================================================================================
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, 1999
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, 2000) was approximately
$354,000,000 (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 17, 2000, was 17,635,277 shares, of which approximately 2,009,033 were
held by affiliates.
================================================================================
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
TABLE OF CONTENTS
ITEM PAGE
- --------- ----
PART I
1. Business............................. 1
2. Properties........................... 4
3. Legal Proceedings.................... 9
4. Submission of Matters to Vote of
Security Holders................... 9
PART II
5. Market for Registrant's Common Equity
and Related Stockholder Matters.... 9
6. Selected Financial Data.............. 10
7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 11
7A. Quantitative and Qualitative
Disclosures About Market Risk...... 17
8. Financial Statements and
Supplementary Data................. 18
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 18
PART III
10. Directors and Executive Officers of
the Registrant..................... 19
11. Executive Compensation............... 19
12. Security Ownership of Certain
Beneficial Owners and Management... 19
13. Certain Relationships and Related
Transactions....................... 19
PART IV
14. Exhibits, Financial Statement
Schedule and Reports on Form 8-K... 19
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,
1999, owns or has ownership interest in, including 10 properties owned by an
unconsolidated joint venture, and operates 129 apartment communities containing
33,901 apartment units in 13 states, primarily in the southeastern United States
and Texas (the "Communities"). The Company currently has 1,367 apartment units
in various stages of construction, development and pre-development in 3 new
communities and 1 addition to an existing community.
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 98 apartment
communities containing 25,528 apartment units.
On June 30, 1999, the Company sold its development, construction and fee
management businesses acquired in connection with the November 1997 merger with
Flournoy Development Company ("Flournoy or FDC") back to the principals of
Flournoy. The Company received net proceeds of $18.1 million for these assets
and recorded a net loss of approximately $4.0 million, relating mainly to the
write-off of goodwill from to the original purchase transaction. In the
transaction, Flournoy reacquired the development businesses, related fixed
assets including single family development, land and property held for sale, and
the fee management business of 5,131 tax credit apartment units. The Company has
contracted with Flournoy to complete the remaining portion of its development
pipeline.
In March 1999 the Company entered into an agreement to form a joint venture
(the "Joint Venture") with Blackstone Real Estate Acquisitions, LLC
("Blackstone"), and operate 10 apartment communities. On March 31, 1999 the
Company sold 6 apartment communities, containing 1,660 apartment units, to the
Joint Venture for approximately $64.6 million in cash. In August 1999, the
Company sold four additional properties containing 1,133 apartment units to the
Joint Venture, for approximately $33.3 million. The Company contributed
additional capital and made a loan to the Joint Venture bringing the Company's
total investment in the Joint Venture to approximately $8.1 million. The Company
recognized a gain of approximately $9.0 million and deferred gains of
approximately $4.8 million for the Company's retained interest. Proceeds from
the transactions were used to pay down the Company's Credit Line, fund the
development pipeline and to fund two cash escrow reserves related to the planned
tax free exchange of a portion of the properties, which exchange was completed
during the balance of 1999. The Company has retained a 33.3% ownership interest
in the Joint Venture and has an agreement to manage the operations of the
communities for a fee of 4% of revenues.
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, 1999,
180,168 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, 1999, held 14,872,572 Common Units, or
83.55% of all outstanding Common Units.
OPERATING PHILOSOPHY
DIVERSIFIED MARKET FOCUS. The Company focuses on owning, operating,
developing, constructing and acquiring apartment communities mainly throughout
the southeast and Texas.
1
<PAGE>
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 produce highly
trained property managers, leasing consultants and service technicians on-site
at each of the Communities. Management believes that this commitment to training
and excellence in associates ultimately translates to higher 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.
PROACTIVE ASSET MANAGEMENT
The Company reviews its existing assets routinely and sells those which no
longer fit the Company's investment criteria. The Company constantly evaluates
the effectiveness of its capital allocations and makes adjustments to its
strategy, including investing in acquisitions and new development, debt
retirement, and repurchases of Company shares.
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 ancillary revenues
while tightly controlling operating expenses and maintaining high occupancy
levels. The Company seeks higher net rental revenues by enhancing the
competitiveness of the Communities, adding revenue-generating services, and
managing 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 offering new services to residents, including telephone, cable, and
internet access on which it generates fee and commission income;
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
2
<PAGE>
o maintaining a hands-on management style and "flat" organizational
structure that emphasizes senior management's continued close contact
with the market and employees;
o when its cost of capital and asset values permit, selling assets and
repurchasing common stock.
DEVELOPMENT STRATEGY. During 1998, the Company's emphasis shifted from
acquisitions to development because of the higher quality assets and higher long
term investment returns generated by development. The Company expects to
continue new development on a disciplined, selective basis. In 1999 the Company
completed the following development projects consisting of a total 1,588
apartment units which are currently in various stages of lease-up:
o 264 unit Paddock Club in Gainesville, Florida
o 254 unit Paddock Club in Panama City, Florida
o 132 unit Phase II expansion of the Paddock Club in Brandon, Florida
o 238 unit Phase II expansion of the Terraces at Towne Lake in Cherokee
County, Georgia
o 252 unit Reserve at Dexter Lake in Memphis, Tennessee
o 240 unit Paddock Club in Murfreesboro, Tennessee
o 208 unit Paddock Club in Montgomery, Alabama
The Company currently has a total of 1,367 apartment units in various
stages of development, construction, and pre-development, of which 1,151 are
scheduled to be completed in 2000 with the remainder in 2001. The Company
anticipates a total capital investment in this development pipeline of
approximately $43.2 million in 2000 and approximately $3 million in 2001. Also
currently under consideration is a new addition to an existing community of 244
units with an estimated cost of $18 million, which is expected to begin in 2001
if development is approved. These projects are expected to be funded by the
Company's outstanding lines of credit ("Credit Lines"), selective property
dispositions and possible joint venture transactions.
In June 1999 the Company concluded that development opportunities were
becoming less financially attractive, reduced its development commitments to
those already in process, and sold its development and construction businesses.
ACQUISITION STRATEGY. An additional strategy of the Company is to acquire
apartment communities that meet its investment criteria and long-term strategic
objectives. 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 did not acquire any apartment communities in 1999 and at the present
time does not anticipate any significant investment in acquisition properties in
2000.
JOINT VENTURE STRATEGY. An additional strategy of the Company is to sell
apartment communities to a joint venture when a favorable return can be
achieved. This allows the Company to obtain favorably-priced financing. The
Company actively is seeking attractively priced investment opportunities which
it and potential joint venture partners can invest in. At this time no
negotiations are in process.
3
<PAGE>
The following apartment communities containing an aggregate of 2,793
apartment units were sold during 1999 to the Joint Venture:
<TABLE>
<CAPTION>
NUMBER GROSS
PROPERTY LOCATION OF UNITS DATE PROCEEDS
- ------------------------------------- ----------------------- --------- --------------- --------------
<S> <C> <C> <C> <C>
Colony at South Park................. Aiken, SC 184 March 31, 1999 $ 7,900,000
Walden Run........................... McDonough, GA 240 March 31, 1999 13,700,000
Woodstream........................... Greensboro, NC 304 March 31, 1999 13,200,000
Northwood............................ Arlington, TX 270 March 31, 1999 7,500,000
Lane at Towne Crossing............... Mesquite, TX 384 March 31, 1999 11,300,000
The Woods............................ Austin, TX 278 March 31, 1999 11,000,000
Cedar Mill........................... Memphis, TN 276 August 4, 1999 11,200,000
Hamilton Pointe...................... Chattanooga, TN 361 August 4, 1999 9,600,000
Hidden Creek......................... Chattanooga, TN 300 August 4, 1999 8,100,000
Lakeshore Landing.................... Jackson, MS 196 August 4, 1999 4,400,000
--------- --------------
Total........................... 2,793 $ 97,900,000
========= ==============
</TABLE>
DISPOSITION STRATEGY. The Company is committed to the selective disposition
of non-strategic assets, those apartment communities that no longer meet its
investment criteria and long-term strategic objectives. Typically the Company
selects assets for disposition that do not meet its present investment criteria
including future return on investment, location, market, potential for growth,
and capital needs.
The following apartment communities containing an aggregate of 1,138
apartment units were sold during 1999:
<TABLE>
<CAPTION>
NUMBER GROSS
PROPERTY LOCATION OF UNITS DATE PROCEEDS
- ------------------------------------- ----------------------- --------- ------------------- --------------
<S> <C> <C> <C> <C>
Hidden Oaks.......................... Albany, Ga 240 April 12, 1999 $ 6,100,000
Sailwinds at Lake Magdalene.......... Tampa, FL 798 November 10, 1999 31,100,000
Regency Club......................... Albany, GA 100 December 6, 1999 800,000
--------- --------------
Total........................... 1,138 $ 38,000,000
========= ==============
</TABLE>
SHARE REPURCHASE PROGRAM
In 1999, the Company's Board of Directors authorized the repurchase of up
to 4 million common shares, of which the Company has repurchased approximately
1.5 million common shares (7% of the common shares and Common Units
outstanding). From time to time the Company intends to sell assets based on its
disposition strategy outlined herein and repurchase shares when it believes that
shareholder value is enhanced. Factors affecting this determination include the
relative valuation of its share price, assets sold, cost of debt and rates of
return of alternative investments.
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.
4
<PAGE>
RECENT DEVELOPMENTS
PROPERTY DISPOSITIONS AND ACQUISITIONS
Subsequent to December 31, 1999, the Company sold two apartment communities
containing 368 apartment units for approximately $14,890,000 and has letters of
intent to sell three additional communities, two of which will be as a tax free
exchange for two identified acquisitions.
DISTRIBUTION INCREASE
In January 2000, the Company raised its quarterly distribution to common
shareholders from $.575 per share to $.58 per share, effective with its
distribution paid on January 31, 2000.
ITEM 2. PROPERTIES
The Company's apartment communities principally appeal 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, 1999 was 12.9 years.
The following table sets forth certain operating data regarding the Company
for the periods indicated where the Company owns or maintains an ownership
interest, including the 10 properties containing 2,793 apartment units owned by
the Joint Venture, at December 31, 1999. The table excludes development
communities.
1999 1998 1997
--------- --------- ---------
Apartment units at year end.......... 33,901 33,831 30,579
Average monthly rental per
apartment.......................... $610 $597 $568
Average occupancy at year end........ 94.6% 94.1% 93.9%
The following table sets forth certain historical information for the
communities the Company owned or maintained an ownership interest, including the
10 properties containing 2,793 apartment units owned by the Joint Venture, at
December 31, 1999:
5
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
YEAR RENTABLE
YEAR MANAGEMENT NUMBER AREA
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Eagle Ridge.......................... Birmingham, AL 1986 1998 200 181,400
Abbington Place...................... Huntsville, AL 1987 1998 152 162,792
Paddock Club - Huntsville............ Huntsville, AL 1989 1997 200 211,600
Paddock Club - Huntsville II......... Huntsville, AL 1998 1997 192 212,736
---------- -------------
744 768,528
---------- -------------
Calais Forest........................ Little Rock, AR 1987 1994 260 194,928
Napa Valley.......................... Little Rock, AR 1984 1996 240 183,216
Westside Creek I & II................ Little Rock, AR 1984 1997 308 148,030
Whispering Oaks...................... Little Rock, AR 1978 1994 207 192,422
---------- -------------
1,015 718,596
---------- -------------
Tiffany Oaks......................... Altamonte Springs, FL 1985 1996 288 234,224
Marsh Oaks........................... Atlantic Beach, FL 1986 1995 120 93,280
Paddock Club - Brandon............... Brandon, FL 1997 1997 308 358,600
Anatole.............................. Daytona Beach, FL 1986 1995 208 149,136
Cooper's Hawk........................ Jacksonville, FL 1987 1995 208 218,400
Hunter's Ridge at Deerwood........... Jacksonville, FL 1987 1997 336 294,888
Lakeside............................. Jacksonville, FL 1985 1996 416 344,192
Paddock Club - Jacksonville I , II &
III................................. Jacksonville, FL 1989 1997 440 216,016
Paddock Club - Mandarin.............. Jacksonville, FL 1998 1998 288 330,336
St. Augustine........................ Jacksonville, FL 1987 1995 400 304,400
Woodbridge at the Lake............... Jacksonville, FL 1985 1994 188 166,000
Woodhollow........................... Jacksonville, FL 1986 1997 450 342,162
Paddock Club - Lakeland I & II....... Lakeland, FL 1988 1997 464 217,704
Savannahs at James Landing........... Melbourne, FL 1990 1995 256 238,592
Paddock Park - Ocala I & II.......... Ocala, FL 1986 1997 480 202,282
Paddock Club - Tallahassee I & II.... Tallahassee, FL 1990 1997 304 208,000
Belmere.............................. Tampa, FL 1984 1994 210 202,440
Links at Carrollwood................. Tampa, FL 1980 1998 204 190,536
---------- -------------
5,568 4,311,188
---------- -------------
High Ridge........................... Athens, GA 1987 1997 160 186,608
Shenandoah Ridge..................... Augusta, GA 1975/1984 1994 272 222,800
Bradford Pointe...................... Augusta, GA 1986 1997 192 156,232
Westbury Creek....................... Augusta, GA 1984 1997 120 106,998
Fountain Lake........................ Brunswick, GA 1983 1997 110 118,046
Island Retreat....................... St. Simons Island, GA 1978 1998 112 129,584
Park Walk............................ College Park, GA 1985 1997 124 112,776
Enclave at Whisperwood............... Columbus, GA 1998 1998 154 189,728
2000 Wynnton......................... Columbus, GA 1983 1997 72 66,056
Riverwind............................ Columbus, GA 1983 1997 44 40,304
Whisperwood I & Spa I................ Columbus, GA 1980-86 1997 854 610,876
Willow Creek......................... Columbus, GA 1968-78 1997 285 246,668
Terraces at Fieldstone............... Conyers, GA 1998 1998 316 351,076
Hollybrook........................... Dalton, GA 1972 1994 158 188,640
Whispering Pines I & II.............. LaGrange, GA 1982 1997 216 123,904
Westbury Springs..................... Lilburn, GA 1983 1997 150 137,744
Austin Chase......................... Macon, GA 1996 1997 256 293,016
The Vistas........................... Macon, GA 1985 1997 144 153,792
Georgetown Grove..................... Savannah, GA 1997 1998 220 239,800
Wildwood I & II...................... Thomasville, GA 1980 1997 216 123,904
<CAPTION>
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1999
AVERAGE RENT PER OCCUPANCY --------------------------
UNIT UNIT AT % AT MORTGAGE
SIZE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST
PROPERTY (SQUARE FT.) 1999 1999 (000'S) RATE
- ------------------------------------- ------------- ------------- ------------- --------- -------------
<S> <C> <C>
Eagle Ridge.......................... 907 $ 602 94.50% $ 6,349 8.250%
Abbington Place...................... 1,071 $ 547 93.42% -- (2) -- (2)
Paddock Club - Huntsville............ 1,058 $ 603 95.00% -- --
Paddock Club - Huntsville II......... 1,108 $ 676 95.83% -- --
--- ------------- ------------- ---------
1,033 $ 610 94.8% $ 6,349
--- ------------- ------------- ---------
Calais Forest........................ 750 $ 555 91.54% -- --
Napa Valley.......................... 763 $ 548 92.92% -- (7) -- (7)
Westside Creek I & II................ 1,042 $ 604 92.86% $ 4,875 8.760% & -- (7)
Whispering Oaks...................... 934 $ 534 93.24% -- --
--- ------------- ------------- ---------
708 $ 564 92.6% $ 4,875
--- ------------- ------------- ---------
Tiffany Oaks......................... 813 $ 607 97.57% -- (7) -- (7)
Marsh Oaks........................... 777 $ 560 94.17% -- (7) -- (7)
Paddock Club - Brandon............... 1,164 $ 790 90.26% -- (2) -- (2)
Anatole.............................. 717 $ 588 96.63% $ 7,000 5.625% &(1)
Cooper's Hawk........................ 1,050 $ 669 92.79% -- (5) -- (5)
Hunter's Ridge at Deerwood........... 878 $ 612 97.32% -- (10) -- (10)
Lakeside............................. 827 $ 605 91.35% -- (7) -- (7)
Paddock Club - Jacksonville I , II &
III................................. 1,080 $ 728 92.95% -- (8) -- (8)
Paddock Club - Mandarin.............. 1,147 $ 764 94.10% -- (2) -- (2)
St. Augustine........................ 761 $ 550 95.75% -- (5) -- (5)
Woodbridge at the Lake............... 883 $ 617 96.81% -- (2) -- (2)
Woodhollow........................... 760 $ 597 95.11% $ 9,784 7.500%
Paddock Club - Lakeland I & II....... 1,089 $ 682 95.91% -- (8) -- (8)
Savannahs at James Landing........... 932 $ 604 95.31% -- (5) -- (5)
Paddock Park - Ocala I & II.......... 1,011 $ 649 94.38% $ 6,805 6.500%
Paddock Club - Tallahassee I & II.... 1,083 $ 692 93.75% $ 4,691 8.500%
Belmere.............................. 964 $ 649 92.86% -- (7) -- (7)
Links at Carrollwood................. 934 $ 653 98.04% $ 5,704 8.750%
--- ------------- ------------- ---------
774 $ 649 94.6% $33,984
--- ------------- ------------- ---------
High Ridge........................... 1,166 $ 765 94.38% -- (7) -- (7)
Shenandoah Ridge..................... 819 $ 477 97.06% -- (7) -- (7)
Bradford Pointe...................... 814 $ 557 94.27% $ 4,760 5.10%
Westbury Creek....................... 892 $ 566 95.83% $ 3,121 7.594%
Fountain Lake........................ 1,180 $ 690 90.00% $ 2,929 7.750%
Island Retreat....................... 1,157 $ 708 89.29% $ 3,388 7.215%
Park Walk............................ 909 $ 642 95.97% $ 3,343 6.370%
Enclave at Whisperwood............... 1,232 $ 760 92.86% -- (1) -- (1)
2000 Wynnton......................... 917 $ 468 97.22% -- --
Riverwind............................ 916 $ 477 93.18% -- --
Whisperwood I & Spa I................ 1,207 $ 631 95.67% -- (1) -- (1)
Willow Creek......................... 866 $ 504 97.19% -- (7) -- (7)
Terraces at Fieldstone............... 1,111 $ 813 96.20% -- (2) -- (2)
Hollybrook........................... 1,194 $ 604 89.87% -- --
Whispering Pines I & II.............. 1,033 $ 577 90.28% $ 5,183 7.750%
Westbury Springs..................... 918 $ 691 96.67% $ 4,186 7.500%
Austin Chase......................... 1,144 $ 667 95.70% -- (10) -- (10)
The Vistas........................... 1,068 $ 596 98.61% $ 4,015 6.230%
Georgetown Grove..................... 1,090 $ 720 94.09% $10,460 7.750%
Wildwood I & II...................... 1,033 $ 504 96.76% $ 4,019 7.500%
MATURITY
PROPERTY DATE
- ------------------------------------- ---------------
Eagle Ridge.......................... 07/01/28
Abbington Place...................... -- (2)
Paddock Club - Huntsville............ --
Paddock Club - Huntsville II......... --
Calais Forest........................ --
Napa Valley.......................... -- (7)
Westside Creek I & II................ 10/01/06 & -- (7)
Whispering Oaks...................... --
Tiffany Oaks......................... -- (7)
Marsh Oaks........................... -- (7)
Paddock Club - Brandon............... -- (2)
Anatole.............................. 12/01/27 & (1)
Cooper's Hawk........................ -- (5)
Hunter's Ridge at Deerwood........... -- (10)
Lakeside............................. -- (7)
Paddock Club - Jacksonville I , II &
III................................. -- (8)
Paddock Club - Mandarin.............. -- (2)
St. Augustine........................ -- (5)
Woodbridge at the Lake............... -- (2)
Woodhollow........................... 09/01/02
Paddock Club - Lakeland I & II....... -- (8)
Savannahs at James Landing........... -- (5)
Paddock Park - Ocala I & II.......... 10/01/08
Paddock Club - Tallahassee I & II.... 04/01/36
Belmere.............................. -- (7)
Links at Carrollwood................. 02/01/03
High Ridge........................... -- (7)
Shenandoah Ridge..................... -- (7)
Bradford Pointe...................... 06/01/28
Westbury Creek....................... 11/01/24
Fountain Lake........................ 04/01/24
Island Retreat....................... 03/01/03
Park Walk............................ 11/01/25
Enclave at Whisperwood............... -- (1)
2000 Wynnton......................... --
Riverwind............................ --
Whisperwood I & Spa I................ -- (1)
Willow Creek......................... -- (7)
Terraces at Fieldstone............... -- (2)
Hollybrook........................... --
Whispering Pines I & II.............. 01/01/23
Westbury Springs..................... 07/01/23
Austin Chase......................... -- (10)
The Vistas........................... 03/01/28
Georgetown Grove..................... 07/01/37
Wildwood I & II...................... 12/01/20
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
YEAR RENTABLE
YEAR MANAGEMENT NUMBER AREA
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Hidden Lake I & II................... Union City, GA 1985 1997 320 171,192
Three Oaks I & II.................... Valdosta, GA 1983 1997 240 123,904
Southland Station I & II............. Warner Robins, GA 1987 1997 304 186,704
Terraces at Towne Lake............... Woodstock, GA 1997 1997 264 286,968
--- -------------
5,303 4,567,320
--- -------------
Fairways at Hartland................. Bowling Green, KY 1996 1997 240 251,180
Paddock Club Florence................ Florence, KY 1994 1997 200 207,036
Lakepointe........................... Lexington, KY 1986 1994 118 90,614
Mansion, The......................... Lexington, KY 1987 1994 184 138,720
Village, The......................... Lexington, KY 1989 1994 252 182,716
Stonemill Village.................... Louisville, KY 1985 1994 384 324,008
--- -------------
1,378 1,194,274
--- -------------
Canyon Creek......................... St. Louis, MO 1987 1994 320 312,592
--- -------------
Riverhills........................... Grenada, MS 1972 1985 96 81,942
Advantages, The...................... Jackson, MS 1984 1991 252 199,136
