that have become void pursuant to Section 3.1(b)) outstanding immediately prior
thereto by mailing such notice in accordance with Section 5.9.
Each Person in whose name any certificate for shares is issued upon the
exchange of Rights pursuant to this Section 3.1(c) or Section 3.1(d) shall for
all purposes be deemed to have become the holder of record of the shares
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of any applicable taxes and other governmental charges payable by the holder was
made; provided, however, that if the date of such surrender and payment is a
date upon which the stock transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the stock
transfer books of the Company are open.
(d) Whenever the Company shall become obligated under Section 3.1(a) or
(c) to issue shares of Common Stock upon exercise of or in exchange for Rights,
the Company, at its option, may substitute therefor shares of Preferred Stock,
at a ratio of one one-hundredth of a share of Preferred Stock for each share of
Common Stock so issuable.
(e) In the event that there shall not be sufficient authorized but
unissued shares of Common Stock or Preferred Stock of the Company to permit the
exercise or exchange in full of the Rights in accordance with Section 3.1(a) or
(c), and the Company elects not to, or is otherwise unable to, make the exchange
referred to in Section 3.1(c), the Company shall take such action as shall be
necessary to ensure and provide, to the extent permitted by applicable law and
any agreements or instruments in effect on the Stock Acquisition Date to which
it is a party, that each Right shall thereafter constitute the right to receive,
(x) at the Company's option, either (A) in return for the Exercise Price, debt
or equity securities or other assets (or a combination thereof) having a fair
value equal to twice the Exercise Price, or (B) without payment of consideration
(except as otherwise required by applicable law), debt or equity securities or
other assets (or a combination thereof) having a fair value equal to the
Exercise Price, or (y) if the Board of Directors of the Company elects to
exchange the Rights in accordance with Section 3.1(c), debt or equity securities
or other assets (or a combination thereof) having a fair value equal to the
product of the Market Price of a share of Common Stock on the Flip-in Date times
the Exchange Ratio in effect on the Flip-in Date, where in any case set forth in
(x) or (y) above the fair value of such debt or equity securities or other
assets shall be as determined in good faith by the Board of Directors of the
Company, after consultation with a nationally recognized investment banking
firm.
III.2 FLIP-OVER. (a) Prior to the Expiration Time, the Company shall not
enter into any agreement with respect to, consummate or permit to occur any
Flip-over Transaction or Event unless and until it shall have entered into a
supplemental agreement with the Flip-over Entity, for the benefit of the holders
of the Rights, providing that, upon consummation or occurrence of the Flip-over
Transaction or Event (i) each Right shall thereafter constitute the right to
purchase from the Flip-over Entity, upon exercise thereof in accordance with the
terms hereof, that number of
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shares of Flip-over Stock of the Flip-over Entity having an aggregate Market
Price on the date of consummation or occurrence of such Flip-over Transaction or
Event equal to twice the Exercise Price for an amount in cash equal to the
Exercise Price (such right to be appropriately adjusted in order to protect the
interests of the holders of Rights generally in the event that after such date
of consummation or occurrence an event of a type analogous to any of the events
described in Section 2.4(a) or (b) shall have occurred with respect to the
Flip-over Stock) and (ii) the Flip-over Entity shall thereafter be liable for,
and shall assume, by virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of the Company pursuant
to this Agreement. The provisions of this Section 3.2 shall apply to successive
Flip-over Transactions or Events.
(b) Prior to the Expiration Time, unless the Rights will be redeemed
pursuant to Section 5.1 hereof in connection therewith, the Company shall not
enter into any agreement with respect to, consummate or permit to occur any
Flip-over Transaction or Event if at the time thereof there are any rights,
warrants or securities outstanding or any other arrangements, agreements or
instruments that would eliminate or otherwise diminish in any material respect
the benefits intended to be afforded by this Rights Agreement to the holders of
Rights upon consummation of such transaction.
ARTICLE IV
THE RIGHTS AGENT
IV.1 GENERAL. (a) The Company hereby appoints the Rights Agent to act as
agent for the Company in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, its directors,
officers, employees and agents for, and to hold each of them harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
to be done by the Rights Agent or such other indemnified party in connection
with the acceptance and administration of this Agreement or the performance of
the Right Agent's duties hereunder, including the costs and expenses of
defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement or the performance of the Right Agent's
duties hereunder, in reliance upon any certificate for securities purchasable
upon exercise of Rights, Rights Certificate, certificate for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons.