Crosswinds........................... Jackson, MS 1988/1989 1996 360 443,200
Pear Orchard......................... Jackson, MS 1985 1994 389 338,400
Pine Trails.......................... Jackson, MS 1978 1988 120 98,560
Reflection Pointe.................... Jackson, MS 1986 1988 296 254,856
Somerset Place....................... Jackson, MS 1981 1995 144 126,848
Woodridge............................ Jackson, MS 1987 1988 192 175,034
--- -------------
1,849 1,717,976
--- -------------
Hermitage at Beechtree............... Cary, NC 1988 1997 194 169,776
Corners, The......................... Winston-Salem, NC 1982 1993 240 173,496
--- -------------
434 343,272
--- -------------
Fairways at Royal Oak................ Cincinnati, OH 1988 1994 214 214,477
--- -------------
Woodwinds............................ Aiken, SC 1988 1997 144 165,188
Tanglewood........................... Anderson, SC 1980 1994 168 146,600
The Fairways......................... Columbia, SC 1992 1994 240 213,720
Paddock Club - Columbia I & II....... Columbia, SC 1989 1997 336 218,872
Highland Ridge....................... Greenville, SC 1984 1995 168 144,000
Howell Commons....................... Greenville, SC 1986/88 1997 348 292,840
Paddock Club - Greenville............ Greenville, SC 1996 1997 208 212,104
Park Haywood......................... Greenville, SC 1983 1993 208 156,776
Spring Creek......................... Greenville, SC 1984 1995 208 182,000
Runaway Bay.......................... Mt. Pleasant, SC 1988 1995 208 177,840
Park Place........................... Spartanburg, SC 1987 1997 184 195,312
--- -------------
2,420 2,105,252
--- -------------
Steeplechase......................... Chattanooga, TN 1986 1991 108 98,602
Windridge............................ Chattanooga, TN 1984 1997 174 238,704
Oaks, The............................ Jackson, TN 1978 1993 100 87,512
Post House Jackson................... Jackson, TN 1987 1989 150 163,640
Post House North..................... Jackson, TN 1987 1989 144 144,724
Williamsburg Village................. Jackson, TN 1987 1994 148 121,412
Woods at Post House.................. Jackson, TN 1995 1995 122 118,922
Clearbrook Village................... Memphis, TN 1974 1987 176 150,400
Crossings............................ Memphis, TN 1974 1991 80 89,968
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1999
AVERAGE RENT PER OCCUPANCY ---------------------------
UNIT UNIT AT % AT MORTGAGE
SIZE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST
PROPERTY (SQUARE FT.) 1999 1999 (000'S) RATE
- ------------------------------------- ------------- ------------- ------------- --------- ------------
<S> <C> <C>
Hidden Lake I & II................... 1,070 $ 670 95.63% $ 4,455 6.34% & --(7)
Three Oaks I & II.................... 1,033 $ 539 92.92% $ 5,687 7.500%
Southland Station I & II............. 1,167 $ 642 97.37% -- (7) -- (7)
Terraces at Towne Lake............... 1,087 $ 814 90.91% $15,132 8.250%
--- ------------- ------------- ---------
861 $ 636 94.9% $70,678
--- ------------- ------------- ---------
Fairways at Hartland................. 1,047 $ 588 92.50% $ 4,552 8.875%
Paddock Club Florence................ 1,035 $ 739 84.50% $ 9,620 7.250%
Lakepointe........................... 768 $ 562 99.15% -- (7) -- (7)
Mansion, The......................... 754 $ 576 98.91% -- --
Village, The......................... 725 $ 593 95.63% -- (7) -- (7)
Stonemill Village.................... 844 $ 587 92.45% -- (4) -- (4)
--- ------------- ------------- ---------
867 $ 607 93.3% $14,172
--- ------------- ------------- ---------
Canyon Creek......................... 977 $ 559 95.94% -- (4) -- (4)
--- ------------- ------------- ---------
Riverhills........................... 854 $ 400 88.54% $ 785 7.000%
Advantages, The...................... 790 $ 466 92.46% -- (4) -- (4)
Crosswinds........................... 1,231 $ 606 96.11% -- (7) -- (7)
Pear Orchard......................... 870 $ 577 94.09% -- (7) -- (7)
Pine Trails.......................... 821 $ 536 96.67% $ 1,270 7.000%
Reflection Pointe.................... 861 $ 590 96.28% $ 5,882 5.35% &(1)
Somerset Place....................... 881 $ 519 94.44% -- (7) -- (7)
Woodridge............................ 912 $ 530 97.92% $ 4,677 6.500%
--- ------------- ------------- ---------
929 $ 548 94.9% $12,614
--- ------------- ------------- ---------
Hermitage at Beechtree............... 875 $ 687 89.18% -- (7) -- (7)
Corners, The......................... 723 $ 551 97.08% $ 4,081 7.850%
--- ------------- ------------- ---------
791 $ 612 93.5% $ 4,081
--- ------------- ------------- ---------
Fairways at Royal Oak................ 1,002 $ 627 92.52% -- (7) -- (7)
--- ------------- ------------- ---------
Woodwinds............................ 1,147 $ 614 91.67% $ 3,466 8.840%
Tanglewood........................... 873 $ 532 93.45% $ 2,410 7.600%
The Fairways......................... 891 $ 606 97.08% $ 7,566 8.500%
Paddock Club - Columbia I & II....... 1,094 $ 708 87.50% -- (2) -- (2)
Highland Ridge....................... 857 $ 515 89.88% -- (3) -- (3)
Howell Commons....................... 841 $ 509 95.69% -- (7) -- (7)
Paddock Club - Greenville............ 1,020 $ 698 89.90% -- (4) -- (4)
Park Haywood......................... 754 $ 537 98.08% -- (7) -- (7)
Spring Creek......................... 875 $ 526 93.27% -- (3) -- (3)
Runaway Bay.......................... 855 $ 694 94.71% -- (3) -- (3)
Park Place........................... 1,061 $ 604 91.85% -- (7) -- (7)
--- ------------- ------------- ---------
870 $ 598 93.0% $13,442
--- ------------- ------------- ---------
Steeplechase......................... 913 $ 566 92.59% -- (7) -- (7)
Windridge............................ 1,372 $ 676 96.55% $ 5,391 6.314%
Oaks, The............................ 875 $ 521 97.00% -- (4) -- (4)
Post House Jackson................... 1,091 $ 596 89.33% $ 5,052 8.170%
Post House North..................... 1,005 $ 609 93.06% $ 3,461 5.750%
Williamsburg Village................. 820 $ 539 90.54% -- (7) -- (7)
Woods at Post House.................. 975 $ 643 90.98% $ 5,255 7.250%
Clearbrook Village................... 855 $ 530 96.59% $ 1,014 9.000%
Crossings............................ 1,125 $ 679 93.75% -- (4) -- (4)
MATURITY
PROPERTY DATE
- ------------------------------------- --------------
Hidden Lake I & II................... 12/1/26 & -- (7)
Three Oaks I & II.................... 02/01/22
Southland Station I & II............. -- (7)
Terraces at Towne Lake............... 01/01/37
Fairways at Hartland................. 05/01/00
Paddock Club Florence................ 02/01/36
Lakepointe........................... -- (7)
Mansion, The......................... --
Village, The......................... -- (7)
Stonemill Village.................... -- (4)
Canyon Creek......................... -- (4)
Riverhills........................... 05/01/13
Advantages, The...................... -- (4)
Crosswinds........................... -- (7)
Pear Orchard......................... -- (7)
Pine Trails.......................... 04/01/15
Reflection Pointe.................... 12/01/27 & (1)
Somerset Place....................... -- (7)
Woodridge............................ 10/01/27
Hermitage at Beechtree............... -- (7)
Corners, The......................... 06/15/03
Fairways at Royal Oak................ -- (7)
Woodwinds............................ 06/01/05
Tanglewood........................... 11/15/02
The Fairways......................... 03/01/33
Paddock Club - Columbia I & II....... -- (2)
Highland Ridge....................... -- (3)
Howell Commons....................... -- (7)
Paddock Club - Greenville............ -- (4)
Park Haywood......................... -- (7)
Spring Creek......................... -- (3)
Runaway Bay.......................... -- (3)
Park Place........................... -- (7)
Steeplechase......................... -- (7)
Windridge............................ 12/01/24
Oaks, The............................ -- (4)
Post House Jackson................... 10/01/27
Post House North..................... 09/01/25
Williamsburg Village................. -- (7)
Woods at Post House.................. 09/01/35
Clearbrook Village................... 05/01/08
Crossings............................ -- (4)
</TABLE>
7
<PAGE>
<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>
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
River Trace I & II................... Memphis, TN 1981 1977 440 205,780 843
Savannah Creek....................... Memphis, TN (6) 1989 1996 204 237,200 1,162
Sutton Place......................... Memphis, TN (6) 1991 1996 253 267,600 1,062
Winchester Square.................... Memphis, TN 1973 1977 253 301,409 1,196
Brentwood Downs...................... Nashville, TN 1986 1994 286 220,166 770
Park at Hermitage.................... Nashville, TN 1987 1995 440 392,480 892
---------- ------------- ---
6,620 5,999,949 906
---------- ------------- ---
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
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
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
---------- ------------- ---
3,307 2,842,312 859
---------- ------------- ---
Township............................. Hampton, VA 1987 1995 296 248,048 838
---------- ------------- ---
TOTAL COMPLETED PROPERTIES........ 29,468 25,343,784 860
---------- ------------- ---
JOINT VENTURE PROPERTIES:
- -------------------------------------
Cedar Mill........................... Memphis, TN 1973/1986 1982/1994 276 297,794 1,079
Hamilton Pointe...................... Chattanooga, TN 1989 1992 361 256,716 711
Hidden Creek......................... Chattanooga, TN 1987 1988 300 259,152 864
Lane at Towne Crossing............... Mesquite, TX 1983 1994 384 277,616 723
Lakeshore Landing.................... Jackson, MS 1974 1994 196 171,156 873
Woodstream........................... Greensboro, NC 1983 1994 304 217,186 714
Walden Run........................... McDonough, GA 1997 1998 240 271,200 1,130
Woods................................ Austin, TX 1977 1997 278 213,970 770
Colony at South Park................. Aiken, SC 1989/91 1997 184 174,800 950
Northwood............................ Arlington, TX 1980 1998 270 224,100 830
---------- ------------- ---
TOTAL JOINT VENTURE PROPERTIES.... 2,793 2,363,690 846
---------- ------------- ---
DEVELOPMENT PROPERTIES:
- -------------------------------------
Paddock Club - Montgomery............ Montgomery, AL 1999 1999 208 230,880 1,110
Paddock Club - Brandon II (11)....... Brandon, FL 1999 1999 132 157,476 1,193
Paddock Club - Gainsville (11)....... Gainsville, FL 1999 1999 264 293,040 1,110
---------- ------------- ---
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1999
RENT PER OCCUPANCY -------------------------------------------------
UNIT AT % AT MORTGAGE
DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST MATURITY
PROPERTY 1999 1999 (000'S) RATE DATE
- ------------------------------------- ------------- ------------- --------- --------- --------------
EastView............................. $ 508 95.83% $ 11,696 8.630% 12/01/99
Glen Eagles.......................... $ 579 100.00% -- (4) -- (4) -- (4)
Greenbrook........................... $ 542 93.70% -- (9) -- (9) -- (9)
Hickory Farm......................... $ 536 97.50% -- (4) -- (4) -- (4)
Kirby Station........................ $ 589 98.38% -- (7) -- (7) -- (7)
Lincoln on the Green................. $ 598 96.09% -- (8) -- (8) -- (8)
Lincoln on the Green II.............. $ 768 96.58% -- (8) -- (8) -- (8)
McKellar Woods....................... $ 474 93.27% -- (9) -- (9) -- (9)
Park Estate.......................... $ 733 91.46% -- (9) -- (9) -- (9)
River Trace I & II................... $ 559 98.86% $ 11,231 8.000% 02/01/22
Savannah Creek....................... $ 624 96.08% -- (7) -- (7) -- (7)
Sutton Place......................... $ 595 95.65% -- (7) -- (7) -- (7)
Winchester Square.................... $ 589 96.05% -- (4) -- (4) -- (4)
Brentwood Downs...................... $ 666 94.76% -- -- --
Park at Hermitage.................... $ 603 91.14% $ 7,770 5.790% 02/01/19
------------- ------------- ---------
$ 577 95.0% $ 50,870
------------- ------------- ---------
Balcones Woods....................... $ 702 97.14% $ 8,608 7.630% 11/01/03
Stassney Woods....................... $ 604 100.00% $ 4,595 6.600% 10/01/19
Travis Station....................... $ 570 97.37% $ 4,065 6.600% 04/01/19
Celery Stalk......................... $ 662 94.15% $ 8,460 9.006% 12/01/04
Courtyards at Campbell............... $ 669 96.98% -- (1) -- (1) -- (1)
Deer Run............................. $ 607 95.07% -- (1) -- (1) -- (1)
Lodge at Timberglen.................. $ 636 92.31% $ 4,740 9.006% 12/01/04
MacArthur Ridge...................... $ 719 93.15% -- (1) -- (1) -- (1)
Westborough.......................... $ 538 98.18% $ 3,958 9.006% 12/01/04
Highwood............................. $ 675 90.31% -- (9) -- (9) -- (9)
Cypresswood Court.................... $ 541 95.67% $ 3,330 9.006% 12/01/04
Green Tree Place..................... $ 613 94.50% $ 3,180 9.006% 12/01/04
------------- ------------- ---------
$ 631 95.6% $ 40,936
------------- ------------- ---------
Township............................. $ 584 93.92% $ 10,800 5.10% &(1) 02/01/28 &(1)
------------- ------------- ---------
TOTAL COMPLETED PROPERTIES........ $ 610 94.6% $262,801
------------- ------------- ---------
JOINT VENTURE PROPERTIES:
- -------------------------------------
Cedar Mill........................... $ 588 94.93% N/A
Hamilton Pointe...................... $ 481 91.14% N/A
Hidden Creek......................... $ 499 89.33% N/A
Lane at Towne Crossing............... $ 554 90.10% N/A
Lakeshore Landing.................... $ 531 90.82% N/A
Woodstream........................... $ 560 98.36% N/A
Walden Run........................... $ 736 95.00% N/A
Woods................................ $ 726 99.28% N/A
Colony at South Park................. $ 595 92.93% N/A
Northwood............................ $ 547 93.70% N/A
------------- ------------- ---------
TOTAL JOINT VENTURE PROPERTIES.... $ 576 93.4% N/A
------------- ------------- ---------
DEVELOPMENT PROPERTIES:
- -------------------------------------
<S> <C> <C> <C> <C> <C>
Paddock Club - Montgomery............ $ 717 97.12% -- (2) -- (2) -- (2)
Paddock Club - Brandon II (11)....... $ 878 91.67% -- (2) -- (2) -- (2)
Paddock Club - Gainsville (11)....... $ 794 88.64% -- (1) -- (1) -- (1)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
YEAR RENTABLE
YEAR MANAGEMENT NUMBER AREA
PROPERTY LOCATION COMPLETED COMMENCED OF UNITS (SQUARE FT.)
- ------------------------------------- --------------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Paddock Club - Panama City (11)...... Panama City, FL 1999 1999 254 283,972
Terraces at Towne Lake II............ Woodstock, GA 1999 1999 238 272,986
Grand Reserve Lexington (11)......... Lexington, KY 1999 1999 52 60,788
Reserve at Dexter Lake............... Memphis, TN 1999 1999 252 262,332
Paddock Club - Murfreesboro (11)..... Murfreesboro, TN 1999 1999 240 268,800
---------- -------------
Total Development Properties...... 1,640 1,830,274
---------- -------------
TOTAL PROPERTIES.................. 33,901 29,537,748
========== =============
ENCUMBRANCES AT
AVERAGE AVERAGE DECEMBER 31, 1999
AVERAGE RENT PER OCCUPANCY --------------------------
UNIT UNIT AT % AT MORTGAGE
SIZE DECEMBER 31, DECEMBER 31, PRINCIPAL INTEREST
PROPERTY (SQUARE FT.) 1999 1999 (000'S) RATE
- ------------------------------------- ------------- ------------- ------------- --------- -------------
Paddock Club - Panama City (11)...... 1,118 $ 801 73.79% -- (1) -- (1)
Terraces at Towne Lake II............ 1,147 $ 827 94.12% -- (2) -- (2)
Grand Reserve Lexington (11)......... 1,169 $ 1,000 38.46% -- (1) -- (1)
Reserve at Dexter Lake............... 1,041 $ 778 95.63% -- (1) -- (1)
Paddock Club - Murfreesboro (11)..... 1,120 $ 784 78.75% -- (1) -- (1)
--- ------------- ------------- ---------
Total Development Properties...... 1,116 $ 800 86.5% $ --
--- ------------- ------------- ---------
TOTAL PROPERTIES.................. 871 $ 610(11) 94.6%(11) $262,801
=== ============= ============= =========
MATURITY
PROPERTY DATE
- ------------------------------------- ---------------
Paddock Club - Panama City (11)...... -- (1)
Terraces at Towne Lake II............ -- (2)
Grand Reserve Lexington (11)......... -- (1)
Reserve at Dexter Lake............... -- (1)
Paddock Club - Murfreesboro (11)..... -- (1)
Total Development Properties......
TOTAL PROPERTIES..................
</TABLE>
- ------------
(1) Encumbered by the AmSouth Credit Line, with an outstanding balance of $60.2
million and a variable interest rate of 7.15% at December 31, 1999.
(2) Encumbered by the FNMA Credit Line, with an outstanding balance of $113.2
million and a variable interest rate of 6.28% at December 31, 1999.
(3) These three properties are encumbered by a $9.86 million mortgage securing
a tax-exempt bond amortizing over 25 years with an average interest rate of
6.09%.
(4) These eight 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 $16.1 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 five 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 three properties, and one commercial building, are encumbered by a
$35.3 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%.
(11) Calculation excludes five of the development properties containing 942
units which are in lease-up at December 31, 1999.
9
<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 17, 2000, the
reported last sale price of the Company's common stock on the NYSE was $22.625
per share and there were approximately 1,700 holders of record of the Common
Stock. The Company estimates there are approximately 11,500 beneficial owners of
the Common Stock. The following table sets forth the quarterly high and low
sales prices of the Common Stock as reported on the NYSE and the distributions
declared by the Company with respect to the periods indicated.
SALES PRICES
-------------------- DIVIDENDS
HIGH LOW DECLARED
--------- --------- ----------
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
1999:
First Quarter........................ 24.125 20.875 .575
Second Quarter....................... 25.000 21.188 .575
Third Quarter........................ 23.125 21.000 .575
Fourth Quarter....................... 23.063 21.438 .58
The Company's current annual distribution rate with respect to the Common
Stock is $2.32 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, Series B, Series C and Series E Preferred Stock 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 to 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.
The Company had a 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) could 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 were 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 has terms substantially similar to the
above DRSPP, except for certain additional benefits offered relating to purchase
of the Company's common shares. The plan replaced the DRSPP, and its
participants were 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,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues....................... $ 226,322 $ 215,543 $ 139,116 $ 111,882 $ 94,963
Expenses:
Property expenses ................. 84,885 79,917 52,404 42,570 37,954
General and administrative......... 14,479 11,960 6,602 6,154 4,851
Interest........................... 48,302 45,704 28,943 25,766 22,684
Depreciation and amortization...... 49,903 46,021 27,737 21,443 16,574
Amortization of deferred financing
costs........................... 2,854 2,348 888 661 593
Gain on dispositions................. 10,237 408 -- 2,185 --
------------ ------------ ------------ ---------- ----------
Income before minority interest in
operating partnership income and
extraordinary item................. 36,136 30,001 22,542 17,473 12,307
Minority interest in operating
partnership income................. 2,497 2,254 2,693 3,213 2,497
Extraordinary item................... (67) (990) (8,622) -- --
------------ ------------ ------------ ---------- ----------
Net income........................... 33,572 26,757 11,227 14,260 9,810
Preferred dividends.................. 16,114 11,430 5,252 990 --
------------ ------------ ------------ ---------- ----------
Net income available for common
shareholders....................... $ 17,458 $ 15,327 $ 5,975 $ 13,270 $ 9,810
============ ============ ============ ========== ==========
PER SHARE DATA:
Basic and diluted:
Before extraordinary item.......... $ 0.93 $ 0.87 $ 1.05 $ 1.21 $ 1.00
Extraordinary item................. -- (0.05) (0.62) -- --
------------ ------------ ------------ ---------- ----------
Net income available per common
share........................... $ 0.93 $ 0.82 $ 0.43 $ 1.21 $ 1.00
============ ============ ============ ========== ==========
Dividends declared................... $ 2.305 $ 2.225 $ 2.155 $ 2.065 $ 2.01
BALANCE SHEET DATA:
Real estate owned, at cost........... $ 1,396,743 $ 1,434,733 $ 1,211,693 $ 641,893 $ 578,788
Real estate owned, net............... $ 1,248,051 $ 1,315,368 $ 1,134,704 $ 592,335 $ 549,284
Total assets......................... $ 1,298,823 $ 1,366,427 $ 1,193,870 $ 611,199 $ 565,267
Total debt........................... $ 744,238 $ 753,427 $ 632,213 $ 315,239 $ 307,939
Minority interest.................... $ 56,060 $ 61,441 $ 62,865 $ 39,238 $ 41,049
Shareholders' equity................. $ 463,884 $ 517,299 $ 461,300 $ 241,384 $ 202,278
Weighted average common shares
(000's):
Basic.............................. 18,784 18,725 13,892 10,938 9,772
Diluted............................ 18,808 18,770 13,955 10,983 9,814
OTHER DATA (AT END OF PERIOD):
Market capitalization (shares and
units)............................. $ 639,095 $ 670,123 $ 710,175 $ 436,739 $ 331,238
Ratio of total debt to total
capitalization(1).................. 53.8% 52.9% 47.1% 41.9% 48.2%
Number of properties, including
ownership interest................. 129 129 116 73 70
Number of apartment units, including
ownership interest................. 33,901 33,831 30,579 19,280 18,219
</TABLE>
- ------------
(1) 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, 1999,
1998, and 1997. 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 the Company owned or had an ownership
interest in, including the 10 properties containing 2,793 apartment units owned
by its 33.3% unconsolidated Joint Venture, at December 31, 1999 was 33,901 in
129 communities, compared to the 33,831 units in 129 communities owned at
December 31, 1998 and 30,579 in 116 communities owned at December 31, 1997. The
average monthly rental per apartment unit increased to $610 at December 31, 1999
from $597 at December 31, 1998 and $568 at December 31, 1997. Overall occupancy
at December 31, 1999, 1998 and 1997 was 94.6%, 94.1% and 93.9%, respectively.
FUNDS FROM OPERATIONS
Funds from operations ("FFO") represents net income (computed in
accordance with GAAP) excluding extraordinary items, minority interest in
Operating Partnership income, gain or loss on disposition of real estate assets,
and certain non-cash and other items, primarily depreciation and amortization,
less preferred stock dividends. Adjustments for the unconsolidated joint venture
are made to include the Company's portion of FFO in the calculation. The Company
computes FFO in accordance with NAREIT's current definition, which eliminates
amortization of deferred financing costs and depreciation of non-real estate
assets as items added back to net income when computing FFO. The Company's
policy is to expense the cost of interior painting, vinyl flooring, and blinds
as incurred for stabilized properties. During the stabilization period for
acquisition properties, these items are capitalized because they are necessary
for the continued use of the property, and, thus, are not deducted in
calculating FFO.
At its October 27, 1999 meeting, NAREIT approved the recommendations of its
Best Financial Practices Council with respect to clarifying the definition of
FFO. The Council recommends that FFO should include all operating results, both
recurring and non-recurring, except those results defined as "extraordinary"
under GAAP. The Company plans to adopt this definition effective January 1,
2000, and will reflect this clarification for all periods presented in
subsequent financial statements.