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(c) The indemnity provided in this Section 4.1 shall survive the
expiration of the Rights and the termination of this Agreement.
IV.2 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent is a party, or any corporation succeeding to the shareholder services
business of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 4.4 hereof. In case at the time
such successor Rights Agent succeeds to the agency created by this Agreement any
of the Rights Certificates have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates have not been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates will have the full force provided in the
Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
IV.3 DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel will be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such advice or
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by a person believed by the Rights Agent to be the
Chairman of the Board, Chief
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Executive Officer, President or any Vice President and by the Treasurer or any
Assistant Treasurer or the Secretary or any Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate will be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
certificates for securities purchasable upon exercise of Rights or the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and will be deemed to have been
made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due authorization, execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any certificate for securities
purchasable upon exercise of Rights or Rights Certificate (except its
countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 3.1(b) hereof) or any adjustment required under any provision of this
Agreement or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights after receipt of the
certificate contemplated by Section 2.4 describing any such adjustment); nor
will it by any act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any securities purchasable upon exercise
of Rights or any Rights or as to whether any securities purchasable upon
exercise of Rights will, when issued, be duly and validly authorized, executed,
issued and delivered and fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman of the Board, Chief
Executive Officer, President or any Executive Vice President or the Secretary or
any Assistant Secretary or the Treasurer or any Assistant Treasurer of the
Company, and to apply to such persons for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such person or for any
delay in acting while awaiting instructions. Any application by the Rights
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Agent for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent under this Agreement and the date on or after which such action
shall be taken or such omission shall be effective. The Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in Common Stock, Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent will not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided the Rights Agent was not grossly negligent in
the selection and continued employment thereof.
(j) The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
(k) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits).
(l) No provisions of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
IV.4 CHANGE OF RIGHTS AGENT. The Rights Agent may resign and be
discharged from its duties under this Agreement upon 90 days' notice (or such
lesser notice as is acceptable to the Company) in writing mailed to the Company
and to each transfer agent of Common Stock by registered or certified mail, and
to the holders of the Rights in accordance with Section 5.9. The Company may
remove the Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent
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and to each transfer agent of the Common Stock by registered or certified mail,
and to the holders of the Rights in accordance with Section 5.9. If the Rights
Agent should resign or be removed or otherwise become incapable of acting, the
Company will appoint a successor to the Rights Agent. If the Company fails to
make such appointment within a period of 30 days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Rights Agent or by the holder of any Rights (which holder
shall, with such notice, submit such holder's Rights Certificate for inspection
by the Company), then the holder of any Rights may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
any state of the United States, in good standing, which is authorized under such
laws to exercise the powers of the Rights Agent contemplated by this Agreement
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000. After appointment, the successor Rights Agent
will be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock, and mail a notice thereof in writing to the holders of the
Rights. Failure to give any notice provided for in this Section 4.4, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
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ARTICLE V
MISCELLANEOUS
V.1 REDEMPTION. (a) The Board of Directors of the Company may, at its
option, at any time prior to the close of business on the Flip-in Date, elect to
redeem all (but not less than all) the then outstanding Rights at the Redemption
Price and the Company, at its option, may pay the Redemption Price either in
cash or shares of Common Stock or other securities of the Company deemed by the
Board of Directors, in the exercise of its sole discretion, to be at least
equivalent in value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of the Company
electing to redeem the Rights (or, if the resolution of the Board of Directors
electing to redeem the Rights states that the redemption will not be effective
until the occurrence of a specified future time or event, upon the occurrence of
such future time or event), without any further action and without any notice,
the right to exercise the Rights will terminate and each Right will thereafter
represent only the right to receive the Redemption Price in cash or securities,
as determined by the Board of Directors. Promptly after the Rights are redeemed,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice in accordance with
Section 5.9.
V.2 EXPIRATION. The Rights and this Agreement shall expire at the
Expiration Time and no Person shall have any rights pursuant to this Agreement
or any Right after the Expiration Time, except, if the Rights are exchanged or
redeemed, as provided in Section 3.1 or 5.1 hereof, respectively.
V.3 ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the number or kind or class of shares of stock purchasable upon exercise of
Rights made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock by the Company
following the Separation Time and prior to the Expiration Time pursuant to the
terms of securities convertible or redeemable into shares of Common Stock or to
options, in each case issued or granted prior to, and outstanding at, the
Separation Time, the Company shall issue to the holders of such shares of Common
Stock, Rights Certificates representing the appropriate number of Rights in
connection with the issuance or sale of such shares of Common Stock; provided,
however, in each case, (i) no such Rights Certificate shall be issued, if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or to the Person to whom such Rights Certificates would be issued, (ii)
no such Rights Certificates shall be issued if, and to the extent that,
appropriate adjustment shall have otherwise been made in lieu of the issuance
thereof, and (iii) the Company shall have no obligation to distribute
21
<PAGE>
Rights Certificates to any Acquiring Person or Affiliate or Associate of an
Acquiring Person or any transferee of any of the foregoing.
V.4 SUPPLEMENTS AND AMENDMENTS. The Company and the Rights Agent may
from time to time supplement or amend this Agreement without the approval of any
holders of Rights (i) in any respect prior to the Flip-in Date (other than to
change the Redemption Price or the Expiration Time, except as contemplated
elsewhere herein), (ii) to make any changes following the close of business on
the Flip-in Date which the Company may deem necessary or desirable and which
shall not materially adversely affect the interests of the holders of Rights
generally or (iii) in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be inconsistent with any other
provisions herein or otherwise defective. Upon the delivery of a certificate
from an officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 5.4, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment that changes the
rights or duties of the Rights Agent under this Agreement shall be effective
without consent of the Rights Agent.
V.5 FRACTIONAL SHARES. If the Company elects not to issue certificates
representing fractional shares upon exercise or redemption of Rights, the
Company shall, in lieu thereof, in the sole discretion of the Board of
Directors, either (a) evidence such fractional shares by depositary receipts
issued pursuant to an appropriate agreement between the Company and a depositary
selected by it, providing that each holder of a depositary receipt shall have
all of the rights, privileges and preferences to which such holder would be
entitled as a beneficial owner of such fractional share, or (b) pay to the
registered holder of such Rights the appropriate fraction of the Market Price
per share in cash.
V.6 RIGHTS OF ACTION. Subject to the terms of this Agreement (including
Sections 3.1(b) and 5.14), rights of action in respect of this Agreement, other
than rights of action vested solely in the Rights Agent, are vested in the
respective holders of the Rights; and any holder of any Rights, without the
consent of the Rights Agent or of the holder of any other Rights, may, on such
holder's own behalf and for such holder's own benefit and the benefit of other
holders of Rights, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, such
holder's right to exercise such holder's Rights in the manner provided in such
holder's Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
V.7 HOLDER OF RIGHTS NOT DEEMED A SHAREHOLDER. No holder, as such, of
any Rights shall be entitled to vote, receive dividends or be deemed for any
purpose the holder of shares or any other securities which may at any time be
issuable on the exercise of such Rights, nor shall anything
22
<PAGE>
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 5.8 hereof), or to receive dividends
or subscription rights, or otherwise, until such Rights shall have been
exercised or exchanged in accordance with the provisions hereof.
V.8 NOTICE OF PROPOSED ACTIONS. In case the Company shall propose after
the Separation Time and prior to the Expiration Time (i) to effect or permit a
Flip-over Transaction or Event or (ii) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of a Right, in accordance with Section 5.9 hereof, a notice of such
proposed action, which shall specify the date on which such Flip-over
Transaction or Event, liquidation, dissolution, or winding up is to take place,
and such notice shall be so given at least 20 Business Days prior to the date of
the taking of such proposed action.
V.9 NOTICES. Notices or demands authorized or required by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights to or on
the Company shall be sufficiently given or made if delivered or sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Mid-America Apartment Communities, Inc.
6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38138
Attention: Secretary
Any notice or demand authorized or required by this Agreement to be given or
made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
First Union National Bank
1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
Attention: Shareholder Services Group
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the registry books of the Rights Agent or, prior to the Separation Time, on
the registry books of the transfer agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice.
23
<PAGE>
V.10 SUSPENSION OF EXERCISABILITY. To the extent that the Company
determines in good faith that some action will or need be taken pursuant to
Section 3.1 or to comply with federal or state securities laws, the Company may
suspend the exercisability of the Rights for a reasonable period in order to
take such action or comply with such laws. In the event of any such suspension,
the Company shall issue as promptly as practicable a public announcement stating
that the exercisability or exchangeability of the Rights has been temporarily
suspended. Notice thereof pursuant to Section 5.9 shall not be required.
Failure to give a notice pursuant to the provisions of this Agreement
shall not affect the validity of any action taken hereunder.