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 flow 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 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. Depreciation expense
includes $385,000, $245,000 and $195,000 at December 31, 1999, 1998 and 1997,
respectively, which relates to computer software, office furniture and fixtures
and other assets found in other industries and which is required to be
recognized, for purposes of computing funds from operations.
12
<PAGE>
Funds from operations ("FFO") decreased during 1999 by $3,947,000 to
$60,046,000 versus $63,993,000 for 1998. FFO for 1997 was $44,896,000. FFO for
the three years ending December 31, 1999, 1998 and 1997 is calculated as follows
(dollars in thousands):
YEAR ENDING DECEMBER 31,
--------------------------------
1999 1998 1997
---------- --------- ---------
Net income available for common
shareholders....................... $ 17,458 $ 15,327 $ 5,975
Depreciation and amortization........ 49,188 45,776 27,542
Adjustment for joint venture
depreciation....................... 741 -- --
Minority interest.................... 2,497 2,254 2,693
Gain on disposition of assets........ (10,237) (408) --
Extraordinary items.................. 67 990 8,622
Other non-recurring items............ 332 54 64
---------- --------- ---------
Funds from operations................ $ 60,046 $ 63,993 $ 44,896
========== ========= =========
Weighted average shares and units:
Basic........................... 21,794 21,717 16,419
Diluted......................... 21,817 21,764 16,482
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED
DECEMBER 31, 1998
During 1999 the Company sold 10 apartment communities containing 2,793
apartment units to the Joint Venture and retained a 33.33% ownership interest
and continued to manage the units for a fee of 4% of revenue. The Company also
completed development of 1,277 total apartment units in 7 new communities and 2
existing communities and sold three communities containing 1,138 units.
Rental revenues for 1999 increased by $11,507,000 due primarily to
increases of (i) $6,371,000 from the 8 communities acquired in 1998 and owned
throughout 1999, (ii) $12,587,000 from the development communities completed
during 1998 and 1999, and (iii) $4,281,000 from the communities owned throughout
both periods. These increases were partially offset by decreases of (i)
$9,691,000 due to the sale of 10 properties to the Joint Venture in 1999 and
(ii) $2,041,000 from the sale of Redford Park Apartments in 1998 and the sale of
Hidden Oaks Apartments, Sailwinds at Lake Magdalene Apartments and Regency Club
Apartments in 1999.
Property operating expenses include costs for property personnel, building
repairs and maintenance, real estate taxes and insurance, utilities, landscaping
and other property operating related costs. As a percentage of rental revenues,
property operating expenses increased from 37.9% in 1998 to 38.2% in 1999. The
majority of the increase is related to increased real estate taxes. Reappraisals
in some of the Company's markets, coupled with changes in tax rates in Shelby
County, Tennessee, and the annexation of three of the Company's properties in
the City of Memphis were the principal causes of the increase. Certain other
expenses contributed to the increase in operating expenses, including initial
lease-up costs for the development properties, and expenses associated with
certain fires and wind damage occurring during the year. Personnel costs
remained flat as a percentage of rental revenues from 1998 to 1999. In 1999
repair and maintenance costs decreased to 4.6% of rental revenues as compared to
4.8% in 1998 primarily as a result of the Company's significant investment of
capital for the last two years to reposition the 7,600 units acquired in the
1997 FDC Merger. Also in 1999, utilities costs decreased to 4.1% of rental
revenue as compared to 4.5% for the same period in 1998 mainly due to continued
savings from the Company's program to submeter units for water usage. Property
operating expenses for 1999 increased by $4,968,000 due primarily to (i)
$2,637,000 from the 8 communities acquired in 1998 and owned throughout 1999,
(ii) $4,290,000 from the development communities completed during 1998 and 1999
and (iii) $2,530,000 from the communities owned throughout both periods. These
increases were partially offset by decreases of (i) $3,609,000 due to the sale
of 10 properties to the Joint Venture in 1999 and (ii) $880,000 from the sale of
Redford Park Apartments in 1998 and the sale of
13
<PAGE>
Hidden Oaks Apartments, Sailwinds at Lake Magdalene Apartments and Regency Club
Apartments in 1999.
Depreciation and amortization expense increased by $3,882,000 primarily due
to (i) $1,448,000 from the 8 communities acquired in 1998 and owned throughout
1999, (ii) $2,232,000 from the development communities completed during 1998 and
1999, and (iii) $1,661,000 from the communities owned throughout both periods.
These increases were offset by decreases of (i) $1,793,000 due to the sale of 10
properties to the Joint Venture in 1999 and (ii) $291,000 from the sale of
Redford Park Apartments in 1998 and the sale of Hidden Oaks Apartments,
Sailwinds at Lake Magdalene Apartments and Regency Club Apartments in 1999.
Amortization of costs in excess of fair value of net assets acquired was
$849,000 and $1,474,000, for 1999 and 1998, respectively, which is included in
depreciation and amortization in the accompanying consolidated statement of
operations. The decrease is due to the write off of goodwill in connection with
the sale of FDC during 1999. Amortization of deferred financing costs was
$2,854,000 and $2,348,000 for 1999 and 1998, respectively. The majority of the
increase is due to additional financing costs related to the restructuring of
the AmSouth Credit Line and the addition of the new FNMA Credit Line.
General and administrative expense increased by $2,519,000 mainly due to
(i) approximately $800,000 in additional property level and support management
bonuses related primarily to improved property level performance at certain
properties as compared to the prior year, (ii) approximately $700,000 in
additional training costs related to the Company's recent investment in regional
training centers, (iii) approximately $450,000 in additional administrative
costs related to recent systems initiatives and staffing changes to support the
Company's portfolio growth, (iv) approximately $250,000 from increased franchise
and excise taxes related to recent legislative changes in the state of
Tennessee, and (v) approximately $240,000 in increased employee insurance costs.
Interest expense increased $2,598,000 due primarily increased debt related
to the 10 property acquisitions in 1998 and additional credit line funding to
complete the new development properties. The Company reduced its average
borrowing cost to 7.06% at December 31, 1999 as compared to 7.11% on December
31, 1998. The average maturity on the Company's debt was 10.7 years and 10.9
years at December 31, 1999 and 1998, respectively.
For the year ended December 31, 1999 the Company recorded a net gain on
disposition of assets totaling $10,237,000 comprised of the following
transactions:
GAIN (LOSS)
-----------
Gain on sale of ten communities sold
to Joint Venture, net of deferred
gain of $4,581,000................. $ 9,264,000
Gain on sale of three communities.... 5,004,000
Loss on sale of FDC.................. (4,031,000)
-----------
$10,237,000
===========
The Company recorded an extraordinary loss of $67,000, net of minority
interest, for 1999 related to the early extinguishment of the mortgage for
Eastview Apartments.
As a result of the foregoing, income before minority interest and
extraordinary item for the year ended December 31, 1999 increased $6,135,000
over the same period a year earlier.
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
14
<PAGE>
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 primarily as a
result 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.
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.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $74,978,000 in 1999 as
compared to $80,405,000 in 1998.
During 1999 the Company received total proceeds of $153,311,000 from the
sale of 10 properties to the Joint Venture, the sale of 3 additional properties,
and the sale of the development, construction and fee management businesses. The
Company invested $71,563,000 in the development and construction of new
properties or expansions of existing properties, $34,377,000 in total capital
improvements to existing properties, and $8,085,000 in capital and advances to
the Joint Venture.
During 1998 the Company invested $63,732,000 in the purchase of additional
properties, $107,963,000 in the development and construction of new properties,
and $32,336,000 in total capital improvements to existing properties. Also
during 1998 the Company received total proceeds of $5,424,000 from the
disposition of properties.
The following table summarizes the Company's communities in various stages
of lease-up, construction, development, and pre-development as of December 31,
1999 (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 Gainesville............. Gainesville, FL 264 $ 17,688 $ 17,678 1Q 1999 3Q 1998
Terraces at Towne Lake II............ Cherokee County, GA 238 13,421 13,313 1Q 1999 4Q 1998
Paddock Club Brandon II.............. Brandon, FL 132 8,063 8,018 1Q 1999 1Q 1999
Reserve at Dexter Lake............... Memphis, TN 252 17,398 17,394 2Q 1999 4Q 1998
Paddock Club Panama City............. Panama City, FL 254 15,536 15,138 2Q 1999 4Q 1998
Paddock Club Montgomery.............. Montgomery, AL 208 14,192 14,189 2Q 1999 1Q 1999
Paddock Club Murfreesboro............ Murfreesboro, TN 240 15,963 15,728 4Q 1999 2Q 1999
------ --------- ---------
1,588 $102,261 $ 101,458
====== ========= =========
DEVELOPMENT COMMUNITIES
IN LEASE-UP:
Grand Reserve Lexington.............. Lexington, KY 370 32,840 22,170 2Q 2000 4Q 1999
Kenwood Club......................... Katy, TX 320 18,807 13,696 2Q 2000 1Q 2000
------ --------- ---------
690 51,647 35,866
------ --------- ---------
UNDER CONSTRUCTION
Reserve at Dexter Lake II............ Memphis, TN 244 16,645 9,115 3Q 2000 1Q 2000
Grande View.......................... Nashville, TN 433 35,550 12,554 1Q 2001 2Q 2000
------ --------- ---------
677 52,195 21,669
------ --------- ---------
------ --------- ---------
Total Development Communities........ 1,367 $103,842 $ 57,535
====== ========= =========
ANTICIPATED
STABILIZA-
TION
------------
COMPLETED COMMUNITIES
IN LEASE-UP:
Paddock Club Gainesville............. 3Q 1999
Terraces at Towne Lake II............ 4Q 1999
Paddock Club Brandon II.............. 3Q 1999
Reserve at Dexter Lake............... 4Q 1999
Paddock Club Panama City............. 2Q 1999
Paddock Club Montgomery.............. 4Q 1999
Paddock Club Murfreesboro............ 2Q 2000
DEVELOPMENT COMMUNITIES
IN LEASE-UP:
Grand Reserve Lexington.............. 2Q 2001
Kenwood Club......................... 2Q 2001
UNDER CONSTRUCTION
Reserve at Dexter Lake II............ 1Q 2001
Grande View.......................... 4Q 2001
Total Development Communities........
</TABLE>
16
<PAGE>
Actual capital expenditures for property improvements during 1999 are
summarized below (in 000's):
Recurring capital at stabilized
properties........................... $ 13,154
Revenue enhancing projects at
stabilized properties................ 9,297
Capital improvements to
pre-stabilized properties............ 10,324
Corporate overhead capital
improvements......................... 1,602
---------
$ 34,377
=========
During 1999 the Company used $11,260,000 for net reductions in borrowings
and to fund deferred financing costs. Also during 1999 the Company initiated its
share repurchase program and acquired 1,473,600 shares for a total cost of
$33,073,000, which represented approximately 7% of the total common shares and
Common Units outstanding. Also during the year the Company paid a total of
$66,425,000 in distributions to holders of preferred shares, common shares, and
partnership units and received $3,549,000 from issuances of common shares and
units.
During 1998 net proceeds from borrowings were $86,920,000 and an additional
$82,411,000 was received from issuances of common and preferred shares and
Common Units, which was mainly used to fund the acquisition and development of
properties mentioned above. During 1998 the Company also distributed $58,547,000
to holders of preferred shares, common shares, and Common Units.
At December 31, 1999, the Company had $173.4 million outstanding on the
Credit Lines. Of this $25 million is effectively fixed at 7.565% through an
interest rate swap agreement which expires in 2003. The average interest rate at
December 31, 1999 for the conventional variable rate debt, including the impact
of the interest rate swap agreement, was 7.2%. At December 31, 1999, the Company
had an additional $31.9 million tax-free variable rate debt outstanding, with an
average rate of 5.1% at December 31, 1999. All other debt was fixed rate term
debt at an average interest rate of 7.1%. In November 1999, the Company
decreased its credit limit under the AmSouth Credit Line from $200 million to
$150 million. Additionally in 1999, the Company borrowed $113.2 million from a
new FNMA Credit Line which is part of a $195 million credit facility. The
Company expects to use the credit lines for future acquisitions, development,
and to provide letters of credit as credit enhancements for tax-exempt bonds.
The Credit Lines are secured and are subject to borrowing base calculations that
effectively reduce the maximum amount that may be borrowed under the credit
lines to $235.7 million as of March 1, 2000.
The weighted average interest rate and weighted average maturity at
December 31, 1999 for the $744.2 million of notes payable were 7.06% and 10.7
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, potential asset sales or joint
venture transactions and the Credit Lines.
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
17
<PAGE>
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
During 1999 the Company completed all phases of an action plan designed to
minimize the impact of Year 2000 ("Y2K") issue. Currently the Company has
experienced no internal or external business disruptions associated with the Y2K
issue. There can be, however, no assurance that future unforeseen Y2K problems
will not cause disruptions to our internal business systems, or those of our
vendors.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activity," as amended by SFAS No. 137, effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. The
accounting 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 2001.
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, 1999, 54% 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
76% of the Company's outstanding debt was subject to fixed interest rates with a
weighted average rate of 7.2% at December 31, 1999. 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.
18
<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
2000 2001 2002 2003 2004 THEREAFTER VALUE
--------- --------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long-term Debt
Fixed Rate .......... $ 9,170 $ 48,219 $ 16,306 $ 166,563 $ 75,886 $ 222,788 $ 516,500
Average interest rate 7.93% 8.48% 7.36% 6.39% 7.23% 6.90%
Variable Rate ....... -- $ 60,171 -- -- $ 113,232 $ 31,903 $ 205,306
Average interest rate --% 7.15% --% --% 6.28% 5.13%
</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- 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.
19
<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:
1. Independent Auditors' Report......... F-1
Consolidated Balance Sheets as of
December 31, 1999 and 1998......... F-2
Consolidated Statements of Operations
for the years ended December 31,
1999, 1998 and 1997................ F-3
Consolidated Statements of
Shareholders' Equity for the years
ended December 31, 1999, 1998 and
1997............................... F-4
Consolidated Statements of Cash Flows
for the years ended December 31,
1999, 1998 and 1997................ F-5
Notes to Consolidated Financial
Statements for the years ended
December 31, 1999, 1998 and 1997... F-6
2. Financial Statement Schedule required
to be filed by item 8 and Paragraph
(d) of this item 14:
Schedule III -- Real Estate and
Accumulated Depreciation as of
December 31, 1999.................. F-22
20
<PAGE>
3. The exhibits required by Item 601 of Regulation S-K, except as otherwise
noted, have been filed with previous reports by the registrant and are
herein incorporated by reference.
EXHIBIT
NUMBERS EXHIBIT DESCRIPTION
- -------------------------------------------------------
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 on June
, 1998
3.9++++ -- Mid-America Apartment Communities,
Inc. Articles of Amendment to the
Amended and Restated Charter dated
December , 1998, as filed with the
Tennessee Secretary of State on
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+ -- 1994 Restricted Stock and Stock
Option Plan
10.3++++ -- Revolving Credit Agreement between
the Registrant and AmSouth Bank of
Alabama
10.4 -- Sixth amendment to the 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
10.7 -- Employment Agreement between
Registrant and George E. Cates
10.8 -- Employment Agreement between
Registrant and H. Eric Bolton
10.9 -- Employment Agreement between
Registrant and Simon R.C. Wadsworth
10.10 -- Master Credit Facility Agreement
between Registrant and WMF Washington
Mortgage Corp. dated November 10,
1999
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
(FOOTNOTES ON FOLLOWING PAGE)
21
<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
++++ Filed as an exhibit to the 1998 Annual Report of the Registrant on Form
10-K for the year ended December 31, 1998
(b) Reports on Form 8-K
The following report was filed on Form 8-K by the registrant during the
fourth quarter of 1999:
DATE OF
FORM EVENTS REPORTED REPORT
- ------------------------------------------ --------
8-K Announcement of an approval by the 11/22/99
Board of Directors to authorize the
Company to repurchase common stock
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Item 14(a)(2) above.
22
<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.
MID-AMERICA APARTMENT
COMMUNITIES, INC.
Date: March 17, 2000 /s/ GEORGE E. CATES
GEORGE E. CATES
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Date: March 17, 2000 /s/ GEORGE E. CATES
GEORGE E. CATES
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Date: March 30, 2000 /s/ SIMON R.C. WADSWORTH
SIMON R.C. WADSWORTH
EXECUTIVE VICE PRESIDENT
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: March 17, 2000 /s/ H. ERIC BOLTON
H. ERIC BOLTON
PRESIDENT AND CHIEF OPERATING OFFICER
Date: March 20, 2000 /s/ JOHN F. FLOURNOY
JOHN F. FLOURNOY
DIRECTOR
Date: March 20, 2000 /s/ ROBERT F. FOGELMAN
ROBERT F. FOGELMAN
DIRECTOR
Date: March 21, 2000 /s/ JOHN S. GRINALDS
JOHN S. GRINALDS
DIRECTOR
Date: March 20, 2000 /s/ O. MASON HAWKINS
O. MASON HAWKINS
DIRECTOR
Date: March 30, 2000 /s/ RALPH HORN
RALPH HORN
DIRECTOR
Date: March 19, 2000 /s/ MICHAEL S. STARNES
MICHAEL S. STARNES
DIRECTOR
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated balance sheets of Mid-America
Apartment Communities, Inc. and subsidiaries (the "Company") as of December
31, 1999 and 1998 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, 1999. In connection with our audits of the
consolidated financial statements, we have also audited the accompanying
financial statement schedule III -- Real Estate and Accumulated Depreciation.
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
and subsidiaries as of December 31, 1999 and 1998, and the results of the their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, 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 25, 2000
F-1
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
1999 1998
------------ ------------
ASSETS:
REAL ESTATE ASSETS:
Land............................ $ 119,823 $ 124,912
Buildings and improvements...... 1,172,780 1,184,611
Furniture, fixtures and
equipment...................... 28,238 26,779
Construction in progress........ 58,840 75,776
------------ ------------
1,379,681 1,412,078
Less accumulated depreciation... (146,611) (117,773)
------------ ------------
1,233,070 1,294,305
Land held for future
development.................... 1,710 11,781
Commercial properties, net...... 5,217 9,282
Investment in and advances to real
estate joint venture............... 8,054 --
------------ ------------
REAL ESTATE ASSETS, NET......... 1,248,051 1,315,368
Cash and cash equivalents............ 14,092 7,237
Restricted cash...................... 12,537 9,282
Deferred financing costs, net........ 10,272 10,359
Other assets......................... 13,871 24,181
------------ ------------
TOTAL ASSETS............... $ 1,298,823 $ 1,366,427
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Notes payable................... $ 744,238 $ 753,427
Accounts payable................ 2,122 10,384
Accrued expenses and other
liabilities.................... 23,199 18,959
Security deposits............... 4,739 4,917
Deferred gain on disposition of
properties..................... 4,581 --
------------ ------------
TOTAL LIABILITIES AND
DEFERRED GAIN.......... 778,879 787,687
MINORITY INTEREST.................... 56,060 61,441
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value,
20,000,000 shares authorized,
$173,470,750 or $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 20
1,000,000 shares at 9.5%
Series E Cumulative.... 10 10
Common stock, $.01 par value
(authorized 50,000,000 shares;
issued and outstanding 17,971,960
and 18,877,691 shares December 31,
1999 and 1998, respectively)....... 190 189
Additional paid-in capital........... 562,537 583,154
Other................................ (1,053) (2,237)
Accumulated distributions in excess
of net income...................... (89,869) (63,876)
Treasury stock at cost, 355,900,
shares in 1999..................... (7,990) --
------------ ------------
TOTAL SHAREHOLDERS'
EQUITY................. 463,884 517,299
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY... $ 1,298,823 $ 1,366,427
============ ============
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1999 1998 1997
---------- ---------- ----------
Revenues:
Rental.......................... $ 222,098 $ 210,591 $ 135,673
Other........................... 3,504 3,111 3,279
Management and development
income, net................... 751 1,841 164
Equity in loss of real estate
joint venture................. (31) -- --
---------- ---------- ----------
Total revenues.................. 226,322 215,543 139,116
---------- ---------- ----------
Expenses:
Personnel....................... 25,239 24,053 14,623
Building repairs and
maintenance................... 10,107 10,030 6,811
Real estate taxes and
insurance..................... 24,561 22,459 14,465
Utilities....................... 9,119 9,376 6,341
Landscaping..................... 5,634 5,009 3,684
Other operating................. 10,225 8,990 6,480
Depreciation and amortization... 49,903 46,021 27,737
General and administrative...... 14,479 11,960 6,602
Interest........................ 48,302 45,704 28,943
Amortization of deferred
financing costs............... 2,854 2,348 888
---------- ---------- ----------
Total expenses.................. 200,423 185,950 116,574
---------- ---------- ----------
Income before gain on disposition of
properties, minority interest in
operating partnership income and
extraordinary item................. 25,899 29,593 22,542
---------- ---------- ----------
Gain on dispositions................. 10,237 408 --
---------- ---------- ----------
Income before minority interest in
operating partnership income and
extraordinary item................. 36,136 30,001 22,542
Minority interest in operating
partnership income................. 2,497 2,254 2,693
---------- ---------- ----------
Income before extraordinary item..... 33,639 27,747 19,849
Extraordinary item -- loss on debt
extinguishment, net of minority
interest........................... (67) (990) (8,622)
---------- ---------- ----------
Net income........................... 33,572 26,757 11,227
Dividends on preferred shares........ 16,114 11,430 5,252
---------- ---------- ----------
Net income available for common
shareholders....................... $ 17,458 $ 15,327 $ 5,975
========== ========== ==========
Net income available per common
share:
Basic (in thousands):
Average common shares
outstanding................... 18,784 18,725 13,892
========== ========== ==========
Basic earnings per share:
Net income available per common
share before extraordinary
item.......................... $ 0.93 $ 0.87 $ 1.05
Extraordinary item.............. -- (0.05) (0.62)
---------- ---------- ----------
Net income available per common
share......................... $ 0.93 $ 0.82 $ 0.43
========== ========== ==========
Diluted (in thousands):
Average common shares
outstanding..................... 18,784 18,725 13,892
Effect of dilutive stock options... 24 45 63
---------- ---------- ----------
Average dilutive common shares
outstanding..................... 18,808 18,770 13,955
========== ========== ==========
Diluted earnings per share:
Net income available per common
share before extraordinary
item.......................... $ 0.93 $ 0.87 $ 1.05
Extraordinary item.............. -- (0.05) (0.62)
---------- ---------- ----------
Net income available per common
share......................... $ 0.93 $ 0.82 $ 0.43
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(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, 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
($2.225 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)
Repurchase of common shares (Note
9)................................. -- -- (1,118) (1) (25,082) -- --
Issuance of common shares............ -- -- 154 2 3,516 -- --
Exercise of stock options............ -- -- -- -- 27 -- --
Notes receivable issued for shares
(Note 8)........................... -- -- 9 -- -- (100) --
Payments received on notes receivable
(Note 8)........................... -- -- -- -- -- 343 --
Reductions to notes receivables (Note
8)................................. -- -- -- -- -- 447 --
Shares issued in exchange for
units.............................. -- -- 49 -- 922 -- --
Amortization of unearned
compensation....................... -- -- -- -- -- 494 --
Dividends on common stock
($2.30 per share).................. -- -- -- -- -- -- (43,451)
Dividends on preferred stock......... -- -- -- -- -- -- (16,114)
Net income........................... -- -- -- -- -- -- 33,572
--------- ------- --------- ------- ----------- --------- ------------
BALANCE DECEMBER 31, 1999............ 6,939 $69 17,972 $ 190 $ 562,537 $ (1,053) $(89,869)
========= ======= ========= ======= =========== ========= ============
TREASURY
STOCK TOTAL
-------- ---------
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
($2.225 per share)................. -- (40,832)
Dividends on preferred stock......... -- (11,430)
Net income........................... -- 26,757
-------- ---------
BALANCE DECEMBER 31, 1998............ -- 517,299
Repurchase of common shares (Note
9)................................. (7,990 ) (33,073)
Issuance of common shares............ -- 3,518
Exercise of stock options............ -- 27
Notes receivable issued for shares
(Note 8)........................... -- (100)
Payments received on notes receivable
(Note 8)........................... -- 343
Reductions to notes receivables (Note
8)................................. -- 447
Shares issued in exchange for
units.............................. -- 922
Amortization of unearned
compensation....................... -- 494
Dividends on common stock
($2.30 per share).................. -- (43,451)
Dividends on preferred stock......... -- (16,114)
Net income........................... -- 33,572
-------- ---------
BALANCE DECEMBER 31, 1999............ $(7,990 ) $ 463,884
======== =========
</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, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
1999 1998 1997
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 33,572 $ 26,757 $ 11,227
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and
amortization................. 52,757 48,369 28,746
Amortization of unearned stock
compensation................. 494 121 121
Equity in loss of real estate
joint venture................ 31 -- --
Minority interest in operating
partnership income........... 2,497 2,254 2,693
Extraordinary item............. 67 990 8,622
Gain on dispositions........... (10,237) (408) --
Changes in assets and
liabilities:
Restricted cash............ (3,300) 4,115 (1,214)
Other assets............... (4,591) 1,044 (1,341)
Accounts payable........... (4,459) 786 140
Accrued expenses and other
liabilities.............. 8,325 (4,031) (4,550)
Security deposits.......... (178) 408 474
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES................... 74,978 80,405 44,918
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate
assets....................... -- (63,732) (76,287)
Improvements to properties..... (34,377) (32,336) (20,205)
Construction of units in
progress and future
development.................. (71,563) (107,963) (16,093)
Proceeds from disposition of
real estate assets........... 134,977 5,424 --
Proceeds from sale of
development and construction
assets....................... 18,134 -- --
Investment in and advances to
real estate joint venture.... (8,085) -- --
Net cash paid in business
combination.................. -- -- (25,678)
---------- ---------- ----------
NET CASH PROVIDED (USED) IN
INVESTING ACTIVITIES......... 39,086 (198,607) (138,263)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in credit lines..... 56,389 71,789 14,820
Proceeds from notes payable.... 11,760 232,799 187,500
Principal payments on notes
payable...................... (75,989) (210,571) (267,003)
Payment of deferred financing
costs........................ (3,420) (7,097) (3,813)
Repurchase of common stock..... (33,073) -- --
Proceeds from issuances of
common shares and units...... 3,549 9,586 165,737
Proceeds from issuance of
preferred shares............. -- 72,825 46,635
Redemption of unitholder
interests.................... -- (150) (8)
Distributions to unitholders... (6,860) (6,285) (5,347)
Dividends paid on common
shares....................... (43,451) (40,832) (29,172)
Dividends paid on preferred
shares....................... (16,114) (11,430) (5,252)
---------- ---------- ----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES......... (107,209) 110,634 104,097
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS......... 6,855 (7,568) 10,752
---------- ---------- ----------
Cash and cash equivalents, beginning of
period................................ 7,237 14,805 4,053
---------- ---------- ----------
Cash and cash equivalents, end of
period................................ $ 14,092 $ 7,237 $ 14,805
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid....................... $ 49,375 $ 45,607 $ 27,468
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Increase in basis of properties
acquired in connection with
business combination.............. $ -- $ -- $ 58,359
Assumption of debt related to
property acquisitions............. $ -- $ 26,231 $ 63,690
Conversion of units for common
shares............................ $ 922 $ 1,785 $ 974
Issuance of units related to
property acquisitions............. $ -- $ 1,911 $ 880
Issuance of advances in exchange for
common shares and units........... $ 100 $ 1,458 $ 906
Interest capitalized................ $ 3,967 $ 4,265 $ 388
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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 Texas. The company owns and operates 120 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. The Company also owns a 33.33% interest
in a real estate joint venture which owns 10 apartment communities. From the
period November 1997 through June 1999, the company conducted third party
property management, construction and development activities through its service
corporation, Flournoy Development Corporation.