V.11 COSTS OF ENFORCEMENT. The Company agrees that if the Company or any
other Person the securities of which are purchasable upon exercise of Rights
fails to fulfill any of its obligations pursuant to this Agreement, then the
Company or such Person will reimburse the holder of any Rights for the costs and
expenses (including legal fees) incurred by such holder in actions to enforce
such holder's rights pursuant to any Rights or this Agreement.
V.12 SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
V.13 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
holders of the Rights any legal or equitable right, remedy or claim under this
Agreement and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the holders of the Rights.
V.14 DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. The Board
of Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board of Directors of
the Company to any liability to the holders of the Rights.
V.15 DESCRIPTIVE HEADINGS. Descriptive headings appear herein for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
24
<PAGE>
V.16 GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT ISSUED HEREUNDER SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TENNESSEE AND FOR
ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH
STATE.
V.17 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
an original, and all such counterparts shall together constitute but one and the
same instrument.
V.18 SEVERABILITY. If any term or provision hereof or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MID-AMERICA APARTMENT COMMUNITIES, INC.
BY:_______________________________________
Name: Simon R.C. Wadsworth
Title: Executive Vice President and
Chief Financial Officer
FIRST UNION NATIONAL BANK
BY:_______________________________________
Name:
Title: Executive Vice President
25
<PAGE>
EXHIBIT A
[Form of Rights Certificate]
Certificate No. W- _______ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE
OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR
ASSOCIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
OR TRANSFEREES OF ANY OF THE FOREGOING WILL BE VOID.
Rights Certificate
MID-AMERICA APARTMENT COMMUNITIES, INC.
This certifies that ____________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Protection Rights Agreement, dated as of March 1,
1999 (as amended from time to time, the "Rights Agreement"), between Mid-America
Apartment Communities, Inc., a Tennessee corporation (the "Company"), and First
Union National Bank, a national banking association as Rights Agent (the "Rights
Agent", which term shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after the Separation Time
(as such term is defined in the Rights Agreement) and prior to the close of
business on March 1, 2009, one one-hundredth of a fully paid share of Series D
Participating Preferred Stock, no par value (the "Preferred Stock"), of the
Company (subject to adjustment as provided in the Rights Agreement) at the
Exercise Price referred to below, upon presentation and surrender of this Rights
Certificate with the Form of Election to Exercise duly executed at the principal
office of the Rights Agent in Memphis, Tennessee. The Exercise Price shall
initially be $87.50 per Right and shall be subject to adjustment in certain
events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase
securities of an entity other than the Company or securities of the Company
other than Preferred Stock or assets of the Company, all as provided in the
Rights Agreement.
EXHIBIT A-1
<PAGE>
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
available without cost upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
evidencing an aggregate number of Rights equal to the aggregate number of Rights
evidenced by the Rights Certificate or Rights Certificates surrendered. If this
Rights Certificate shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, each Right evidenced
by this Certificate may be (a) redeemed by the Company under certain
circumstances, at its option, at a redemption price of $0.01 per Right or (b)
exchanged by the Company under certain circumstances, at its option, for one
share of Common Stock or one one-hundredth of a share of Preferred Stock per
Right (or, in certain cases, other securities or assets of the Company), subject
in each case to adjustment in certain events as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of any securities
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised or exchanged as provided in
the Rights Agreement.
EXHIBIT A-2
<PAGE>
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Date: ____________
ATTEST: MID-AMERICA APARTMENT COMMUNITIES, INC.
_______________ BY______________________________________
Secretary
Countersigned:
FIRST UNION NATIONAL BANK
By____________________________
Authorized Signature
EXHIBIT A-3
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer this Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and
transfers unto ______________________________________ (Please print name and
address of transferee) this Rights Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_______________ Attorney, to transfer the within Rights Certificate on the books
of the within-named Company, with full power of substitution.
Dated: _______________, ___
Signature Guaranteed:
___________________________________
Signature
(Signature must correspond to name
as written upon the face of this
Rights Certificate every particular,
without alteration or enlargement or
any change whatsoever)
Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee Medallion program), pursuant to
SEC Rule 17Ad-15.
_______________________________
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate are
not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
___________________________________
Signature
EXHIBIT A-4
<PAGE>
NOTICE
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
Owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem the
Rights evidenced by such Rights Certificate to be void and not transferable or
exercisable.
EXHIBIT A-5
<PAGE>
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to
exercise the Rights Certificate.)
TO: MID-AMERICA APARTMENT COMMUNITIES, INC.