BASIS OF PRESENTATION
The consolidated financial statements presented herein include the accounts
of Mid-America, the Operating Partnership, MACP, and all other subsidiaries
("the Company"). The Company owns 51% to 100% of these subsidiaries. The
Company uses the equity method of accounting for its investments in 20 to 50
percent-owned entities. 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. 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 therefrom 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 of Directors 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. Operating Partnership net income for 1999, 1998 and
1997 was allocated approximately 15.6%, 15.6% and 17.9%, respectively, to
holders of Operating Partnership Units and 84.4%, 84.4% and 82.1%, respectively,
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.
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.
F-6
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEVELOPMENT, CONSTRUCTION AND FEE MANAGEMENT REVENUES
The Company provided development, construction and property management
services to third parties from November 1997 (the date of the FDC Merger -- note
2) until June 1999 (the date of disposing of those businesses -- note 3).
The Company provided development services related to the development of
third party properties. Development fee income was recognized as earned as the
property was developed and certain operating and financing performance
conditions were met.
Construction contract revenues, which are presented net of construction
contract costs in the accompanying statements of operations, were recognized
using the percentage-of-completion method. Under this method, the percentage of
contract revenue to be recognized currently was 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 were 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
was provided for currently in its entirety without regard to the percentage of
completion.
The Company provided property management services for Section 42 Housing
Tax Credit multifamily properties and conventional properties. Property
management revenue was recorded on the accrual method of accounting as earned.
RENTAL COSTS
Costs associated with rental activities are expensed as incurred. Certain
costs associated with the lease-up of development projects, including cost of
model units, their furnishings, signs, and "grand openings" are capitalized
and amortized over their estimated useful lives. All other costs relating to
renting development projects are expenses as incurred.
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
estimated fair value, less cost to sell. 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.
F-7
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company records all gains and losses on real estate in accordance with
SFAS No. 66. The total gain for the period ended December 31, 1999 and 1998 was
approximately $10,237,000 and $408,000, respectively.
The Company periodically evaluates its real estate asset investments to
determine whether any impairment indicators are present by comparing current
capitalized net operating income to the carrying value of the asset. If any
investment asset is considered impaired, a loss is provided to reduce the
carrying value of the property to its estimated fair value. No such losses have
been required or provided in the accompanying financial statements.
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 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 1999, 1998 and
1997 was $3,967,000, $4,265,000 and $388,000 respectively.
LAND 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.
INVESTMENT IN AND ADVANCES TO REAL ESTATE JOINT VENTURE
The Company's investment in an unconsolidated real estate joint venture is
recorded on the equity method as the Company does not have a controlling
interest in the joint venture. The portion of the gain realized upon the
Company's sale of apartment communities to the joint venture was deferred in
proportion to the Company's ownership interest in the joint venture. The
deferred gain will be amortized over 20 years, which approximates the useful
life of the joint venture's real estate assets.
DEFERRED COSTS AND OTHER INTANGIBLES
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 30
years.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activity," effective for years beginning after June 15,
1999. In June 1999, SFAS No. 137 was issued to defer the implementation of SFAS
No. 133 to all fiscal years beginning June 15, 2000. The accounting 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 2001.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with 1999
presentation. The reclassifications had no effect on net income available for
common shareholders.
F-8
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS
On November 25, 1997, the Company completed the merger with Flournoy
Development Company and related entities ("FDC") (the "FDC Merger")
accounted for using the purchase method of accounting. Total consideration
consisted of $88,271,000, including 1,550,311 shares of common stock and 412,110
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 operating results of FDC are included in the
accompanying statement of operations commencing November 25, 1997.
The assets acquired and liabilities assumed in connection with the merger
were recorded at their respective fair values as follows:
Fair value of assets acquired,
primarily real estate assets......... $ 411,397,000
Liabilities assumed.................. 335,326,000
---------------
Net assets acquired............. $ 76,071,000
===============
3. SALE OF DEVELOPMENT, CONSTRUCTION AND FEE MANAGEMENT BUSINESSES
On June 30, 1999, the Company sold its development, construction and fee
management businesses acquired in connection with the November 1997 FDC Merger
back to the principals of Flournoy Development Company ("Flournoy"). The
Company received net proceeds of $18.1 million for these assets and recorded a
net loss for approximately $4.0 million, relating mainly to the write-off of
goodwill related to the original purchase transaction as described in Note 2. In
the transaction, Flournoy reacquired the development businesses, related fixed
assets including single family development, land and property held for sale, and
the fee management business of 5,131 tax credit apartment units. The Company has
contracted with Flournoy to complete the remaining portion of its development
pipeline.
4. REAL ESTATE JOINT VENTURE
In March 1999 the Company entered into an agreement to form a joint venture
(the "Joint Venture") with Blackstone Real Estate Acquisitions, LLC
("Blackstone"), to own and operate 10 apartment communities to be completed in
two transactions. The first transaction was completed on March 31, 1999 when the
Company sold 6 apartment communities, containing 1,660 apartment units, to the
Joint Venture for approximately $64.6 million in cash. In August 1999, the
Company closed the second portion of the Joint Venture transaction with
Blackstone. The Company sold four additional properties containing 1,134
apartment units to the Joint Venture, for proceeds of approximately $33.3
million. The Company contributed cash and made an additional loan to the Joint
Venture related to this transaction bringing the total investment in the Joint
Venture to approximately $4.6 million and the total loan to $3.4 million, $3
million at an interest rate of 10% and $.4 million at a rate of 7%, both for the
life of the entity. The loan is unsecured and is presented in the accompanying
consolidated balance sheets in the caption "Investments in and advances to real
estate joint venture". Interest and management fees are recorded as earned and
presented in the accompanying consolidated income statement as "Other revenue"
and "Management and development income, net", respectively.
F-9
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company recognized a gain of approximately $9.0 million and deferred
gains for the Company's retained interest of approximately $4.8 million. The
Company retained a 33.33 percent ownership interest in the Joint Venture and
manages the communities for a fee of 4% of revenues. The agreement provides that
income and cash flows generated by the Joint Venture are to be allocated based
on respective ownership percentages. Summary combined unaudited financial
information for the Joint Venture for the year ended December 31, 1999 follows:
1999
----------
Real estate assets, net.............. $ 98,323
Total assets......................... $ 103,011
Long-term debt....................... $ 86,150
Total liabilities.................... $ 89,313
Partners' capital.................... $ 13,698
Total revenues....................... $ 11,344
Depreciation expense................. $ 2,226
Net loss............................. $ 64
5. BORROWINGS
At December 31, 1999 the Company has two lines of credit (the Credit Lines)
with a total outstanding balance of $173.4 million. The Credit Lines are secured
by certain of the properties and have restrictive financial covenants. The
AmSouth Credit Line has a $150 million borrowing limit at December 31, 1999 and
expires in November 2001. The AmSouth Credit Line has a tiered interest rate as
determined by the Company's percentage of total liabilities to a valuation of
the Company's investment in real estate assets ("AmSouth Ratio"), as defined by
the loan agreement, which is reviewed quarterly for interest rate adjustments.
The AmSouth Credit Line bears interest at LIBOR plus 1.45%, 1.65%, and 1.75%
based on an AmSouth Ratio less than 55%, between 55% and 60%, and over 60%,
respectively. The AmSouth Credit Line had an interest rate at December 31, 1999
of LIBOR plus 1.75% (7.75%). The FNMA Credit Line has a $195 million borrowing
limit, bears interest at the 90-day FNMA mortgage backed security rate plus .67%
(6.28% at December 31, 1999) and expires November 2004. At December 31, 1998 the
Company had $117.0 million outstanding under the AmSouth Credit Line and $25.0
million outstanding under a short-term note payable.
During 1999, the Company paid off approximately $73.2 million of various
notes payable including $18.4 million relating to property dispositions and a
$25.0 million short-term note payable established in 1998. The Company incurred
costs of $67,000, net of minority interest, related to the early extinguishment
of one mortgage which is included in "Extraordinary item -- loss on early
extinguishment of debt" in the accompanying financial statements.
The Company had approximately $570.8 million and $612.0 million at December
31, 1999 and 1998, respectively, outstanding under various mortgage notes and
bonds payable secured by real estate assets.
The Company has issued $142 million aggregate principal amount of 6.376%
Bonds due 2003 (the "Bonds"). The Bonds are secured by a first priority deed
of trust, security agreement and assignment of rents and leases in respect of 26
mortgaged properties, with a net book value of $207.2 million at December 31,
1999. In anticipation of the Bond issuance, 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%. In 1998 the Company realized a $1.4
million loss on the interest rate contracts. The realized loss resulting from
the change in the
F-10
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
market value of these contracts is being amortized into interest expense over
the life of the related debt issuance.
During 1998, the Company refinanced approximately $29.1 million of various
notes payable. The Company also refunded $4.8 million of bonds secured by its
Sterling Ridge Apartments and 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 accompany
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 a bridge loan.
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, 1999, the Company estimated that the weighted average
interest rate on the Company's debt was 7.06% with an average maturity of 10.7
years.
The following table summarizes the Company's indebtedness at December 31,
1999.
<TABLE>
<CAPTION>
ACTUAL AVERAGE
INTEREST RATES INTEREST RATE MATURITY 1999 1998
-------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN
MILLIONS)
Fixed Rate:
Taxable......................... 6.376-9.006% 7.371% 2000-2037 $ 442.6 $ 481.5
Tax-exempt...................... 5.281-7.594% 6.118% 2008-2028 96.3 97.9
--------- ---------
$ 538.9 $ 579.4
Variable Rate:
Taxable......................... 6.28-7.15% 7.127% 2000-2004 $ 173.4* $ 142.0
Tax-exempt...................... 5.0-5.4% 5.133% 2025-2028 31.9 32.0
--------- ---------
$ 205.3 $ 174.0
--------- ---------
$ 744.2 $ 753.4
========= =========
</TABLE>
- ------------
* Includes $25 million of variable rate effectively fixed through the interest
rate swap.
Scheduled principal repayments on the borrowings at December 31, 1999 are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR AMORTIZATION BALLOON PAYMENTS TOTAL
- ------------------------------------- ------------ ---------------- ----------
<S> <C> <C> <C>
2000................................. $ 4,618 $ 4,552 $ 9,170
2001................................. 4,819 103,571 108,390
2002................................. 4,916 11,390 16,306
2003................................. 4,742 161,821 166,563
2004................................. 4,719 184,399 189,118
Thereafter........................... 170,082 84,609 254,691
------------ ---------------- ----------
$193,896 $550,342 $ 744,238
============ ================ ==========
</TABLE>
The Company's indebtedness includes various restrictive financial
covenants. The Company believes that it was in compliance with these covenants
as of December 31, 1999.
F-11
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. 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, 1999 and 1998 total $538.9 million
and $579.4 million, respectively, and have an estimated fair value of $516.5
million and $582.4 million (excluding prepayment penalties) based upon interest
rates available for the issuance of debt with similar terms and remaining
maturities as of December 31, 1999 and 1998. 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 at December 31, 1999 and 1998 total $205.3 million
and $174.0 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,
1999 and 1998. Approximately $32.0 million in 1999 and 1998 of these mortgages
are non-taxable and have lower rates than would be expected for taxable notes
with similar terms.
The fair value estimates presented herein are based on information
available to management as of December 31, 1999 and 1998. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date, and current estimates of fair
value may differ significantly from the amounts presented herein.
7. 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, 1999, 1998, and 1997
of $256,000, $138,000, and $187,000, respectively.
8. INCOME TAXES
No provision for federal income taxes has been made in the accompanying
consolidated financial statements. The Company has made an election to be taxed
as a Real Estate Investment Trust ("REIT") under Sections 856 through 860 of
the Code. As a REIT, the Company generally is not subject to Federal income tax
to the extent it distributes 95% of its REIT taxable income to its shareholders
and meets certain other tests relating to the number of shareholders, types of
assets and allocable income. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to the Federal income tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Even though the Company qualifies for taxation as a REIT, the
Company may be subject to certain Federal, state and local taxes on its income
and property and to Federal income and excise tax on its undistributed income.
F-12
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 1998 and 1997 and
the estimated taxability for 1999:
1999 1998 1997
----- ----- -----
Per common share
Ordinary income................. $1.40 $1.28 $1.16
Capital gains................... .18 -- --
Return of capital............... .72 .92 .98
----- ----- -----
Total...................... $2.30 $2.20 $2.14
===== ===== =====
9. 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. On and after November 1,
2001, the Series A Preferred shares will be redeemable for cash at the option of
the Company, in whole or in part, at a redemption price equal to the liquidation
preference plus dividends accrued and unpaid to the redemption date.
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. On and after December 1, 2002, the Series B Preferred shares will
be redeemable for cash at the option of the Company, in whole or in part, at a
redemption price equal to the liquidation preference plus dividends accrued and
unpaid to the redemption date.
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. On and after June 30, 2003, the Series C Preferred
shares will be redeemable for cash at the option of the Company, in whole or in
part, at a redemption price equal to the liquidation preference plus dividends
accrued and unpaid to the redemption date.
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.
F-13
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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. The
Series E Preferred Stock is equal in rank with the Company's other series of
Preferred Stock with respect to the payment of dividends and amounts upon
liquidation, dissolution or winding up.
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.
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 distributions
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 replaced the Company's previous Dividend Reinvestment and Stock Purchase
Plan (the "DRSPP"). The Company has registered with the Securities and
Exchange Commission the offer and sale of up to 1,600,000 shares of common stock
pursuant to the DSPDRP and DRSPP. Additional shares will be purchased at the
market price on the "Investment Date" each month, which shall in no case be
later than ten business days following the distribution payment date. Common
stock shares totaling 111,637, 62,175 and 24,785 were acquired by shareholders
during 1999, 1998 and 1997, respectively.
STOCK REPURCHASE PLAN
In 1999, the Company's Board of Directors approved a stock repurchase plan
to acquire up to a total of 4.0 million shares of the Company's common shares.
In 1999, the Company repurchased approximately 1.5 million shares of common
stock, of which 1.1 million were retired, for a cost of approximately $33
million at an average price per common share of $22.40.
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 outstanding
plus the shares resulting from the assumed exercise of all dilutive outstanding
options using the treasury stock method. The Series E Preferred Shares, which
are convertible five years from the date of issuance, are not included in the
calculation because the assumed conversion would be anti-dilutive.
A reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations for the years ended December 31, 1999,
1998 and 1997 is presented on the Consolidated Statement of Operations.
F-14
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. EMPLOYEE BENEFIT PLANS
401 (K) SAVINGS PLAN
The Mid-America Apartment Communities, Inc. 401(k) Savings Plan is a
defined contribution plan that satisfies the requirements of Section 401(a) and
401(k) of the Code. The Company may, but is not obligated to, make a matching
contribution of $.50 for each $1.00 contributed, up to 6% of the participant's
compensation. The Company's contribution to this plan was $204,200, $318,200 and
$154,300 in 1999, 1998 and 1997, respectively.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
The Company has adopted a non-qualified deferred compensation plan for key
employees who are not qualified for participation in the Company's 401 (k)
Savings Plan. Under the terms of the plan, employees may elect to defer a
percentage of their compensation and the Company matches a portion of their
salary deferral. The plan is designed so that the employees' investment earnings
under the non-qualified plan should be the same as the earning assets in the
Company's 401 (k) Savings Plan. The Company's match to this plan in 1999, 1998
and 1997 was $17,300, $19,100 and $18,600, 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 1999, 1998 and 1997, the ESPP purchased 6,721, 5,242 and 2,758 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 1999, 1998 and 1997, the
Company contributed $640,100, $448,300 and $344,000, respectively, to the ESOP
which purchased an additional 28,233, 17,156 and 11,921 shares, respectively.
STOCK OPTION PLAN
The Company has adopted the 1994 Restricted Stock and Stock Option Plan
(the "Plan") to provide incentives to attract and retain independent
directors, executive officers and key employees. The Plan provides for the grant
of options to purchase a specified number of shares of common stock
("Options") or grants of restricted shares of common stock ("Restricted
Stock"). The Plan also allows the Company to grant options to purchase
Operating Partnership Units at the price of the common stock on the New York
Stock Exchange on the day prior to issuance of the units (the "LESOP
Provision"). The Plan authorizes the issuance of 1,000,000 common shares or
options to acquire shares.
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
options to purchase 75,000 shares of common stock and 110,000 Operating
Partnership Units were exercised pursuant to the LESOP Provision 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
F-15
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 1998, the Company issued 150,000 shares of common stock and 100,000
Operating Partnership Units to certain executive officers of the Company. The
Company received approximately $5,899,250 cash and advanced the employees
approximately $1,040,750 secured by the common stock and Operating Partnership
Units of the Company. The advances bear interest at rates ranging from 5.59% to
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, 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. 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 common stock of the Company and are presented as a
reduction of shareholders' equity in the accompanying consolidated balance
sheets.
During 1999, the Company issued 9,000 shares of common stock to certain
other officers of the Company at the market price on the date of issuance. The
Company received approximately $100,000 cash and advanced the employees
approximately $100,000. The advances bear interest at 7.5% and 8.25% per annum,
are secured by the common 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.
In connection with the sale of the development, construction and fee
management businesses (note 3) certain executive officers of the Company
resigned. Amounts due from these officers which related to the issuances of
shares, totaling approximately $447,000, were forgiven as a part of the sale.
The effect of this debt forgiveness is included in the loss on disposition of
those businesses in the accompanying financial statements.
At December 31, 1999, 1998 and 1997, the total outstanding principal
balance on the employee advances was approximately $1,296,000, $2,219,000 and
$906,000 respectively, and is presented as a reduction in the Company's
statements of shareholders' equity.
F-16
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1999 is as follows:
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
---------- ----------------
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
Granted......................... 371,750 22.25
Exercised....................... (1,300) 19.75
Forfeited....................... (219,550) 25.47
----------
Outstanding at December 31, 1999..... 946,219
==========
Options exercisable:
December 31, 1997............... 140,500 $21.71
December 31, 1998............... 208,769 23.19
December 31, 1999............... 285,694 23.34
Exercise prices for options outstanding as of December 31, 1999 ranged from
$19.75 to $29.50. The weighted average remaining contractual life of those
options is 7.3 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. If the fair value
method of accounting allowed under SFAS No. 123 had been used by the Company,
the pro forma net income available to common shareholders would have been
$17,254,000, $14,681,000, $5,452,000 for 1999, 1998 and 1997, respectively. The
pro forma diluted net income available per common share would have been $0.92,
$0.78 and $0.39 for 1999, 1998 and 1997, respectively. The calculation was
prepared using the Black-Scholes option pricing model using the following
factors: 1) risk free interest rate of 6.38%, 2) expected life of 7.3 years, 3)
expected volatility of 19.14%, and 4) expected dividends of 10.16%. The weighted
average fair value of all options granted during the year is $8,271,000 at a
weighted average option price of $22.25 per share.
11. 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 lines of credit.
F-17
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 AmSouth Credit Line. As of December 31, 1999, $25 million
notional amount was outstanding on this agreement with a fixed interest rate
paid by the Company of 7.57%. The fair value of this agreement at December 31,
1999 was $894,000.
12. 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.
Pursuant to a management contract with the Joint Venture, the Company
manages the operations of the 10 Joint Venture apartment communities for a fee
of 4% of the revenues of the Joint Venture. In 1999 the Company received
approximately $453,000 as management fees from the Joint Venture.
13. SEGMENT INFORMATION
At December 31, 1999, the Company owned or had an ownership interest in 130
multifamily apartment communities, including the 10 apartment communities owned
by the Joint Venture, 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-18
<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, 1999, 1998 and 1997 (in 000's).
For purposes of this disclosure multifamily revenues, net operating income and
real estate assets include amounts related to the 10 properties owned by the
unconsolidated Joint Venture.
1999 1998 1997
----------- ----------- ---------
Multifamily rental revenues.......... $ 233,442 $ 210,591 $ 135,673
Other multifamily revenues........... 2,116 2,248 1,426
----------- ----------- ---------
Segment revenues................. 235,558 212,839 137,099
Reconciling items to consolidated
revenues:
Joint Venture revenues........... (11,344) -- --
Management and development
income, net.................... 751 1,841 164
Equity in loss of joint
venture........................ (31) -- --
Interest income and other
revenues....................... 1,388 863 1,853
----------- ----------- ---------
Total revenues................. $ 226,322 $ 215,543 $ 139,116
=========== =========== =========
Multifamily net operating income..... 145,874 132,922 84,695
Reconciling items to net income
available for common shareholders:
Joint Venture net operating
income......................... (6,545) -- --
Management and development
income, net.................... 751 1,841 164
Equity in loss of real estate
joint venture.................. (31) -- --
Interest income and other
revenues....................... 1,388 863 1,853
Interest expense................. (48,302) (45,704) (28,943)
General and administrative
expenses....................... (14,479) (11,960) (6,602)
Depreciation and amortization.... (49,903) (46,021) (27,737)
Amortization of deferred
financing costs................ (2,854) (2,348) (888)
Gain on dispositions............. 10,237 408 --
Extraordinary items, net......... (67) (990) (8,622)
Minority interest................ (2,497) (2,254) (2,693)
Dividends on preferred shares.... (16,114) (11,430) (5,252)
----------- ----------- ---------
Net income available for common
shareholders................ $ 17,458 $ 15,327 $ 5,975
=========== =========== =========
1999 1998
----------- -----------
ASSETS:
Multifamily real estate assets....... $ 1,480,232 $ 1,412,078
Accumulated
depreciation -- multifamily
assets............................. (148,839) (117,773)
----------- -----------
1,331,393 1,294,305
Reconciling items to total assets:
Joint Venture multifamily real estate
assets, net........................ (98,323) --
Land held for future
development.................... 1,710 11,781
Commercial properties, net....... 5,217 9,282
Investment in and advances to
real estate joint venture...... 8,054 --
Cash and Restricted Cash......... 26,629 16,519
Other assets..................... 24,143 34,540
----------- -----------
Total assets................ $ 1,298,823 $ 1,366,427
=========== ===========
1999 1998 1997
----------- ----------- ---------
Multifamily expenditures for property
improvements, acquisitions and
construction....................... $ 107,508 $ 204,031 $ 112,585
Less reconciling items:
Joint Venture property
improvements................... (1,568) -- --
----------- ----------- ---------
Total expenditures for
property improvements,
acquisitions and
construction.............. $ 105,940 $ 240,031 $ 112,585
=========== =========== =========
F-19
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SUBSEQUENT EVENTS (UNAUDITED)
DECLARATION OF DIVIDEND
The Company declared a 1999 fourth quarter common stock dividend of $0.58
per share to be paid January 31, 2000 to holders of record on January 24, 2000.
PROPERTY DISPOSITIONS
On February 11, 2000, the Company sold the 120-unit Pine Trails apartment
community in Clinton, Mississippi for approximately $2,815,000 for cash. On
February 25, 2000, the Company sold the 248-unit MacArthur Ridge apartment
community for approximately $12,075,000 for cash. The proceeds from both
dispositions were to be used to reduce debt, fund the development pipeline, and
as a source of capital for future share repurchases.
F-20
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. 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, 1999
-------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Total revenues ..................... $ 57,089 $ 56,362 $ 56,983 $ 55,888
Income before minority interest in
operating partnership income and
extraordinary item ............... $ 7,512 $ 2,275 $ 11,445 $ 14,904
Minority interest in operating
partnership income (loss) ........ $ 1,196 $ (414) $ 917 $ 798
Extraordinary item, net of minority
interest ......................... $ (67) -- -- --
Net income (loss) available for
common shareholders .............. $ 6,920 $ (1,340) $ 6,500 $ 5,378
Per share:
Basic and diluted per share:
Net income available per common
shares
Before extraordinary item ..... $ 0.37 $ (0.07) $ 0.34 $ 0.29
Extraordinary item ............ -- -- -- --
-------- -------- -------- --------
Net income available per common
share ....................... $ 0.37 $ (0.07) $ 0.34 $ 0.29
======== ======== ======== ========
Dividend declared .................. $ 0.575 $ 0.575 $ 0.575 $ 0.58
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Total revenues....................... $ 50,982 $52,166 $ 56,086 $56,309
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 shareholder................. $ 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>
F-21
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1999(6)
-------------------- ---------------- --------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ------------------------------- -------- --------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
The Advantages....................... Jackson, MS -- (1) $ 422 $ 3,727 $-- $ 949 $ 422
McKellar Woods....................... Memphis, TN -- (8) 737 13,200 -- 2,054 737
Pine Trails.......................... Clinton, MS $ 1,270 178 2,728 -- 775 178
Reflection Pointe.................... Jackson, MS $ 5,882 710 8,770 140 2,517 850
Riverhills........................... Grenada, MS $ 785 153 2,092 -- 385 153
Woodridge............................ Jackson, MS $ 4,677 471 5,522 -- 515 471
Greenbrook........................... Memphis, TN -- (8) 2,100 24,468 25 9,295 2,125
Steeplechase......................... Hixson, TN -- (9) 217 1,957 -- 1,305 217
Clearbrook Village................... Memphis, TN $ 1,014 260 3,658 -- 992 260
Crossings............................ Memphis, TN -- (1) 554 2,216 -- 627 554
Eastview............................. Memphis, TN $ 11,696 700 9,646 -- 1,633 700
Gleneagles........................... Memphis, TN -- (1) 443 3,983 -- 1,851 443
The Park Estate...................... Memphis, TN -- (8) 178 1,141 -- 920 178
Winchester Square.................... Memphis, TN -- (1) 350 7,279 -- 1,187 350
Post House North..................... Jackson, TN $ 3,461 381 4,299 -- 862 381
Post House Jackson................... Jackson, TN $ 5,052 443 5,078 -- 754 443
The Oaks............................. Jackson, TN -- (1) 177 1,594 -- 742 177
The Corners.......................... Winston-Salem, NC $ 4,081 685 6,165 -- 673 685
Park Haywood......................... Greenville, SC -- (9) 325 2,925 35 2,595 360
Hickory Farm......................... Memphis, TN -- (1) 580 5,220 -- 598 580
Stonemill Village.................... Louisville, KY -- (1) 1,169 10,518 -- 1,562 1,169
Canyon Creek......................... St. Louis, MO -- (1) 880 7,923 220 2,091 1,100
Whispering Oaks...................... Little Rock, AR -- 506 4,551 -- 1,644 506
Pear Orchard......................... Jackson, MS -- (9) 1,352 12,168 -- 1,444 1,352
Celery Stalk......................... Dallas, TX $ 8,460 1,463 13,165 -- 2,282 1,463
Hollybrook........................... Dalton, GA -- 405 3,646 -- 1,123 405
Green Tree Place..................... Woodlands, TX $ 3,180 539 4,850 -- 836 539
MacArthur Ridge...................... Irving, TX -- (2) 1,131 10,183 -- 763 1,131
Lincoln on the Green................. Memphis, TN -- (10) 1,498 13,484 -- 993 1,498
Brentwood Downs...................... Nashville, TN -- (3) 1,193 10,739 -- 778 1,193
Shenandoah Ridge..................... Augusta, GA -- (9) 650 5,850 -- 1,955 650
Westborough Crossing................. Katy, TX $ 3,958 677 6,091 -- 935 677
Woodbridge at the Lake............... Jacksonville, FL -- (3) 645 5,804 -- 1,025 645
Lakepointe........................... Lexington, KY -- (9) 411 3,699 -- 665 411
The Mansion.......................... Lexington, KY -- (3) 694 6,242 -- 999 694
The Village.......................... Lexington, KY -- (9) 900 8,097 -- 1,067 900
Cypresswood Court.................... Spring, TX $ 3,330 577 5,190 -- 926 577
The Lodge at Timberglen.............. Dallas, TX $ 4,740 825 7,422 -- 1,856 825
Calais Forest........................ Little Rock, AR $ -- 1,026 9,244 -- 1,378 1,026
The Fairways......................... Columbia, SC $ 7,566 910 8,207 -- 523 910
Kirby Station........................ Memphis, TN -- (9) 1,148 10,337 -- 2,317 1,148
Belmere.............................. Tampa, FL -- (9) 851 7,667 -- 1,730 851
Williamsburg Village................. Jackson, TN -- (9) 523 4,711 -- 543 523
Fairways @ Royal Oak................. Cincinnati, OH -- (9) 814 7,335 -- 964 814
Tanglewood........................... Anderson, SC $ 2,410 427 3,853 -- 829 427
Woods at Post House.................. Jackson, TN $ 5,255 240 6,839 -- 670 240
Somerset............................. Jackson, MS -- (9) 477 4,294 -- 694 477
Highland Ridge....................... Greenville, SC -- (4) 482 4,337 -- 473 482
Spring Creek......................... Greenville, SC -- (4) 597 5,374 -- 667 597
St. Augustine........................ Jacksonville, FL -- (5) 2,858 6,475 -- 2,026 2,858
Cooper's Hawk........................ Jacksonville, FL -- (5) 854 7,500 -- 879 854
Marsh Oaks........................... Atlantic Beach, FL -- (9) 244 2,829 -- 600 244
Park at Hermitage.................... Nashville, TN $ 7,770 1,524 14,800 -- 1,638 1,524
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7)
- ------------------------------------- --------- --------- ----------- --------- ------------ ------------
The Advantages....................... $ 4,676 $ 5,098 $ (1,443) $ 3,655 1984 5 - 40
McKellar Woods....................... 15,254 15,991 (3,483) 12,508 1976 5 - 40
Pine Trails.......................... 3,503 3,681 (1,348) 2,333 1978 5 - 40
Reflection Pointe.................... 11,287 12,137 (2,061) 10,076 1986 5 - 40
Riverhills........................... 2,477 2,630 (692) 1,938 1972 5 - 40
Woodridge............................ 6,037 6,508 (1,135) 5,373 1987 5 - 40
Greenbrook........................... 33,759 35,888 (6,565) 29,323 1986 5 - 40
Steeplechase......................... 3,262 3,479 (816) 2,663 1986 5 - 40
Clearbrook Village................... 4,650 4,910 (965) 3,945 1974 5 - 40
Crossings............................ 2,843 3,397 (864) 2,533 1974 5 - 40
Eastview............................. 11,279 11,979 (2,780) 9,199 1974 5 - 40
Gleneagles........................... 5,834 6,277 (2,075) 4,202 1975 5 - 40
The Park Estate...................... 2,061 2,239 (988) 1,251 1974 5 - 40
Winchester Square.................... 8,466 8,816 (1,873) 6,943 1973 5 - 40
Post House North..................... 5,161 5,542 (980) 4,562 1987 5 - 40
Post House Jackson................... 5,832 6,275 (1,102) 5,173 1987 5 - 40
The Oaks............................. 2,336 2,513 (526) 1,987 1978 5 - 40
The Corners.......................... 6,838 7,523 (1,433) 6,090 1982 5 - 40
Park Haywood......................... 5,520 5,880 (1,004) 4,876 1983 5 - 40
Hickory Farm......................... 5,818 6,398 (1,224) 5,174 1985 5 - 40
Stonemill Village.................... 12,080 13,249 (2,525) 10,724 1985 5 - 40
Canyon Creek......................... 10,014 11,114 (1,991) 9,123 1987 5 - 40
Whispering Oaks...................... 6,195 6,701 (1,369) 5,332 1978 5 - 40
Pear Orchard......................... 13,612 14,964 (2,792) 12,172 1985 5 - 40
Celery Stalk......................... 15,447 16,910 (3,044) 13,866 1978 5 - 40
Hollybrook........................... 4,769 5,174 (948) 4,226 1972 5 - 40
Green Tree Place..................... 5,686 6,225 (1,119) 5,106 1984 5 - 40
MacArthur Ridge...................... 10,946 12,077 (2,131) 9,946 1991 5 - 40
Lincoln on the Green................. 14,477 15,975 (2,782) 13,193 1988 5 - 40
Brentwood Downs...................... 11,517 12,710 (2,311) 10,399 1986 5 - 40
Shenandoah Ridge..................... 7,805 8,455 (1,628) 6,827 1982 5 - 40
Westborough Crossing................. 7,026 7,703 (1,370) 6,333 1984 5 - 40
Woodbridge at the Lake............... 6,829 7,474 (1,355) 6,119 1985 5 - 40
Lakepointe........................... 4,364 4,775 (879) 3,896 1986 5 - 40
The Mansion.......................... 7,241 7,935 (1,381) 6,554 1987 5 - 40
The Village.......................... 9,164 10,064 (1,825) 8,239 1989 5 - 40
Cypresswood Court.................... 6,116 6,693 (1,167) 5,526 1984 5 - 40
The Lodge at Timberglen.............. 9,278 10,103 (1,868) 8,235 1984 5 - 40
Calais Forest........................ 10,622 11,648 (2,058) 9,590 1987 5 - 40
The Fairways......................... 8,730 9,640 (1,629) 8,011 1992 5 - 40
Kirby Station........................ 12,654 13,802 (2,443) 11,359 1978 5 - 40
Belmere.............................. 9,397 10,248 (1,698) 8,550 1984 5 - 40
Williamsburg Village................. 5,254 5,777 (1,016) 4,761 1987 5 - 40
Fairways @ Royal Oak................. 8,299 9,113 (1,559) 7,554 1988 5 - 40
Tanglewood........................... 4,682 5,109 (860) 4,249 1980 5 - 40
Woods at Post House.................. 7,509 7,749 (1,817) 5,932 1995 5 - 40
Somerset............................. 4,988 5,465 (969) 4,496 1981 5 - 40
Highland Ridge....................... 4,810 5,292 (722) 4,570 1984 5 - 40
Spring Creek......................... 6,041 6,638 (910) 5,728 1984 5 - 40
St. Augustine........................ 8,501 11,359 (1,754) 9,605 1987 5 - 40
Cooper's Hawk........................ 8,379 9,233 (1,448) 7,785 1987 5 - 40
Marsh Oaks........................... 3,429 3,673 (630) 3,043 1986 5 - 40
Park at Hermitage.................... 16,438 17,962 (2,765) 15,197 1987 5 - 40
</TABLE>
F-22
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1999(6)
-------------------- ---------------- --------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ------------------------------- -------- --------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Anatole.............................. Daytona Beach, FL $ 7,000 1,227 5,879 -- 676 1,227
The Savannahs........................ Melbourne, FL -- (5) 582 7,868 -- 1,551 582
Stassney Woods....................... Austin, TX $ 4,595 1,621 7,501 -- 1,537 1,621
Travis Station....................... Austin, TX $ 4,065 2,282 6,169 -- 1,058 2,282
Runaway Bay.......................... Mt. Pleasant, SC -- (4) 1,085 7,269 -- 849 1,085
The Township......................... Hampton, VA $ 10,800 1,509 8,189 -- 709 1,509
Lakeside............................. Jacksonville, FL -- (9) 1,431 12,883 288 2,456 1,719
Crosswinds........................... Jackson, MS -- (9) 1,535 13,826 -- 1,145 1,535
Sutton Place......................... Horn Lake, MS -- (9) 894 8,053 -- 977 894
Savannah Creek....................... Southaven, MS -- (9) 778 7,013 -- 609 778
Napa Valley.......................... Little Rock, AR -- (9) 960 8,642 -- 700 960
Altamonte Springs,
Tiffany Oaks......................... FL -- (9) 1,024 9,219 -- 1,199 1,024
Lincoln on the Green II.............. Memphis, TN -- 0 6,999 -- 6,987 0
Howell Commons....................... Greenville, SC -- (9) 1,304 11,740 -- 672 1,304
Balcones Woods....................... Austin, TX $ 8,608 1,598 14,398 -- 1,635 1,598
Westside Creek I..................... Little Rock, AR -- (9) 616 5,559 -- 495 616
Fairways at Hartland................. Bowling Green, KY $ 4,552 1,038 9,342 -- 766 1,038
Woodhollow........................... Jacksonville, FL $ 9,784 1,686 15,179 -- 1,732 1,686
Hunters Ridge at Deerwood............ Jacksonville, FL -- (11) 1,533 13,835 -- 494 1,533
Austin Chase......................... Macon, GA -- (11) 1,409 12,687 -- (433) 1,409
Westside Creek II.................... Little Rock, AR $ 4,875 654 5,904 -- 237 654
Woodwinds............................ Aiken, SC $ 3,466 503 4,540 -- 389 503
Hermitage at Beechtree............... Cary, NC -- (9) 900 8,099 -- 851 900
Bradford Pointe (Sterling Ridge)..... Augusta, GA $ 4,760 772 6,949 -- 420 772
Fountain Lake........................ Brunswick, GA $ 2,929 502 4,551 -- 782 502
Hidden Lake I........................ Union City, GA $ 4,455 675 6,128 -- 348 675
Hidden Lake II....................... Union City, GA -- (9) 621 5,587 -- 224 621
High Ridge........................... Athens, GA -- (9) 884 7,958 -- 289 884
Paddock Club Columbia................ Columbia, SC -- (3) 1,840 16,560 -- 469 1,840
Paddock Club Huntsville.............. Huntsville, AL -- 830 7,470 -- 403 830
Paddock Club Jacksonville I.......... Jacksonville, FL -- (10) 963 8,739 -- 273 963
Paddock Club Lakeland................ Lakeland, FL -- (10) 2,254 20,452 -- 974 2,254
Paddock Club Tallahassee I........... Tallahassee, FL -- (3) 950 8,550 -- 270 950
Paddock Park I....................... Ocala, FL $ 6,805 901 8,177 -- 544 901
Paddock Park II...................... Ocala, FL -- (3) 1,383 12,547 -- 509 1,383
Park Place........................... Spartanburg, SC -- (9) 723 6,504 -- 812 723
Park Walk............................ College Park, GA $ 3,343 536 4,859 -- 281 536
River Trace I........................ Memphis, TN $ 5,648 881 7,996 -- 703 881
River Trace II....................... Memphis, TN $ 5,583 741 6,727 -- 303 741
Riverwind............................ Columbus, GA -- 108 979 -- 223 108
Southland Station I.................. Warner Robins, GA -- (9) 777 6,992 -- 571 777
Southland Station II................. Warner Robins, GA -- 693 6,292 -- 229 693
Three Oaks I......................... Valdosta, GA $ 2,801 462 4,188 -- 494 462
Three Oaks II........................ Valdosta, GA $ 2,885 460 4,170 -- 227 460
The Vistas........................... Macon, GA $ 4,015 595 5,403 -- 399 595
Westbury Creek....................... Augusta, GA $ 3,121 400 3,626 -- 373 400
Westbury Springs..................... Lilburn, GA $ 4,186 665 6,038 -- 441 665
Whispering Pines I................... LaGrange, GA $ 2,701 454 4,116 -- 343 454
Whispering Pines II.................. LaGrange, GA $ 2,482 370 3,354 -- 248 370
Whisperwood.......................... Columbus, GA -- (2) 2,330 20,970 -- 1,686 2,330
Whisperwood Spa I.................... Columbus, GA -- (2) 1,510 13,590 -- 474 1,510
Wildwood I........................... Thomasville, GA $ 2,034 438 3,971 -- 240 438
Wildwood II.......................... Thomasville, GA $ 1,985 372 3,372 -- 155 372
Willow Creek......................... Columbus, GA -- (9) 614 5,523 -- 678 614
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7)
- ------------------------------------- --------- --------- ----------- --------- ------------ ------------
Anatole.............................. 6,555 7,782 (1,145) 6,637 1986 5 - 40
The Savannahs........................ 9,419 10,001 (1,549) 8,452 1990 5 - 40
Stassney Woods....................... 9,038 10,659 (1,514) 9,145 1985 5 - 40
Travis Station....................... 7,227 9,509 (1,226) 8,283 1987 5 - 40
Runaway Bay.......................... 8,118 9,203 (1,345) 7,858 1988 5 - 40
The Township......................... 8,898 10,407 (1,366) 9,041 1987 5 - 40
Lakeside............................. 15,339 17,058 (2,418) 14,640 1985 5 - 40
Crosswinds........................... 14,971 16,506 (1,917) 14,589 1988/1990 5 - 40
Sutton Place......................... 9,030 9,924 (1,152) 8,772 1991 5 - 40
Savannah Creek....................... 7,622 8,400 (973) 7,427 1989 5 - 40
Napa Valley.......................... 9,342 10,302 (1,083) 9,219 1984 5 - 40
Tiffany Oaks......................... 10,418 11,442 (1,140) 10,302 1985 5 - 40
Lincoln on the Green II.............. 13,986 13,986 (1,269) 12,717 1997 5 - 40
Howell Commons....................... 12,412 13,716 (1,302) 12,414 1986/1988 5 - 40
Balcones Woods....................... 16,033 17,631 (1,653) 15,978 1983 5 - 40
Westside Creek I..................... 6,054 6,670 (612) 6,058 1984 5 - 40
Fairways at Hartland................. 10,108 11,146 (1,024) 10,122 1996 5 - 40
Woodhollow........................... 16,911 18,597 (1,752) 16,845 1986 5 - 40
Hunters Ridge at Deerwood............ 14,329 15,862 (636) 15,226 1987 5 - 40
Austin Chase......................... 12,254 13,663 (501) 13,162 1996 5 - 40
Westside Creek II.................... 6,141 6,795 (502) 6,293 1986 5 - 40
Woodwinds............................ 4,929 5,432 (398) 5,034 1988 5 - 40
Hermitage at Beechtree............... 8,950 9,850 (675) 9,175 1988 5 - 40
Bradford Pointe (Sterling Ridge)..... 7,369 8,141 (557) 7,584 1986 5 - 40
Fountain Lake........................ 5,333 5,835 (426) 5,409 1983 5 - 40
Hidden Lake I........................ 6,476 7,151 (486) 6,665 1985 5 - 40
Hidden Lake II....................... 5,811 6,432 (432) 6,000 1987 5 - 40
High Ridge........................... 8,247 9,131 (611) 8,520 1987 5 - 40
Paddock Club Columbia................ 17,029 18,869 (1,241) 17,628 1989/1995 5 - 40
Paddock Club Huntsville.............. 7,873 8,703 (577) 8,126 1989 5 - 40
Paddock Club Jacksonville I.......... 9,012 9,975 (672) 9,303 1989 5 - 40
Paddock Club Lakeland................ 21,426 23,680 (1,606) 22,074 1988/1990 5 - 40
Paddock Club Tallahassee I........... 8,820 9,770 (659) 9,111 1990 5 - 40
Paddock Park I....................... 8,721 9,622 (674) 8,948 1986 5 - 40
Paddock Park II...................... 13,056 14,439 (991) 13,448 1988 5 - 40
Park Place........................... 7,316 8,039 (550) 7,489 1987 5 - 40
Park Walk............................ 5,140 5,676 (386) 5,290 1985 5 - 40