The undersigned hereby irrevocably elects to exercise
_______________________________ whole Rights represented by the attached Rights
Certificate to purchase the shares of Series D Participating Preferred Stock
issuable upon the exercise of such Rights and requests that certificates for
such shares be issued in the name of:
________________________________________
Address:
________________________________________
Social Security or Other Taxpayer
Identification Number:
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
________________________________________
Address:
________________________________________
Social Security or Other Taxpayer
Identification Number:
Dated: _______________, ____
Signature Guaranteed: ________________________________________
Signature
(Signature must correspond to name
as written upon the face of the
attached Rights Certificate in every
particular, without alteration or
enlargement or any change whatsoever)
EXHIBIT A-6
<PAGE>
Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee Medallion program), pursuant to
SEC Rule 17Ad-15.
___________________________________________
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of
Rights and shares of Common Stock, that the Rights evidenced by the attached
Rights Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).
_______________________________________
Signature
NOTICE
In the event the certification set forth above is not completed in
connection with a purported exercise, the Company will deem the Beneficial Owner
of the Rights evidenced by the attached Rights Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
or a transferee of any of the foregoing and accordingly will deem the Rights
evidenced by such Rights Certificate to be void and not transferable or
exercisable.
EXHIBIT A-6
<PAGE>
EXHIBIT B
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
SHARES OF PREFERRED STOCK
Pursuant to the provisions of Sections 48-16-102, 48-20-102 and
48-20-106 of the Tennessee Business Corporation Act, the undersigned corporation
adopts the following Articles of Amendment to its Charter:
1. The name of the corporation is Mid-America Apartment Communities,
Inc. (the "Company").
2. The amendment adopted is as follows:
Article 6 of the Company's Charter is hereby amended by adding the
following at the end thereof:
There is hereby established a series of Preferred Stock, $.01 par value,
of the Company, with the designation and certain powers, preferences and other
rights of the shares of such series, and certain qualifications, limitations and
restrictions thereon, hereby fixed as follows:
(i) The distinctive serial designation of this series shall be
"Series D Participating Preferred Stock" (hereinafter called "this
Series"). Each share of this Series shall be identical in all respects
with the other shares of this Series except as to the dates from and
after which dividends thereon shall be cumulative.
(ii) The number of shares in this Series shall initially be
_____________________, which number may from time to time be increased
(but not above the total number of shares of Preferred Stock then
authorized) or decreased (but not below the number then outstanding) by
the Board of Directors. Shares of this Series purchased by the Company
shall be cancelled and shall revert to authorized but unissued shares of
Preferred Stock undesignated as to series. Shares of this Series may be
issued in fractional shares, which fractional shares shall entitle the
holder, in proportion to such holder's fractional share, to all rights
of a holder of a whole share of this Series.
EXHIBIT B-1
<PAGE>
(iii) The holders of full or fractional shares of this Series
shall be entitled to receive, when and as declared by the Board of
Directors, but only out of funds legally available therefor, dividends,
(A) on each date that dividends or other distributions (other than
dividends or distributions payable in Common Stock of the Company) are
payable on or in respect of Common Stock comprising part of the
Reference Package (as defined below), in an amount per whole share of
this Series equal to the aggregate amount of dividends or other
distributions (other than dividends or distributions payable in Common
Stock of the Company) that would be payable on such date to a holder of
the Reference Package and (B) on the last day of March, June, September
and December in each year, in an amount per whole share of this Series
equal to the excess (if any) of $______1 over the aggregate dividends
paid per whole share of this Series during the three month period ending
on such last day. Each such dividend shall be paid to the holders of
record of shares of this Series on the date, not exceeding seventy days
preceding such dividend or distribution payment date, fixed for the
purpose by the Board of Directors in advance of payment of each
particular dividend or distribution. Dividends on each full and each
fractional share of this Series shall be cumulative from the date such
full or fractional share is originally issued; provided that any such
full or fractional share originally issued after a dividend record date
and on or prior to the dividend payment date to which such record date
relates shall not be entitled to receive the dividend payable on such
dividend payment date or any amount in respect of the period from such
original issuance to such dividend payment date.
The term "Reference Package" shall initially mean 100 shares of Common
Stock, par value $.01 per share ("Common Stock"), of the Company. In the event
the Company shall at any time after the close of business on _________, 19__2
(A) declare or pay a dividend on any Common Stock payable in Common Stock, (B)
subdivide any Common Stock or (C) combine any Common Stock into a smaller number
of shares, then and in each such case the Reference Package after such event
shall be the Common Stock that a holder of the Reference Package immediately
prior to such event would hold thereafter as a result thereof.
Holders of shares of this Series shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends, as
herein provided on this Series.
- -------------
1Insert an amount equal to 1/4 of 1% of the Exercise Price divided by
the number of shares purchasable upon exercise of one Right (i.e., a guaranteed
1% dividend). Where a Right is exercisable for one-hundredth of a share, this
simplifies to one-fourth the Exercise Price.
2For a certificate of designation relating to shares to be issued
pursuant to Section 2.3 of the Rights Agreement, insert the Separation Time. For
a certificate of designation relating to shares to be issued pursuant to Section
3.1(d) of the Rights Agreement, insert the Flip-in Date.
EXHIBIT B-2
<PAGE>
So long as any shares of this Series are outstanding, no dividend (other than a
dividend in Common Stock or in any other stock ranking junior to this Series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to this Series as to dividends or upon liquidation,
nor shall any Common Stock nor any other stock of the Company ranking junior to
or on a parity with this Series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of any
such stock) by the Company (except by conversion into or exchange for stock of
the Company ranking junior to this Series as to dividends and upon liquidation),
unless, in each case, the full cumulative dividends (including the dividend to
be due upon payment of such dividend, distribution, redemption, purchase or
other acquisition) on all outstanding shares of this Series shall have been, or
shall contemporaneously be, paid.
(iv) In the event of any merger, consolidation, reclassification or
other transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of this Series shall at the
same time be similarly exchanged or changed in an amount per whole share
equal to the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, that a holder of
the Reference Package would be entitled to receive as a result of such
transaction.
(v) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, the holders of
full and fractional shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of the Common
Stock or any other stock of the Company ranking junior to this Series
upon liquidation, to be paid in full an amount per whole share of this
Series equal to the greater of (A) $__________3 or (B) the aggregate
amount distributed or to be distributed prior to such date in connection
with such liquidation, dissolution or winding up to a holder of the
Reference Package (such greater amount being hereinafter referred to as
the "Liquidation Preference"), together with accrued dividends to such
distribution or payment date, whether or not earned or declared. If such
payment shall have been made in full to all holders of shares of this
Series, the holders of shares of this Series as such shall have no right
or claim to any of the remaining assets of the Company.
- --------------
3Insert an amount equal to 100 times the Exercise Price in effect as of
the Separation Time.
EXHIBIT B-3
<PAGE>
In the event the assets of the Company available for distribution to the
holders of shares of this Series upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are
entitled pursuant to the first paragraph of this Section (v), no such
distribution shall be made on account of any shares of any other class
or series of Preferred Stock ranking on a parity with the shares of this
Series upon such liquidation, dissolution or winding up unless
proportionate distributive amounts shall be paid on account of the
shares of this Series, ratably in proportion to the full distributable
amounts for which holders of all such parity shares are respectively
entitled upon such liquidation, dissolution or winding up. Upon the
liquidation, dissolution or winding up of the Company, the holders of
shares of this Series then outstanding shall be entitled to be paid out
of assets of the Company available for distribution to its shareholders
all amounts to which such holders are entitled pursuant to the first
paragraph of this Section (v) before any payment shall be made to the
holders of Common Stock or any other stock of the Company ranking junior
upon liquidation to this Series.
For the purposes of this Section (v), the consolidation or merger of the
Company with any other corporation shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company.
(vi) The shares of this Series shall not be redeemable.
(vii) In addition to any other vote or consent of shareholders required
by law or by the Charter, as amended, of the Company, each whole or
fractional share of this Series shall, on any matter, vote as a class
with any other capital stock comprising part of the Reference Package
and voting on such matter and shall have the number of votes thereon
that a holder of the Reference Package would have.
3. The amendment was duly adopted by the board of directors without
shareholder action on [date]. No shareholder action was required.
4. The amendment shall be effective when filed by the Secretary of State
and is being submitted for filing pursuant to the Tennessee Business Corporation
Act.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By: _______________________________________
Name:
Title:
Date: _______________________
EXHIBIT B-4
EXHIBIT 10.4
MID-AMERICA APARTMENT COMMUNITIES, INC.
MID-AMERICA APARTMENTS, L.P.
REVOLVING CREDIT AGREEMENT
(AMENDED AND RESTATED)
AMSOUTH BANK
ADMINISTRATIVE AGENT
MARCH 16, 1998
<PAGE>
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
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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 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
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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
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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
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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:
o the sum of Two Hundred Million Dollars ($200,000,000.00), or
o the Borrowing Base reduced by (a) the amount of all outstanding
Letters of Credit and (b) the amount of outstanding Advances.