River Trace I........................ 8,699 9,580 (654) 8,926 1981 5 - 40
River Trace II....................... 7,030 7,771 (536) 7,235 1985 5 - 40
Riverwind............................ 1,202 1,310 (89) 1,221 1983 5 - 40
Southland Station I.................. 7,563 8,340 (565) 7,775 1987 5 - 40
Southland Station II................. 6,521 7,214 (481) 6,733 1990 5 - 40
Three Oaks I......................... 4,682 5,144 (354) 4,790 1983 5 - 40
Three Oaks II........................ 4,397 4,857 (334) 4,523 1984 5 - 40
The Vistas........................... 5,802 6,397 (427) 5,970 1985 5 - 40
Westbury Creek....................... 3,999 4,399 (310) 4,089 1984 5 - 40
Westbury Springs..................... 6,479 7,144 (474) 6,670 1983 5 - 40
Whispering Pines I................... 4,459 4,913 (342) 4,571 1982 5 - 40
Whispering Pines II.................. 3,602 3,972 (268) 3,704 1984 5 - 40
Whisperwood.......................... 22,656 24,986 (1,645) 23,341 1981/1986 5 - 40
Whisperwood Spa I.................... 14,064 15,574 (1,054) 14,520 1988 5 - 40
Wildwood I........................... 4,211 4,649 (311) 4,338 1980 5 - 40
Wildwood II.......................... 3,527 3,899 (266) 3,633 1984 5 - 40
Willow Creek......................... 6,201 6,815 (473) 6,342 1971/1977 5 - 40
</TABLE>
F-23
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
DECEMBER
COST CAPITALIZED 31,
SUBSEQUENT TO
INITIAL COST ACQUISITION 1999(6)
-------------------- ---------------- --------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ------------------------------- -------- --------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Windridge............................ Chattanooga, TN $ 5,391 817 7,416 -- 344 817
2000 Wynnton......................... Columbus, GA -- 192 1,741 -- 197 192
Paddock Club Tallahassee II.......... Tallahassee, FL $ 4,691 530 4,805 -- 128 530
Paddock Club Jacksonville II......... Jacksonville, FL -- (10) 689 6,255 -- 56 689
Paddock Club Florence................ Florence, KY $ 9,620 1,209 10,969 -- 362 1,209
Paddock Club Greenville.............. Greenville, SC -- 1,200 10,800 -- 315 1,200
Paddock Club Brandon I............... Brandon, FL -- (3) 2,100 18,900 -- 134 2,100
Terraces at Towne Lake I............. Woodstock, GA $ 15,132 1,689 15,321 -- 51 1,689
Paddock Club Jacksonville III........ Jacksonville, FL -- (10) 642 5,756 -- 122 642
Paddock Club Huntsville II........... Huntsville, AL -- 909 10,152 -- 56 909
Paddock Club Mandarin................ Jacksonville, FL -- (3) 1,410 14,967 -- 147 1,410
Enclave at Whisperwood............... Columbus, GA -- (2) 450 8,162 -- 53 450
Terraces at Fieldstone............... Conyers, GA -- (3) 1,284 15,819 -- -- 1,284
Abbington Place at SouthPoint........ Huntsville, AL -- (3) 524 4,724 -- 741 524
Eagle Ridge.......................... Birmingham, AL $ 6,349 851 7,667 -- 636 851
Georgetown Grove..................... Savannah, GA $ 10,460 1,288 11,579 -- 210 1,288
Courtyards at Campbell............... Dallas, TX -- (2) 988 8,893 -- 680 988
Deer Run............................. Dallas, TX -- (2) 1,252 11,271 -- 1,163 1,252
Highwood............................. Plano, TX -- 864 7,783 -- 755 864
Links at Carrollwood................. Tampa, FL $ 5,704 817 7,355 -- 1,093 817
St. Simons Island,
Island Retreat....................... GA $ 3,388 510 4,594 -- 435 510
------------ -------- --------- ----- -------- --------
Total Completed Communities.......... $262,801 $110,642 $ 997,152 $ 708 $119,454 $111,350
------------ -------- --------- ----- -------- --------
Construction of units in lease-up:
- -------------------------------------
Reserve at Dexter Lake............... Memphis, TN -- (2) 1,260 16,043 -- 1,260
Paddock Club Gainesville............. Gainesville, FL -- (2) 1,800 15,879 -- 1,800
Terraces at Towne Lake II............ Woodstock, GA -- (3) 1,331 11,918 -- 1,331
Paddock Club Panama City............. Panama City, FL -- (2) 898 14,276 -- 898
Paddock Club Murfreesboro............ Murfreesboro, TN -- (2) 915 14,774 -- 915
Paddock Club Brandon II.............. Brandon, FL -- (3) 796 7,211 -- 796
Paddock Club Montgomery.............. Montgomery, AL -- (3) 965 13,190 -- 965
Grand Reserve Lexington.............. Lexington, KY -- (2) 392 18,849 -- 392
Kenwood Park......................... Katy, TX -- 109 12,275 -- 109
------------ -------- --------- ----- -------- --------
Total Construction of units in
lease-up........................... $ -- $ 8,466 $ 124,415 $-- $ -- $ 8,466
Construction of units in process:
- -------------------------------------
Reserve at Dexter Lake II............ Memphis, TN -- -- -- 7,583 --
Grand View Nashville................. Nashville, TN -- (2) -- -- 11,257 --
------------ -------- --------- ----- -------- --------
Total Construction of Units in
process............................ $ -- $ -- $ -- $-- $ 18,840 $ --
------------ -------- --------- ----- -------- --------
Total Apartments..................... $262,801 $119,108 $1,121,567 $ 708 $138,294 $119,816
------------ -------- --------- ----- -------- --------
Land held for future developments.... Various -- 1,710 -- -- -- 1,710
Commercial properties................ Various -- 300 2,769 -- 4,229 300
------------ -------- --------- ----- -------- --------
Total other.......................... $ -- $ 2,010 $ 2,769 $-- $ 4,229 $ 2,010
------------ -------- --------- ----- -------- --------
Total Real Estate Assets............. $262,801 $121,118 $1,124,336 $ 708 $142,523 $121,826
============ ======== ========= ===== ======== ========
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7)
- ------------------------------------- --------- --------- ----------- --------- ------------ ------------
Windridge............................ 7,760 8,577 (574) 8,003 1984 5 - 40
2000 Wynnton......................... 1,938 2,130 (148) 1,982 1983 5 - 40
Paddock Club Tallahassee II.......... 4,933 5,463 (366) 5,097 1995 5 - 40
Paddock Club Jacksonville II......... 6,311 7,000 (465) 6,535 1996 5 - 40
Paddock Club Florence................ 11,331 12,540 (839) 11,701 1994 5 - 40
Paddock Club Greenville.............. 11,115 12,315 (806) 11,509 1996 5 - 40
Paddock Club Brandon I............... 19,034 21,134 (1,392) 19,742 1997 5 - 40
Terraces at Towne Lake I............. 15,372 17,061 (1,127) 15,934 1997 5 - 40
Paddock Club Jacksonville III........ 5,878 6,520 (312) 6,208 1997 5 - 40
Paddock Club Huntsville II........... 10,208 11,117 (411) 10,706 1998 5 - 40
Paddock Club Mandarin................ 15,114 16,524 (612) 15,912 1998 5 - 40
Enclave at Whisperwood............... 8,215 8,665 (329) 8,336 1998 5 - 40
Terraces at Fieldstone............... 15,819 17,103 (501) 16,602 1998 5 - 40
Abbington Place at SouthPoint........ 5,465 5,989 (354) 5,635 1987 5 - 40
Eagle Ridge.......................... 8,303 9,154 (468) 8,686 1986 5 - 40
Georgetown Grove..................... 11,789 13,077 (650) 12,427 1997 5 - 40
Courtyards at Campbell............... 9,573 10,561 (458) 10,103 1986 5 - 40
Deer Run............................. 12,434 13,686 (582) 13,104 1985 5 - 40
Highwood............................. 8,538 9,402 (407) 8,995 1983 5 - 40
Links at Carrollwood................. 8,448 9,265 (459) 8,806 1980 5 - 40
Island Retreat....................... 5,029 5,539 (177) 5,362 1978 5 - 40
--------- --------- ----------- ---------
Total Completed Communities.......... $1,116,606 $1,227,960 $(145,160) $1,082,800
--------- --------- ----------- ---------
Construction of units in lease-up:
- -------------------------------------
Reserve at Dexter Lake............... 16,043 17,303 (240) 17,063 1999 5 - 40
Paddock Club Gainesville............. 15,879 17,679 (420) 17,259 1999 5 - 40
Terraces at Towne Lake II............ 11,918 13,249 (289) 12,960 1999 5 - 40
Paddock Club Panama City............. 14,276 15,174 (364) 14,810 1999 5 - 40
Paddock Club Murfreesboro............ 14,774 15,689 (138) 15,551 1999 5 - 40
Paddock Club Brandon II.............. 7,211 8,007 -- 8,007 1999 5 - 40
Paddock Club Montgomery.............. 13,190 14,155 -- 14,155 1999 5 - 40
Grand Reserve Lexington.............. 18,849 19,241 -- 19,241 -- N/A
Kenwood Park......................... 12,275 12,384 -- 12,384 -- N/A
--------- --------- ----------- ---------
Total Construction of units in
lease-up........................... $ 124,415 $ 132,881 $ (1,451) $ 131,430
Construction of units in process:
- -------------------------------------
Reserve at Dexter Lake II............ 7,583 7,583 -- 7,583 -- N/A
Grand View Nashville................. 11,257 11,257 -- 11,257 -- N/A
--------- --------- ----------- ---------
Total Construction of Units in
process............................ $ 18,840 $ 18,840 $ -- $ 18,840
--------- --------- ----------- ---------
Total Apartments..................... $1,259,861 $1,379,681 $(146,611) $1,233,070
--------- --------- ----------- ---------
Land held for future developments.... -- 1,710 -- 1,710 N/A N/A
Commercial properties................ 6,998 7,298 (2,081) 5,217 Various 5 - 40
--------- --------- ----------- ---------
Total other.......................... $ 6,998 $ 9,008 $ (2,081) $ 6,927
--------- --------- ----------- ---------
Total Real Estate Assets............. $1,266,859 $1,388,689 $(148,692) $1,239,997
========= ========= =========== =========
</TABLE>
F-24
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT
COST CAPITALIZED DECEMBER
SUBSEQUENT TO 31,
INITIAL COST ACQUISITION 1999(6)
-------------------- ---------------- --------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ------------------------------------- ------------------------------- -------- --------- ----- -------- --------
<S> <C> <C>
LIFE USED
TO COMPUTE
DEPRECIATION
BUILDING IN LATEST
AND ACCUMULATED DATE OF INCOME
PROPERTY NAME FIXTURES TOTAL DEPRECIATION NET CONSTRUCTION STATEMENT(7)
- ------------------------------------- --------- --------- ----------- --------- ------------ ------------
</TABLE>
Note: This schedule excludes the dispositions.
(1) These ten properties are encumbered by a $43.4 million note payable
with an interest rate of 8.65% at December 31, 1999, maturing July 1,
2001.
(2) Encumbered by the AmSouth Credit Line, with an outstanding balance of
$60.2 million at December 31, 1999 and a variable interest rate of
7.15%.
(3) Encumbered by the FNMA Credit Line, with an outstanding balance of
$113.2 million at December 31, 1999 and a variable interest rate of
6.28%.
(4) These three properties are encumbered by a $9.86 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 6.09%.
(5) These three properties are encumbered by a $16.1 million mortgage
securing a tax-exempt bond amortizing over 25 years with an average
interest rate of 5.75%.
(6) The aggregate cost for Federal income tax purposes was approximately
$1,015 million at December 31, 1999. 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.
(7) 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.
(8) These 3 properties, and one commercial building, are encumbered by a
$35.3 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 five 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-25
<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:
YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
Real estate investments:
Balance at beginning of year.... $ 1,434,733 $ 1,211,693 $ 641,893
Acquisitions.................... -- 91,895 140,858
Improvements and development.... 105,940 136,933 36,298
Assets acquired from business
combination................... -- -- 392,644
Disposition of real estate
assets........................ (152,015) (5,788) --
Investment in and advances to
real estate joint
venture....................... 8,085 -- --
------------ ------------ ------------
Balance at end of year..... $ 1,396,743 $ 1,434,733 $ 1,211,693
============ ============ ============
Accumulated depreciation:
Balance at beginning of year.... $ 117,773 $ 76,989 $ 49,558
Depreciation.................... 48,687 41,556 27,431
Disposition of real estate
assets........................ (19,849) (772) --
------------ ------------ ------------
Balance at end of year..... $ 146,611 $ 117,773 $ 76,989
============ ============ ============
The Company's consolidated balance sheet at December 31, 1999 includes
accumulated depreciation of $2,081 in the caption "Commercial properties,
net".
See accompanying independent auditors' report.
F-26
EXHIBIT 10.4
SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Sixth Amendment to Revolving Credit Agreement (the "Sixth
Amendment") is dated as of November 12, 1999, 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").
RECITALS
A. MAAC, Mid-America, certain Lenders and the Administrative Agent
entered into that certain Revolving Credit Agreement dated as of March 16, 1998,
executed in amendment and restatement of that certain Revolving Credit Agreement
among MAAC, Mid-America, the Administrative Agent and certain lenders, dated
November 20, 1997, as amended by First Amendment to Revolving Credit Agreement
dated as of May 15, 1998, by Second Amendment to Revolving Credit Agreement
dated as of October 1, 1998, by Third Amendment to Revolving Credit Agreement
dated as of November 12, 1998, by Fourth Amendment to Revolving Credit Agreement
dated as of March 31, 1999, and by Fifth Amendment to Revolving Credit Agreement
dated as of May 28, 1999 (as it may be amended further from time to time, the
"Agreement"). Unless otherwise defined in this Sixth Amendment, capitalized
terms shall the meaning assigned to them in the Agreement.
B. The Borrowers have requested that the Agreement be amended to
extend the Maturity Date and to modify certain other provisions of the
Agreement.
C. The parties to the Agreement desire to execute this Sixth
Amendment to evidence the extension of the Maturity Date and the other
modifications.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals, the parties
hereby agree as follows:
1. SECTION 1.1, The Loans, is hereby amended by deleting the amount of
"$200,000,000" and replacing it with the amount of "$150,000,000".
2. SECTION 1.3, Commitments, is hereby amended by deleting the amount of
"$200,000,000.00" and replacing it with the amount of
"$150,000,000.00".
3. SECTION 1.11(A), Letter of Credit Fees, is hereby amended by replacing
the percentage of (a) one and fifteen hundredths of one percent (1.15%)
with one and fifty hundredths of one percent (1.50%), and (b) one
fortieth of one percent (.025%) with
1
<PAGE>
five hundredths of one percent (.05%), to be effective for any Letters
of Credit issued or renewed after the date of this Sixth Amendment.
4. SECTION 1.11(C), Facility Fee, is hereby deleted in its entirety and
replaced with the following:
(c) Facility Fee
The Borrowers shall pay to Lenders in accordance with their
respective Proportionate Share an annual fee quarterly in arrears
beginning December 31, 1999 (the "Facility Fee"). Said Facility Fee
shall be determined based upon the then current ratio of Total
Liabilities to Total Market Value of Assets, as follows:
TOTAL LIABILITIES/TOTAL
MARKET VALUE OF ASSETS FACILITY FEE
< 55% 20 basis points
> 55% but <60% 20 basis points
-
> 60% 25 basis points
-
5. SECTION 1.11, Fees, is further amended by adding the following
subclauses:
(i) In consideration of this Sixth Amendment, the Borrowers shall pay
to the Lenders on the date hereof an extension fee equal to 22.5 basis
points of the Commitments ($337,500.00). An additional extension fee
shall be payable by the Borrowers to the Administrative Agent on the
date hereof pursuant to a separate letter agreement between the
Administrative Agent and the Borrowers.
(j) 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.
6. SECTION 1.13, Interest, is hereby amended by deleting therefrom
subclause (e)(1).
7. SECTION 6.8, Other Financial Covenants, is hereby amended as follows:
(a) Subsection (a) is hereby amended by replacing "sixty percent (60%)"
with "sixty-two percent (62%)".
(b) Subsection (b) is hereby amended by replacing "ten percent (10%)"
with "seven and one-half of one percent (7.5%)".
(c) Subsection (c) is hereby amended by replacing "1.75" with "1.70".
2
<PAGE>
(d) Subsection (e) is hereby deleted in its entirety and replaced with
the following:
(e) Fail to maintain at all times a consolidated Tangible Net Worth
which is not less than Five Hundred Fifty Million Dollars
($550,000,000) plus seventy percent (70%) of net proceeds of new
equity offerings, which calculation shall include accumulated
depreciation.
(e) Subsection (f) is hereby deleted in its entirety and replaced with
the following:
(f) Through the quarter ended June 30, 2000, 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 1.25 to
1.0. For the quarter ended September 30, 2000, permit such ratio to be
less than 1.35 to 1.0. Thereafter, permit such ratio to be less than
1.50 to 1.0.
(f) Subsection (g) is hereby amended by replacing "22.5%" with "10%".
(g) A new subsection (h) is hereby added as follows:
(h) Fail to maintain as of the end of each fiscal quarter a ratio
of Adjusted NOI from Stabilized Properties only (based on the prior
three (3) months, annualized) to Assumed Debt Service for the same
period (utilizing a 30-year assumed amortization period instead of
a 25-year period) of at least 1.25 to 1.0, commencing with the
quarter ended March 31, 2000.
8. SECTION 7.1, Events of Default, is hereby amended by deleting
subsection (k) thereof in its entirety and replacing it with the
following:
(k) if MAAC shall cease to be the sole general partner of Mid-America;
or if any single Person or related group of Persons shall control
more than twenty percent (20%), in the aggregate, of MAAC's voting
shares and Mid- America's partnership interests. 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
9. SECTION 10.6, Amendments and Waivers, is hereby amended by adding a new
subsection (h) as follows:
(h) permits a change in control. For purposes of this subsection (h), a
"change in control" shall have occurred if MAAC shall cease to be
the sole general
3
<PAGE>
partner of Mid-America or if any single Person or related group of
Persons shall control more than twenty percent (20%), in the
aggregate, of MAAC's voting shares and Mid-America's partnership
interests. 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 a change
in control hereunder.
10. SECTION 11.1, Definitions, is hereby amended as follows:
(a) The definition of "Borrowing Base" is hereby amended by (i)
deleting the last sentence thereof (added pursuant to the Fourth
Amendment) and (ii) replacing "$50,000,000" with "$41,250,000".
Commencing January 1, 2001, said $41,250,000 limitation shall have a
sublimit of $15,000,000 for Development Projects for which all
appropriate Certificates of Occupancy have not yet been issued.
(b) The definition of "Fees" is hereby amended by replacing "(E)" with
"(J)".
(c) The definition of "Margin" is hereby deleted in its entirety and
replaced with the following:
MARGIN shall be determined based upon the then applicable ratio of
Total Liabilities to Total Market Value of Assets, as follows:
TOTAL LIABILITIES/TOTAL
MARKET VALUE OF ASSETS LIBOR MARGIN
< 55% 145 basis points
> 55% but <60% 165 basis points
-
> 60% 175 basis points
-
(d) The definition of "Maturity Date" is hereby amended by replacing
"November 24, 2000" with "November 24, 2001".
11. The parties hereto acknowledge and agree that EBITDA shall include
Borrowers' pro rata share of NOI directly resulting from any joint
venture arrangement with any Person.
12. SCHEDULE 1 is hereby deleted in its entirety and replaced with
SCHEDULE 1 attached hereto and made a part hereof.
13. SCHEDULE 2 is hereby deleted in its entirety and replaced with
SCHEDULE 2 attached hereto and made a part hereof.
4
<PAGE>
14. SCHEDULE 3 is hereby deleted in its entirety and replaced with
SCHEDULE 3 attached hereto and made a part hereof.
15. SCHEDULE 4 is hereby deleted in its entirety and replaced with
SCHEDULE 4 attached hereto and made a part hereof.
16. EXHIBIT J is hereby amended by replacing the Debt Covenant Worksheet
for Compliance Certificate with the Worksheet attached hereto and made
a part hereof.
17. This Sixth Amendment shall not be effective until the following
conditions have been fulfilled:
a. The Administrative Agent has received a fully executed original of
this Sixth Amendment;
b. The Administrative Agent has received 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;
c. The fees required herein have been received by the Administrative
Agent;
d. The Administrative Agent has received appropriate resolutions of
the Borrowers and the Subsidiaries authorizing the transactions
contemplated herein;
e. The Administrative Agent has received an opinion of counsel to each
of the Borrowers, which opinion shall be satisfactory to the
Administrative Agent in all respects; and
f. The Administrative Agent has received a confirmation from each
Subsidiary that is a Mortgagor that its Subsidiary Guaranty is in
full force and effect.
Except as expressly amended hereby, the Agreement shall remain in full
force and effect in accordance with its terms.
Each Borrower represents and warrants that no Event of Default has
occurred and is continuing under the Agreement, nor does any event that upon
notice or lapse of time or both would constitute such an Event of Default exist.
IN WITNESS WHEREOF, the parties have executed this Sixth Amendment as
of the date first set forth above.
5
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
MID-AMERICA APARTMENT
COMMUNITIES, INC.
By __________________________________
Name________________________________
Title_________________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
MID-AMERICA APARTMENTS, L.P.
By Mid-America Apartment
Communities, Inc.
Its Sole General Partner
By _________________________________
Name_______________________________
Title________________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
AMSOUTH BANK,
in its individual capacity as Lender
and as Administrative Agent
By __________________________________
Name________________________________
Title_________________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
HIBERNIA NATIONAL BANK
By ________________________________
Name______________________________
Title_______________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
COMMERZBANK AG
NEW YORK AND GRAND CAYMAN
BRANCHES
By _______________________________
Name_____________________________
Title______________________________
By _______________________________
Name_____________________________
Title______________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
PNC BANK, NATIONAL ASSOCIATION
By _______________________________
Name_____________________________
Title______________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
FIRST TENNESSEE BANK, N.A.
By _______________________________
Name_____________________________
Title______________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
NATIONAL BANK OF COMMERCE
By _______________________________
Name_____________________________
Title______________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
MELLON BANK, N.A.
By _______________________________
Name_____________________________
Title______________________________
<PAGE>
Signature page to
Sixth Amendment to Revolving Credit Agreement
NATIONAL BANK OF COMMERCE OF
BIRMINGHAM
By _______________________________
Name_____________________________
Title______________________________
<PAGE>
SCHEDULE 1
LIST OF LENDERS PERCENTAGE
- --------------- ----------
AmSouth Bank 19.1667%
Hibernia National Bank 10.0%
National Bank of Commerce 7.5%
of Birmingham
First Tennessee Bank, N.A. 13.3333%
Commerzbank AG, New York 12.0%
and Grand Cayman Branches
PNC Bank, National Association 14.0%
National Bank of Commerce 10.0%
Mellon Bank, N.A. 14.0%
---------
TOTAL 100.0%
<PAGE>
SCHEDULE 2
[CURRENT LIST OF PROPERTIES]
AVAILABILITY
PROPERTY ADVANCE RATE AS OF [9/30/99]
-------- ------------ ---------------
I. STABILIZED PROPERTIES:
1. Reflection Point (MS) 60% $ 7,441,787
2. Anatole (FL) 60% 5,505,411
3. Whisperwood (GA) 60% 14,529,411
4. Whisperwood Spa I (GA) 60% 9,381,347
5. Township (VA) 60% 6,473,053
6. Sterling Ridge (GA) 60% 4,685,646
7. Courtyards at Campbell (TX) 60% 5,764,345
8. Deer Run (TX) 60% 7,566,720
9. MacArthur Ridge (TX) 60% 5,277,537
10. Whisperwood Spa II (GA) 60% 5,092,099
II. DEVELOPMENT PROJECTS:
1. Paddock Club Gainesville (FL) 50% of cost $ 8,332,491
2. Paddock Club Panama City (FL) 50% of cost 6,505,188
3. Grande View Nashville (TN) 50% of cost 4,272,800
4. Paddock Club Murfreesboro (TN) 50% of cost 7,401,442
5. Grand Reserve Lexington (KY) 50% of cost 7,465,847
6. Reserve at Dexter (TN) 50% of cost 6,921,261
<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
Attn: Ms. Yancey Jones
First Tennessee Bank, N.A.
1st Floor-Real Estate
165 Madison Avenue
Memphis, Tennessee 38103
Attn: Ms. Jennifer Andrews
Commerzbank AG, New York
and Grand Cayman Branches
Two World Financial Center
225 Liberty Street, 34th Floor
New York, New York 10281
Attn: Mr. Doug Traynor
PNC Bank, N.A.
249 5th Avenue
Mail Stop #P1-POOP-19-2
Pittsburg, Pennsylvania 15222
Attn: Mr. Wayne Robertson
National Bank of Commerce
7770 Poplar Avenue, Suite 105
Germantown, Tennessee 38138
<PAGE>
Attn: Mr. Billy Frank
Mellon Bank, N.A.
One Mellon Bank Center, Suite 5325
Pittsburgh, PA 15258-0001
Attn: Mr. John G. Kozeka, CPM
National Bank of Commerce of Birmingham
1927 1st Avenue North
Birmingham, AL 35203
Attn: Mr. J. Cotten Volman
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 & OWNERSHIP]
Whisperwood Associates, A Limited Partnership, a Georgia limited partnership
Whisperwood Spa & Club, A Limited Partnership, a Georgia limited partnership
Mid-America Apartments of Texas, L.P., a Texas limited partnership
<PAGE>
MID-AMERICA APARTMENT COMMUNITIES
REVOLVING CREDIT AGREEMENT
DEBT COVENANT WORKSHEET
FOR COMPLIANCE CERTIFICATE
Quarter Quarter
Ending Ending Annualized
--------- --------- ----------
Total Liabilities
________________________________________________________________________________
EBITDA-MAA
________________________________________________________________________________
EBITDA-FDC
________________________________________________________________________________
EBITDA-Combined
________________________________________________________________________________
Total Market Value
________________________________________________________________________________
Total Liabilities/Total Market Value
________________________________________________________________________________
________________________________________________________________________________
TOTAL DEVELOPMENT AND JV INVESTMENT
As % of Total Market Value
________________________________________________________________________________
________________________________________________________________________________
Total Annualized Fixed Charges
________________________________________________________________________________
Preferred Dividend
________________________________________________________________________________
Principal (from below)
________________________________________________________________________________
Interest Total Annualized Fixed Charges
________________________________________________________________________________
EBITDA/ANNUALIZED FIXED CHARGES:
________________________________________________________________________________
Principal
________________________________________________________________________________
From Mac Schedule
________________________________________________________________________________
Westside Creek II
________________________________________________________________________________
FDC
________________________________________________________________________________
Total Principal
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
TOTAL ANNUALIZED DEBT SERVICE:
________________________________________________________________________________
Principal
________________________________________________________________________________
Interest
________________________________________________________________________________
Total Debt Service
________________________________________________________________________________
EBITDA/DEBT SERVICE
________________________________________________________________________________
________________________________________________________________________________
TANGIBLE NET WORTH
________________________________________________________________________________
Equity
________________________________________________________________________________
Less Intangibles
________________________________________________________________________________
Tangible Net Worth
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
AmSouth Properties only
________________________________________________________________________________
ADJUSTED NOI OF MORTGAGED PROPERTIES
________________________________________________________________________________
Assumed Debt Service
________________________________________________________________________________
Adjusted NOI/Assumed Debt Service
________________________________________________________________________________
________________________________________________________________________________
Dividend Payments
________________________________________________________________________________
Common Dividend Payment
________________________________________________________________________________
Preferred Dividend Payment
________________________________________________________________________________
Total Dividend Payment
________________________________________________________________________________
FFO
________________________________________________________________________________
FFO + Preferred Dividend
________________________________________________________________________________
TOTAL DIVIDENDS/FFO+PREFERRED
================================================================================
<PAGE>
================================================================================
[QUARTER]
________________________________________________________________________________
>2.00:1.0 Debt Service Ratio
________________________________________________________________________________
>1.70:1.0 Fixed Charge Ratio
________________________________________________________________________________
>1.25:1.0 (through 6/30/00) Adjusted NOI Ratio
________________________________________________________________________________
>1.35:1.0 (quarter ended Adjusted NOI Ratio
9/30/00)
________________________________________________________________________________
>1.50:1.0 thereafter Adjusted NOI Ratio
________________________________________________________________________________
>$550MM with accumulated Net Worth
depreciation added back
________________________________________________________________________________
<7.5% MVA Development & Construction
Debt
________________________________________________________________________________
<90% FFO Dividend payout
________________________________________________________________________________
<62% Debt/Total Market Value of
Assets
________________________________________________________________________________
<10% Development Project Costs/
Total Market Value of Assets
________________________________________________________________________________
>1.25:1.0 Adjusted NOI Ratio
(Stabilized Properties)
================================================================================
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") effective as of December __,
1999, by and between Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Company"), and George E. Cates (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the Chief
Executive Officer of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following definitions:
"1994 PLAN" means the Company's Amended and Restated 1994 Restricted Stock
and Stock Option Plan.
"1999 PLAN" means the Company's 1999 Equity Compensation Plan.
"ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including additional
taxes on such Additional Amount) incurred by Executive as a result of Executive
receiving Change of Control Benefits as further described in SECTION 9(E) of
this Agreement.
"ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to this
Agreement.
"AWARD PLANS" has the meaning set forth in SECTION 4(B)of this Agreement.
"BASE SALARY" means the annual salary to be paid to Executive as set forth
in SECTION 4(A) of this Agreement.
"BENEFIT PLANS" has the meaning set forth in SECTION 4(C) of this
Agreement.
"BOARD" means the Board of Directors of the Company.
<PAGE>
"CHANGE OF CONTROL" means any of the following events which occur during
the Term of this Agreement:
(i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is, a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of such securities by the
acquiring person;
(ii) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
unless any such change is approved by the vote of at least 80% of the
members of the Board of Directors of the Company in office immediately
prior to such cessation;
(iii) the Company is merged, consolidated or reorganized into or with
another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal person,
and immediately after such merger, consolidation, reorganization or
exchange less than 80% of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such transaction are held, directly or indirectly, in the aggregate
by the holders of securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction;
(iv) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation or
other legal person and less than a majority of the combined voting power
of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in
the aggregate by the holders of securities entitled to vote generally in
the election of directors of the Company immediately prior to such sale;
(v) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate business
operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under
the Exchange Act) of the Company and its subsidiaries immediately prior
thereto;
2
<PAGE>
(vi) the Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K (or any successor, form or report or item therein) that a change
in control of the Company has occurred;
(vii) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(viii) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of the
preceding clauses in this sentence.
"CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation (except for
the Additional Amount) which the Executive receives or has the right to receive
from the Company or any of its affiliates as a result of Executive's
termination.
"CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause of
the Executive's employment by the Company, in anticipation of, on, or within
three (3) years after a Change of Control, (ii) the Executive's resignation for
Good Reason on or within three (3) years after a Change of Control, or (iii)
Executive's giving of a Termination Notice of Voluntary Termination during the
thirty days immediately following the Change of Control or during the thirty
days immediately following the one year anniversary of the Change of Control.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Mid-America Apartment Communities, Inc., a Tennessee
corporation, and any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
"COMPANY SHARES" means the shares of common stock of the Company or any
securities of a successor company which shall have replaced such common stock.
"COMPENSATION COMMITTEE" means the compensation committee of the Board.
"EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G of
the Code.
"EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant to
Code section 4999.
"EXECUTIVE" means the person identified in the preamble paragraph of this
Agreement.
"FAIR MARKET VALUE" means, on any give date, the closing sale price of the
common stock of the Company on the New York Stock Exchange on such date, or, if
the New York Stock
3
<PAGE>
Exchange shall be closed on such date, the next preceding date on which the New
York Stock Exchange shall have been open.
"GOOD REASON" means any of the following:
(i) a change in the Executive's status, position or responsibilities
(including reporting responsibilities) which, in the Executive's
reasonable judgment and without Executive's consent, represents a
reduction in or demotion of the Executive's status, position or
responsibilities as in effect immediately prior to a Change of Control;
the assignment to the Executive of any duties or responsibilities which,
in the Executive's reasonable judgment, are inconsistent with such status,
position or responsibilities; or any removal of the Executive from or
failure to reappoint or reelect the Executive to any of such positions,
except in connection with a Termination with Cause, as a result of the
Executive's death or Permanent Disability or by Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect on the date
hereof or as the same may be increased from time to time or modifying,
suspending, discontinuing, or terminating any Award Plan or Benefit Plan
in a manner which treats Executive differently than other similarly
situated employees or singles out or discriminates against Executive;
(iii) the relocation of the Company's principal executive offices to a
location outside a thirty-mile radius of Memphis, Tennessee or the
Company's requiring the Executive to be based at any place other than a
location within a thirty-mile radius of Memphis, Tennessee, except for
reasonably required travel on the Company's business;
(iv) the failure by the Company to continue to provide the Executive with
compensation and benefits provided for under this Agreement or benefits
substantially similar to those provided to the Executive under any of the
employee benefit plans in which the Executive is or becomes a participant,
or the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Change of Control;
(v) any material breach by the Company of any provision of this Agreement;
(vi) any purported termination of Executive's employment by the Company
which is not effected pursuant to the procedures set forth in SECTION 3;
or
(vii) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company to
assume and agree to perform this Agreement.
"MULTI-FAMILY RESIDENTIAL BUSINESS" means the business of acquiring,
developing, constructing, owning or operating multi-family residential apartment
communities.
4
<PAGE>
"MULTI-FAMILY RESIDENTIAL PROPERTY" means any real estate upon which the
Multi-Family Residential Business is being conducted.
"OPTION(S)" means any options issued pursuant to the 1994 Plan, 1999 Plan
or any other stock option plan adopted by the Company, any option granted with
respect to Partnership Units, or any option granted under the plan of any
successor company that replaces or assumes the Company's or the Partnership's
options.
"PARTNERSHIP" means Mid-America Apartments, L.P., a Tennessee limited
partnership.
"PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to redeem such
interests. The Company may elect to effectuate such redemption by either paying
cash or exchanging Company Shares for such interests.
"PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the services described in SECTION
2 of the Agreement that continues for a period of six (6) consecutive months.
"TERM" has the meaning assigned to it in SECTION 3 of this Agreement.
"TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be (i) in the case of Executive's Permanent Disability, 30 days
after a Termination Notice is given and Executive does not return to the
full-time performance of his duties within such 30 day period or (ii) in all
other instances, the date specified as the Termination Date in the Termination
Notice, which date shall not be less than thirty nor more than sixty days from
the date the Termination Notice is given.
"TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
"TERMINATION PAYMENT" has the meaning set forth in SECTION 9(B)(I) of this
Agreement.
"TERMINATION WITH CAUSE" means the termination of the Executive's
employment by act of the Board for any of the following reasons:
(i) the Executive's conviction for a felony;
(ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's property or
business opportunity;
(iii) the Executive's intentional breach of the noncompetition provisions
contained in SECTION 10 of this Agreement; or
5
<PAGE>
(iv) the Executive's ongoing willful neglect of or failure to perform his
duties hereunder or his ongoing willful failure or refusal to follow any
reasonable, unambiguous duly adopted written direction of the Board or any
duly constituted committee thereof that is not inconsistent with the
description of the Executive's duties set forth in SECTION 2, if such
willful neglect or failure is materially damaging or materially
detrimental to the business and operations of the Company; provided that
Executive shall have received written notice of such failure and shall
have continued to engage in such failure after 30 days following receipt
of such notice from the Board, which notice specifically identifies the
manner in which the Board believes that Executive has engaged in such
failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company. Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with his counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, Executive was
guilty of misconduct as set forth above, and of continuing such misconduct after
notice from the Board.
"TERMINATION WITHOUT CAUSE" means the termination of the Executive's
employment by the Company for any reason other than Termination With Cause, or
termination by the Company due to Executive's death or Permanent Disability.
"UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 ET SEQ., as amended.
"VOLUNTARY TERMINATION" means the Executive's voluntary termination of his
employment hereunder for any reason other than Good Reason. If the Executive
gives a Termination Notice of Voluntary Termination and, prior to the
Termination Date, the Executive voluntarily refuses or fails to provide
substantially all the services described in SECTION 2 hereof for a period
greater than two consecutive weeks, the Voluntary Termination shall be deemed to
be effective as of the date on which the Executive so ceases to carry out his
duties. Voluntary refusal to perform services shall not include taking vacation
otherwise permitted in accordance with SECTION 4 hereof, the Executive's failure
to perform services on account of his illness or the illness of a member of his
immediate family, provided such illness is adequately substantiated at the
reasonable request of the Company, or any other absence from service with the
written consent of the Board.
2. EMPLOYMENT; SERVICES. The Company shall employ the Executive, and the
Executive agrees to be so employed, in the capacity of Chief Executive Officer
of the Company to serve for the Term hereof, subject to earlier termination as
hereinafter provided. The Executive shall devote such amount of his time and
attention to the Company's affairs as are necessary to perform his duties to the
Company in his capacity as Chief Executive Officer. The Executive shall have
authority and
6
<PAGE>
responsibility with respect to the day-to-day management of the Company,
consistent with direction from the Company's Board.
3. TERM; TERMINATION.
(a) The term of the Executive's employment hereunder shall be one
year and shall commence on the date hereof and shall be extended automatically,
for so long as the Executive remains employed by the Company hereunder, the
first day of each month beginning January 1, 2000 for an additional one-month
period (such period, as it may be extended from time to time, being herein
referred to as the "Term"), unless terminated earlier in accordance with the
terms of this Agreement, to the effect that on the first day of each month, the
remaining term of this Agreement and the Executive's employment hereunder shall
be one year.
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay the
Executive for his services a Base Salary of $276,750.00, to be paid in
accordance with customary Company policies, such Base Salary being subject to
any increases approved by the Compensation Committee or the Board, as the case
may be.
(b) AWARD PLANS. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, or Options, and shall be eligible to
participate the 1994 Plan, 1999 Plan, and any other stock option, incentive
compensation, profit participation, bonus or extra compensation plan that is
adopted by the Company and in which the Company's executive officers generally
participate (collectively, "AWARD PLANS").
7
<PAGE>
(c) BENEFIT PLANS. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life, medical, dental, disability, insurance and welfare plan maintained
by the Company including, without limitation, the benefits contemplated by
SECTION 5 of this Agreement, that are maintained from time to time by the
Company for the benefit of Executive, the executives of the Company generally or
for the Company's employees generally, provided that Executive is eligible to
participate in such plan under the eligibility provisions thereof that are
generally applicable to the participants thereof (collectively, "BENEFIT
PLANS").
(d) VACATION. The Executive shall be entitled each calendar year to
vacation time, during which time his compensation shall be paid in full. The
time allotted for such vacation shall be three (3) weeks.
(e) CONTINUATION OF WELFARE BENEFITS. If Executive's employment is
terminated due to Executive's Permanent Disability, Termination Without Cause,
or termination for Good Reason, and if Executive is no longer eligible to
participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
one (1) year after the Termination Date. If Executive's employment is terminated
due to a Change of Control Termination, and if Executive is no longer eligible
to participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
two (2) years after the Termination Date.
(f) OVERALL QUALIFICATION. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. EXPENSES. The Company recognizes that the Executive will have to incur
certain out-of-pocket expenses, including but not limited to travel expenses,
related to his services and the Company's business and the Company agrees to
reimburse the Executive for all reasonable expenses necessarily incurred by him
in the performance of his duties upon presentation of a voucher or documentation
indicating the amount and business purposes of any such expenses, including, but
not limited to, expenses incurred in connection with the operation of
Executive's aircraft in the course of conducting the Company's business;
provided that Executive complies with the Company's policies and procedures
regarding business expenses.
8
<PAGE>
6. VOLUNTARY TERMINATION; TERMINATION WITH CAUSE. Except as otherwise
provided in SECTION 9 of this Agreement, if (i) the Executive shall cease being
an employee of the Company on account of a Voluntary Termination or (ii) there
shall be a Termination With Cause, the Executive shall not be entitled to any
compensation after the Termination Date of such Voluntary Termination or
Termination With Cause (except Base Salary and vacation accrued but unpaid on
the Termination Date of such event). In the event of a Voluntary Termination or
Termination With Cause, the Executive shall continue to be subject to the
noncompetition covenant contained in SECTION 10 hereof for the remainder of the
Term.
7. DEATH OR DISABILITY. In the event of the Executive's death or Permanent
Disability, the Company may elect to terminate Executive's employment with the
Company. Upon termination of Executive by the Company due to Executive's death
or Permanent Disability, the Company shall continue to pay the Executive or his
heirs, devisees, executors, legatees or personal representatives, as
appropriate, the semi-monthly payments of the Base Salary then in effect for one
year from the Termination Date. The Company shall also pay any amounts due
pursuant to the terms of any Benefit Plans and Award Plans in which Executive
was a participant, including, without limitation, the pro rata amount of any
bonus to be paid to Executive for the fiscal year in which Executive was
terminated. In addition, Executive shall be permitted to participate in, and
have all rights and benefits provided by, all Benefit Plans which Executive was
eligible to participate in immediately prior to the Termination Date (to the
extent such participation is possible under the laws then pertaining to such
Benefit Plans), for a minimum of one (1) year following the Termination Date.
8. TERMINATION WITHOUT CAUSE. RESIGNATION FOR GOOD REASON. The Company may
terminate Executive for any reason, or no reason at all, at any time and
Executive may terminate this Agreement at any time for Good Reason, provided
that, upon termination of this Agreement by the Executive for Good Reason or in
the event of a Termination Without Cause, except as otherwise provided in
SECTION 9 of this Agreement, the Company shall provide the compensation and
benefits set forth in this SECTION 8. Executive may terminate this Agreement for
Good Reason notwithstanding any incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) BASE SALARY, BENEFIT AND AWARD PLANS. The Company shall continue
to pay the Executive the semi-monthly payments of the Base Salary then in effect
for one year after the Termination Date. The Company shall also pay on the
Termination Date any amounts due pursuant to the terms of any Benefit Plans and
Award Plans in which Executive was a participant, including, without limitation,
the pro rata amount of any bonus to be paid to Executive for the fiscal year in
which Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for a minimum of one year following the
Termination Date.
9
<PAGE>
(b) STOCK OPTIONS. All Options granted to Executive shall become
fully vested at the Termination Date. In lieu of Company Shares issuable upon
exercise of any outstanding and unexercised Options granted to Executive,
Executive may, at Executive's option, receive an amount in cash equal to the
product of (i) the Fair Market Value of Company Shares on the Termination Date
over the per share exercise price of each Option held by Executive, times (ii)
the number of Company Shares covered by each such Option. In the event Executive
does not elect to receive a cash payment for any outstanding and unexercised
Options granted to Executive, Executive shall have the right to exercise such
Options in accordance with the terms and conditions provided in the applicable
stock option plans as if Executive had continued his employment with the
Company, notwithstanding Executive's termination.
(c) LEGAL FEES. The Company shall also pay to Executive all legal
fees and expenses incurred by Executive as a result of a Termination Without
Cause or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
9. CHANGE OF CONTROL.
(a) TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL.
Notwithstanding any other provision in this Agreement, in the event of a Change
of Control Termination, the Company shall, on the Termination Date, pay the
Executive, in addition to any Base Salary earned but not paid through the
Termination Date and any amounts due pursuant to Award Plans and Benefit Plans
including, without limitation, the pro rata amount of Executive's anticipated
bonus for the fiscal year in which Executive is terminated, the compensation and
benefits set forth in SECTION 9(B).
(b) COMPENSATION AND BENEFITS.
(i) A Termination Payment shall be paid which is equal to the sum of
two and 99/100 (2.99) times the Executive's annual base salary in effect on the
Termination Date plus two and 99/100 (2.99) times the average annual cash bonus
paid to the Executive for the two immediately preceding fiscal years, under this
Agreement or otherwise (but not including compensation under the Company's
Shareholder Value Plan) ("Termination Payment"). Notwithstanding SECTION 9(A),
the Termination Payment shall be calculated and paid immediately prior to the
closing of the transactions constituting a Change of Control if the Executive
receives notice prior to the Change of Control that his employment will be
terminated on or after the Change of Control.
(ii) Executive shall be permitted to participate in, and have all
rights and benefits provided by, all Benefit Plans which Executive was eligible
to participate in immediately prior to the Termination Date (to the extent such
participation is possible under the laws then pertaining to such Benefit Plans),
for a minimum of two years following the Termination Date.