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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
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(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
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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).
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(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
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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.
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(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:
o 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
o 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.
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(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
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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.
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(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.
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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
o 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
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o 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,
o each payment of a Fee shall be allocated among the Lenders in
their Proportionate Share for the relevant period,
o 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
o 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.
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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.
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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.
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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:
o state the Conversion Date,
o identify each then outstanding Borrowing that is to be
converted,
o state the aggregate unpaid principal amount of the Loans in
such outstanding Borrowings, and
o 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.
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III. CONDITIONS
3.1. Conditions to effectiveness of this Agreement
This Agreement shall become effective when the Administrative Agent
has received the following documents:
o for each party to the Agreement, an original or telecopied
counterpart of this Agreement signed by all parties;
o 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;
o the original Mortgages upon the Initial Properties identified
in Schedule 2;
o a Subsidiary Guaranty executed by each Subsidiary executing a
Mortgage on the Initial Properties;
o 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;
o opinions of counsel satisfactory to the Administrative Agent
to each of the Borrowers, substantially in the form of Exhibit
E;
o 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
o 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.
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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:
o this Agreement is effective;
o the Administrative Agent receives a Borrowing Notice
conforming to the requirements of this Agreement;
o 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;
o each Borrower represents that no material adverse change in
its financial condition or results of operations has occurred;
o immediately before and after the Borrowing, no Default will
have occurred and be continuing;
o 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;
o 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;
o 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;
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o 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;
o 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;
o 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
o 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
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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.
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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;
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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
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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.
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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.
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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.
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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.
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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
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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 10-Q;
(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.
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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:
o 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;
o 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;
o 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
o Such other insurance as the Administrative Agent may,
from time to time, reasonably require by notice in
writing to the Borrowers.
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(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.
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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
o 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,
o receives notice of complete or partial Withdrawal Liability
under Title IV of ERISA,
o 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
o 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
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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
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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;
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(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:
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(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).
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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.
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(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
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o any principal of a Loan when due,
o 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
o 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
o a covenant applicable to it regarding use of Loan
proceeds, notice of Defaults or maintenance of
existence, merger, or sales of assets; or
o 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
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(f) either Borrower or any Subsidiary that is at the time the
owner of a Mortgaged Property
o 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,
o 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,
o makes a general assignment for the benefit of creditors,
o fails generally to pay its debts as they become due, or
o 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)
o 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,
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o 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),
o 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,
o 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,
o a condition exists that entitles the PBGC to obtain a
decree adjudicating that a Material Pension Plan must be
terminated, or
o 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
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(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
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(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
o the Borrowers' Rights are terminated, whereupon such Borrowing
Rights shall terminate, or
o 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
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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
o 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
o 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.
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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
o 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
o 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.
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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.
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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
o 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,
o imposes on a Lender or its Office or the London interbank
market any other condition affecting the Lender's
Eurodollar Loans, or
o imposes, modifies or deems applicable any standards of capital
adequacy, and such Regulatory Action will, in the Lender's
judgment,
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o increase the cost to the Lender or Office of making or
maintaining any Eurodollar Loan,
o reduce the amount receivable by the Lender or Office under
this Agreement with respect to any such Eurodollar Loan, or
o 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).
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9.3. LIBOR unavailable or inadequate
If on or before the second Business Day before an Interest Period
for a Borrowing
o 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
o 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.
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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:
o 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,
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o 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
o 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,
o 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,
o pay the Tax to the appropriate taxing authority for the
Lender's account, and
o as promptly as possible, send the Lender evidence showing
payment of the Tax, together with any additional documentary
evidence the Lender reasonably requests.
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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
o 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
o 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
o the obligation of a Lender to make Eurodollar Loans is
suspended under Section 9.4 (Illegal Loans),
o a Lender demands compensation or payment under SECTION 9.2
(Increased cost or reduced return), or SECTION 9.6 (Taxes on
payments), or
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o 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.
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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.
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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
o a Borrower's breach of, or any Default under, this Agreement,
o 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,
o an actual or proposed use of Loan proceeds by the Borrowers,
or
o 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
o 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
o 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.
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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,
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(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).
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(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.
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(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.
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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.
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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.
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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.
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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.
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<PAGE>
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,
o all obligations of the Person for borrowed money, including
all obligations of the Person evidenced by bonds, debentures,
notes or other similar instruments,
o 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,
o all obligations of the Person as lessee under capital leases,
o all Debt of others secured by a Lien on assets of the Person,
whether or not the Debt is assumed by the Person,
o all Debt of others Guaranteed by the Person,
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o all letters of credit, banker's acceptances, swap transactions
and similar hedge agreements, and
o 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.
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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:
o 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
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<PAGE>
o 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.
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LIBOR for an Interest Period means
o 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
o 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.
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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.
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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.
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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.
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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.
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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.
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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.'
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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)
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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
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Signature page to
Revolving Credit Agreement
MID-AMERICA APARTMENT COMMUNITIES, INC.
By______________________________
Name__________________________
Title_________________________
MID-AMERICA APARTMENTS, L.P.
By Mid-America Apartments Communities, Inc.
Its Sole General Partner
By______________________________
Name__________________________
Title_________________________
<PAGE>
Revolving Credit Agreement
AMSOUTH BANK,
IN ITS INDIVIDUAL CAPACITY AS LENDER
AND AS ADMINISTRATIVE AGENT
By__________________________________
Name________________________________
Title_______________________________
<PAGE>
SIGNATURE PAGE TO
REVOLVING CREDIT AGREEMENT
HIBERNIA NATIONAL BANK
By______________________________
Name__________________________
Title_________________________
<PAGE>
Signature page to
Revolving Credit Agreement
COLUMBUS BANK & TRUST COMPANY
By_______________________________
Name_____________________________
Title____________________________
<PAGE>
Signature page to
Revolving Credit Agreement
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA
AGENCY
By_______________________________
Name_____________________________
Title____________________________
By_______________________________
Name_____________________________
Title____________________________
<PAGE>
Signature page to
Revolving Credit Agreement
PNC BANK, NATIONAL ASSOCIATION
By_______________________________
Name_____________________________
Title____________________________
<PAGE>
Signature page to
Revolving Credit Agreement
FIRST TENNESSEE BANK, N.A.
By_______________________________
Name_____________________________
Title____________________________
<PAGE>
Signature page to
Revolving Credit Agreement
NATIONAL BANK OF COMMERCE
By_______________________________
Name_____________________________
Title____________________________
<PAGE>
Signature page to
Revolving Credit Agreement
MELLON BANK, N.A.
By___________________________
Name_________________________
Title________________________
<PAGE>
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%
<PAGE>
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 (FL) 50% of cost 96,492.00
4. Paddock Club Brandon II (FL) 50% of cost 0.00
5. Paddock Club Mandarin (FL) 50% of cost 6,306,681.00
- ---------------
TOTAL
BORROWING BASE $130,812,814.00
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT A
[Form of Notes]
<PAGE>
EXHIBIT B
[Swingline Request]
<PAGE>
EXHIBIT C
[Borrowing Notice]
<PAGE>
EXHIBIT D
[Conversion Notice]
<PAGE>
EXHIBIT E
[Form of Attorney Opinion]
<PAGE>
EXHIBIT F
[Borrowing Base Certificate]
<PAGE>
EXHIBIT G
[Assignment and Assumption]
<PAGE>
EXHIBIT H
[Subsidiary Guaranty]
<PAGE>
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.
EXHIBIT 21
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
MAACP, Inc.
Flournoy Development Company, Inc.
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
Woodridge Joint Venture LP
River Hills Partnership
Madison LP
LP Jackson LP
The 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.
Fountain Lakes Apartments Ltd.
Paddock Club Brandon, A Limited Partnership
Paddock Club Columbia, 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 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.
Mid-America Apartments of Birmingham, LP
Mid-America Apartments of Savannah, LP
Mid-America Apartments of Little Rock, LP
Mid-America Apartments of St. Simons, LP
Mid-America Mortgage Trust 1998-1
Mid-America Finance, Inc.
MAACOD, Inc.
MAAC of Duval, LP
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.
33-941416) on Form s-8 and the registration statements (Nos. 333-71315,
333-60285 and, 333-570309) on Form S-3 of Mid-America Apartments Communities,
Inc. of our report dated February 26, 1999, relating to the consolidated balance
sheets of Mid-America Apartment Communities, Inc. as of December 31, 1998 and
1997, 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, 1998, and the related schedule, which report appears in the
December 31, 1998 Annual Report on Form 10-K of Mid-America Apartment
Communities, Inc.
KPMG LLP
Memphis, Tennessee
February 26, 1999
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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