10
<PAGE>
(iii) In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
excess of the higher of the Fair Market Value of Company Shares on the
Termination Date, or the highest per share price for Company Shares actually
paid in connection with any Change of Control of the Company, over the per share
exercise price of each Option held by Executive, times (ii) the number of
Company Shares covered by each such Option. In the event Executive does not
elect to receive a cash payment for any outstanding and unexercised Options
granted to Executive, Executive shall have the right to exercise such Options in
accordance with the terms and conditions provided in the applicable stock option
plans.
(iv) The Company shall also pay to Executive all legal fees and
expenses incurred by Executive as a result of a termination described in SECTION
9(A) of this Agreement (including all such fees and expenses, if any, incurred
in contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
(c) CERTAIN TRANSACTIONS. Notwithstanding the provisions of
subparagraphs (i) or (vi) in the definition of change of control, unless
otherwise determined in a specific case by majority vote of the Board, a Change
of Control shall not be deemed to have occurred for purposes of this Agreement
solely because (i) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities or (ii) any
Company-sponsored employee stock ownership plan, or any other employee benefit
plan of the Company, either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item thereon)
under the Exchange Act, disclosing beneficial ownership by it of shares of stock
of the Company, or because the Company reports that a Change of Control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership.
(d) ESCROW ARRANGEMENT. If within thirty (30) days after the
effective date of a Change of Control Executive's employment has not been
terminated, the Company shall deposit with an escrow agent, pursuant to an
escrow agreement between the Company and such escrow agent, a sum of money, or
other property permitted by such escrow agreement, which is substantially
sufficient in the opinion of the Company's management to fund the amounts due to
Executive set forth in SECTION 9(B) of this Agreement. The escrow agreement
shall provide that such agreement may not be terminated until the earlier of (i)
Executive's employment has terminated and all amounts due to Executive as set
forth in this Agreement have been paid to Executive or (ii) three (3) years
after the effective date of the Change of Control.
(e) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will
be imposed on the Executive under Code section 4999 as a result of the
Executive's receipt of the Change of Control Benefits, the Company shall
indemnify the Executive and hold him harmless against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes. To effect this
11
<PAGE>
indemnification, the Company shall pay to the Executive the Additional Amount
which is sufficient to indemnify and hold the Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on the Executive under section 4999 of the Code
with respect to the Change of Control Benefits; (ii) the additional (A) Excise
Tax under section 4999 of the Code, (B) hospital insurance tax under section
3111(b) of the Code and (C) federal, state and local income taxes for which the
Executive is or will be liable on account of the payment of the amount described
in subitem (i); and (iii) the further excise, hospital insurance and income
taxes for which the Executive is or will be liable on account of the payment of
the amount described in subitem (ii) and this subitem (iii) and any other
indemnification payment under this SECTION 9(E). The Additional Amount shall be
calculated and paid to the Executive at the time that the Termination Payment is
paid to the Executive. In calculating the Additional Amount, the highest
marginal rates of federal and applicable state and local income taxes applicable
to individuals and in effect for the year in which the Change of Control occurs
shall be used. Nothing in this paragraph shall give the Executive the right to
receive indemnification from the Company for federal, state or local income
taxes or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Change in Control Benefits, or (b) any additional payment,
benefit or compensation other than the Additional Amount. As specified in items
(ii) and (iii), above, all income, hospital insurance and additional Excise
Taxes resulting from additional compensation in the form of the Excise Tax
payment specified in item (i), above, shall be paid to the Executive.
The provisions of this SECTION 9(E) are illustrated by the following
example:
Assume that the Termination Payment and all other Change of Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an Excise Tax liability under Code
section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
10. NONCOMPETITION. During the Term, the Executive shall not, other than
through the Company or affiliates of the Company, own any interest in any
Multi-Family Residential Property (other than Multi-Family Residential Property
in which the Company or the Partnership has an ownership interest), as partner,
shareholder or otherwise, or engage in the Multi-Family Residential Business,
directly or indirectly, for his own account or for the account of others, either
as an officer, director, shareholder, owner, partner, promoter, employee,
consultant, advisor, agent, manager, or in any other capacity. For a period of
two (2) years after a Change of Control Termination, Executive shall not own any
interest in any Multi-Family Residential Property as partner, shareholder or
otherwise, or directly or indirectly, for his own account or for the account of
others, either as an officer, director, promoter, employee, consultant, advisor,
agent, manager, or in any other capacity, engage in the Multi-Family Residential
Business within 5 miles of any Multi-Family Residential Property owned by the
Company or the Partnership at the time of termination of employment.
12
<PAGE>
The Executive agrees that damages at law for violation of the restrictive
covenant contained herein would not be an adequate or proper remedy to the
Company, and that should the Executive violate or threaten to violate any of the
provisions of such covenant, the Company, its successors or assigns, shall be
entitled to obtain a temporary or permanent injunction, as appropriate, against
the Executive in any court having jurisdiction over the person and the subject
matter, prohibiting any further violation of any such covenants. The injunctive
relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
11. EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is
an employee of the Company, not an independent contractor. Any payments made to
Executive by the Company pursuant to this Agreement shall be treated for federal
and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
12. NOTICES. All notices or deliveries authorized or required pursuant to
this Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid, addressed to the parties at the following addresses
or to such other addresses as either may designate in writing to the other
party:
To the Company: 6584 Poplar Avenue
Suite 340
Memphis, TN 38128
Attn: Chief Financial Officer
To the Executive: George E. Cates
211 E. Galloway
Memphis, Tennessee 38111
13. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided, however, that any amendment or
termination of the covenant of noncompetition in SECTION 10 must be approved
13
<PAGE>
by a majority of the Directors of the Company other than the Executive, if the
Executive is then a director of the Company. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
14. ARBITRATION. Any controversy concerning or claim arising out of or
relating to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party seeking
such arbitration.
(a) THE ARBITRATORS. Any arbitration proceeding shall be conducted
by three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
(b) ARBITRATION PROCEDURES. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
15. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee.
16. ASSIGNMENT. The Executive acknowledges that his services are unique
and personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement, except with respect to certain
rights to receive payments as described in SECTION 7.
17. HEADINGS. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
18. SUCCESSORS; BINDING AGREEMENT. The Company will require any successor
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be
14
<PAGE>
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a beach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as Executive would be entitled to hereunder if Executive terminates his
employment for Good Reason. The Company's rights and obligations under this
Agreement shall inure to the benefit of and shall be binding upon the Company's
successors and assigns.
[The remainder of this page is intentionally left blank.]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By: ____________________________
Name: __________________________
Title: _________________________
EXECUTIVE:
________________________________
George E. Cates
16
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") effective as of December ___,
1999, by and between Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Company"), and H. Eric Bolton (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
President and Chief Operating Officer of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following definitions:
"1994 PLAN" means the Company's Amended and Restated 1994 Restricted Stock
and Stock Option Plan.
"1999 PLAN" means the Company's 1999 Equity Compensation Plan.
"ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including additional
taxes on such Additional Amount) incurred by Executive as a result of Executive
receiving Change of Control Benefits as further described in SECTION 9(E) of
this Agreement.
"ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to this
Agreement.
"AWARD PLANS" has the meaning set forth in SECTION 4(B)of this Agreement.
"BASE SALARY" means the annual salary to be paid to Executive as set forth
in SECTION 4(A) of this Agreement.
"BENEFIT PLANS" has the meaning set forth in SECTION 4(C) of this
Agreement.
"BOARD" means the Board of Directors of the Company.
<PAGE>
"CHANGE OF CONTROL" means any of the following events which occur during
the Term of this Agreement:
(i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is, a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of such securities by the
acquiring person;
(ii) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
unless any such change is approved by the vote of at least 80% of the
members of the Board of Directors of the Company in office immediately
prior to such cessation;
(iii) the Company is merged, consolidated or reorganized into or with
another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal person,
and immediately after such merger, consolidation, reorganization or
exchange less than 80% of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such transaction are held, directly or indirectly, in the aggregate
by the holders of securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction;
(iv) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation or
other legal person and less than a majority of the combined voting power
of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in
the aggregate by the holders of securities entitled to vote generally in
the election of directors of the Company immediately prior to such sale;
(v) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate business
operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under
the Exchange Act) of the Company and its subsidiaries immediately prior
thereto;
2
<PAGE>
(vi) the Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K (or any successor, form or report or item therein) that a change
in control of the Company has occurred;
(vii) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(viii) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of the
preceding clauses in this sentence.
"CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation (except for
the Additional Amount) which the Executive receives or has the right to receive
from the Company or any of its affiliates as a result of Executive's
termination.
"CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause of
the Executive's employment by the Company, in anticipation of, on, or within
three (3) years after a Change of Control, (ii) the Executive's resignation for
Good Reason on or within three (3) years after a Change of Control, or (iii)
Executive's giving of a Termination Notice of Voluntary Termination during the
thirty days immediately following the Change of Control or during the thirty
days immediately following the one year anniversary of the Change of Control.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Mid-America Apartment Communities, Inc., a Tennessee
corporation, and any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
"COMPANY SHARES" means the shares of common stock of the Company or any
securities of a successor company which shall have replaced such common stock.
"COMPENSATION COMMITTEE" means the compensation committee of the Board.
"EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G of
the Code.
"EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant to
Code section 4999.
"EXECUTIVE" means the person identified in the preamble paragraph of this
Agreement.
"FAIR MARKET VALUE" means, on any give date, the closing sale price of the
common stock of the Company on the New York Stock Exchange on such date, or, if
the New York Stock
3
<PAGE>
Exchange shall be closed on such date, the next preceding date on which the New
York Stock Exchange shall have been open.
"GOOD REASON" means any of the following:
(i) a change in the Executive's status, position or responsibilities
(including reporting responsibilities) which, in the Executive's
reasonable judgment and without Executive's consent, represents a
reduction in or demotion of the Executive's status, position or
responsibilities as in effect immediately prior to a Change of Control;
the assignment to the Executive of any duties or responsibilities which,
in the Executive's reasonable judgment, are inconsistent with such status,
position or responsibilities; or any removal of the Executive from or
failure to reappoint or reelect the Executive to any of such positions,
except in connection with a Termination with Cause, as a result of the
Executive's death or Permanent Disability or by Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect on the date
hereof or as the same may be increased from time to time or modifying,
suspending, discontinuing, or terminating any Award Plan or Benefit Plan
in a manner which treats Executive differently than other similarly
situated employees or singles out or discriminates against Executive;
(iii) the relocation of the Company's principal executive offices to a
location outside a thirty-mile radius of Memphis, Tennessee or the
Company's requiring the Executive to be based at any place other than a
location within a thirty-mile radius of Memphis, Tennessee, except for
reasonably required travel on the Company's business;
(iv) the failure by the Company to continue to provide the Executive with
compensation and benefits provided for under this Agreement or benefits
substantially similar to those provided to the Executive under any of the
employee benefit plans in which the Executive is or becomes a participant,
or the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Change of Control;
(v) any material breach by the Company of any provision of this Agreement;
(vi) any purported termination of Executive's employment by the Company
which is not effected pursuant to the procedures set forth in SECTION 3;
or
(vii) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company to
assume and agree to perform this Agreement.
"MULTI-FAMILY RESIDENTIAL BUSINESS" means the business of acquiring,
developing, constructing, owning or operating multi-family residential apartment
communities.
4
<PAGE>
"MULTI-FAMILY RESIDENTIAL PROPERTY" means any real estate upon which the
Multi-Family Residential Business is being conducted.
"OPTION(S)" means any options issued pursuant to the 1994 Plan, 1999 Plan
or any other stock option plan adopted by the Company, any option granted with
respect to Partnership Units, or any option granted under the plan of any
successor company that replaces or assumes the Company's or the Partnership's
options.
"PARTNERSHIP" means Mid-America Apartments, L.P., a Tennessee limited
partnership.
"PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to redeem such
interests. The Company may elect to effectuate such redemption by either paying
cash or exchanging Company Shares for such interests.
"PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the services described in SECTION
2 of the Agreement that continues for a period of six (6) consecutive months.
"TERM" has the meaning assigned to it in SECTION 3 of this Agreement.
"TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be (i) in the case of Executive's Permanent Disability, 30 days
after a Termination Notice is given and Executive does not return to the
full-time performance of his duties within such 30 day period or (ii) in all
other instances, the date specified as the Termination Date in the Termination
Notice, which date shall not be less than thirty nor more than sixty days from
the date the Termination Notice is given.
"TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
"TERMINATION PAYMENT" has the meaning set forth in SECTION 9(B)(I) of this
Agreement.
"TERMINATION WITH CAUSE" means the termination of the Executive's
employment by act of the Board for any of the following reasons:
(i) the Executive's conviction for a felony;
(ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's property or
business opportunity;
(iii) the Executive's intentional breach of the noncompetition provisions
contained in SECTION 10 of this Agreement; or
5
<PAGE>
(iv) the Executive's ongoing willful neglect of or failure to perform his
duties hereunder or his ongoing willful failure or refusal to follow any
reasonable, unambiguous duly adopted written direction of the Board or any
duly constituted committee thereof that is not inconsistent with the
description of the Executive's duties set forth in SECTION 2, if such
willful neglect or failure is materially damaging or materially
detrimental to the business and operations of the Company; provided that
Executive shall have received written notice of such failure and shall
have continued to engage in such failure after 30 days following receipt
of such notice from the Board, which notice specifically identifies the
manner in which the Board believes that Executive has engaged in such
failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company. Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with his counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, Executive was
guilty of misconduct as set forth above, and of continuing such misconduct after
notice from the Board.
"TERMINATION WITHOUT CAUSE" means the termination of the Executive's
employment by the Company for any reason other than Termination With Cause, or
termination by the Company due to Executive's death or Permanent Disability.
"UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 ET SEQ., as amended.
"VOLUNTARY TERMINATION" means the Executive's voluntary termination of his
employment hereunder for any reason other than Good Reason. If the Executive
gives a Termination Notice of Voluntary Termination and, prior to the
Termination Date, the Executive voluntarily refuses or fails to provide
substantially all the services described in SECTION 2 hereof for a period
greater than two consecutive weeks, the Voluntary Termination shall be deemed to
be effective as of the date on which the Executive so ceases to carry out his
duties. Voluntary refusal to perform services shall not include taking vacation
otherwise permitted in accordance with SECTION 4 hereof, the Executive's failure
to perform services on account of his illness or the illness of a member of his
immediate family, provided such illness is adequately substantiated at the
reasonable request of the Company, or any other absence from service with the
written consent of the Board.
2. EMPLOYMENT; SERVICES. The Company shall employ the Executive, and the
Executive agrees to be so employed, in the capacity of President and Chief
Operating Officer of the Company to serve for the Term hereof, subject to
earlier termination as hereinafter provided. The Executive shall devote such
amount of his time and attention to the Company's affairs as are necessary to
perform his duties to the Company in his capacity as President and Chief
Operating Officer. The
6
<PAGE>
Executive shall have authority and responsibility with respect to the day-to-day
management of the Company, consistent with direction from the Company's Board.
3. TERM; TERMINATION.
(a) The term of the Executive's employment hereunder shall be one
year and shall commence on the date hereof and shall be extended automatically,
for so long as the Executive remains employed by the Company hereunder, the
first day of each month beginning January 1, 2000 for an additional one-month
period (such period, as it may be extended from time to time, being herein
referred to as the "Term"), unless terminated earlier in accordance with the
terms of this Agreement, to the effect that on the first day of each month, the
remaining term of this Agreement and the Executive's employment hereunder shall
be one year.
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay the
Executive for his services a Base Salary of $225,500.00, to be paid in
accordance with customary Company policies, such Base Salary being subject to
any increases approved by the Compensation Committee or the Board, as the case
may be.
(b) AWARD PLANS. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, or Options, and shall be eligible to
participate the 1994 Plan, 1999 Plan, and any other stock option, incentive
compensation, profit participation, bonus or extra compensation plan that is
adopted by the Company and in which the Company's executive officers generally
participate (collectively, "AWARD PLANS").
7
<PAGE>
(c) BENEFIT PLANS. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life, medical, dental, disability, insurance and welfare plan maintained
by the Company including, without limitation, the benefits contemplated by
SECTION 5 of this Agreement, that are maintained from time to time by the
Company for the benefit of Executive, the executives of the Company generally or
for the Company's employees generally, provided that Executive is eligible to
participate in such plan under the eligibility provisions thereof that are
generally applicable to the participants thereof (collectively, "BENEFIT
PLANS").
(d) VACATION. The Executive shall be entitled each calendar year to
vacation time, during which time his compensation shall be paid in full. The
time allotted for such vacation shall be three (3) weeks.
(e) CONTINUATION OF WELFARE BENEFITS. If Executive's employment is
terminated due to Executive's Permanent Disability, Termination Without Cause,
or termination for Good Reason, and if Executive is no longer eligible to
participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
one (1) year after the Termination Date. If Executive's employment is terminated
due to a Change of Control Termination, and if Executive is no longer eligible
to participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
two (2) years after the Termination Date.
(f) OVERALL QUALIFICATION. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. EXPENSES. The Company recognizes that the Executive will have to incur
certain out-of-pocket expenses, including but not limited to travel expenses,
related to his services and the Company's business and the Company agrees to
reimburse the Executive for all reasonable expenses necessarily incurred by him
in the performance of his duties upon presentation of a voucher or documentation
indicating the amount and business purposes of any such expenses, including, but
not limited to, expenses incurred in connection with the operation of
Executive's aircraft in the course of conducting the Company's business;
provided that Executive complies with the Company's policies and procedures
regarding business expenses.
8
<PAGE>
6. VOLUNTARY TERMINATION; TERMINATION WITH CAUSE. Except as otherwise
provided in SECTION 9 of this Agreement, if (i) the Executive shall cease being
an employee of the Company on account of a Voluntary Termination or (ii) there
shall be a Termination With Cause, the Executive shall not be entitled to any
compensation after the Termination Date of such Voluntary Termination or
Termination With Cause (except Base Salary and vacation accrued but unpaid on
the Termination Date of such event). In the event of a Voluntary Termination or
Termination With Cause, the Executive shall continue to be subject to the
noncompetition covenant contained in SECTION 10 hereof for the remainder of the
Term.
7. DEATH OR DISABILITY. In the event of the Executive's death or Permanent
Disability, the Company may elect to terminate Executive's employment with the
Company. Upon termination of Executive by the Company due to Executive's death
or Permanent Disability, the Company shall continue to pay the Executive or his
heirs, devisees, executors, legatees or personal representatives, as
appropriate, the semi-monthly payments of the Base Salary then in effect for one
year from the Termination Date. The Company shall also pay any amounts due
pursuant to the terms of any Benefit Plans and Award Plans in which Executive
was a participant, including, without limitation, the pro rata amount of any
bonus to be paid to Executive for the fiscal year in which Executive was
terminated. In addition, Executive shall be permitted to participate in, and
have all rights and benefits provided by, all Benefit Plans which Executive was
eligible to participate in immediately prior to the Termination Date (to the
extent such participation is possible under the laws then pertaining to such
Benefit Plans), for a minimum of one (1) year following the Termination Date.
8. TERMINATION WITHOUT CAUSE. RESIGNATION FOR GOOD REASON. The Company may
terminate Executive for any reason, or no reason at all, at any time and
Executive may terminate this Agreement at any time for Good Reason, provided
that, upon termination of this Agreement by the Executive for Good Reason or in
the event of a Termination Without Cause, except as otherwise provided in
SECTION 9 of this Agreement, the Company shall provide the compensation and
benefits set forth in this SECTION 8. Executive may terminate this Agreement for
Good Reason notwithstanding any incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) BASE SALARY, BENEFIT AND AWARD PLANS. The Company shall continue
to pay the Executive the semi-monthly payments of the Base Salary then in effect
for one year after the Termination Date. The Company shall also pay on the
Termination Date any amounts due pursuant to the terms of any Benefit Plans and
Award Plans in which Executive was a participant, including, without limitation,
the pro rata amount of any bonus to be paid to Executive for the fiscal year in
which Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for a minimum of one year following the
Termination Date.
9
<PAGE>
(b) STOCK OPTIONS. All Options granted to Executive shall become
fully vested at the Termination Date. In lieu of Company Shares issuable upon
exercise of any outstanding and unexercised Options granted to Executive,
Executive may, at Executive's option, receive an amount in cash equal to the
product of (i) the Fair Market Value of Company Shares on the Termination Date
over the per share exercise price of each Option held by Executive, times (ii)
the number of Company Shares covered by each such Option. In the event Executive
does not elect to receive a cash payment for any outstanding and unexercised
Options granted to Executive, Executive shall have the right to exercise such
Options in accordance with the terms and conditions provided in the applicable
stock option plans as if Executive had continued his employment with the
Company, notwithstanding Executive's termination.
(c) LEGAL FEES. The Company shall also pay to Executive all legal
fees and expenses incurred by Executive as a result of a Termination Without
Cause or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
9. CHANGE OF CONTROL.
(a) TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL.
Notwithstanding any other provision in this Agreement, in the event of a Change
of Control Termination, the Company shall, on the Termination Date, pay the
Executive, in addition to any Base Salary earned but not paid through the
Termination Date and any amounts due pursuant to Award Plans and Benefit Plans
including, without limitation, the pro rata amount of Executive's anticipated
bonus for the fiscal year in which Executive is terminated, the compensation and
benefits set forth in SECTION 9(B).
(b) COMPENSATION AND BENEFITS.
(i) A Termination Payment shall be paid which is equal to the sum of
two and 99/100 (2.99) times the Executive's annual base salary in effect on the
Termination Date plus two and 99/100 (2.99) times the average annual cash bonus
paid to the Executive for the two immediately preceding fiscal years, under this
Agreement or otherwise (but not including compensation under the Company's
Shareholder Value Plan) ("Termination Payment"). Notwithstanding SECTION 9(A),
the Termination Payment shall be calculated and paid immediately prior to the
closing of the transactions constituting a Change of Control if the Executive
receives notice prior to the Change of Control that his employment will be
terminated on or after the Change of Control.
(ii) Executive shall be permitted to participate in, and have all
rights and benefits provided by, all Benefit Plans which Executive was eligible
to participate in immediately prior to the Termination Date (to the extent such
participation is possible under the laws then pertaining to such Benefit Plans),
for a minimum of two years following the Termination Date.
10
<PAGE>
(iii) In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
excess of the higher of the Fair Market Value of Company Shares on the
Termination Date, or the highest per share price for Company Shares actually
paid in connection with any Change of Control of the Company, over the per share
exercise price of each Option held by Executive, times (ii) the number of
Company Shares covered by each such Option. In the event Executive does not
elect to receive a cash payment for any outstanding and unexercised Options
granted to Executive, Executive shall have the right to exercise such Options in
accordance with the terms and conditions provided in the applicable stock option
plans.
(iv) The Company shall also pay to Executive all legal fees and
expenses incurred by Executive as a result of a termination described in SECTION
9(A) of this Agreement (including all such fees and expenses, if any, incurred
in contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
(c) CERTAIN TRANSACTIONS. Notwithstanding the provisions of
subparagraphs (i) or (vi) in the definition of change of control, unless
otherwise determined in a specific case by majority vote of the Board, a Change
of Control shall not be deemed to have occurred for purposes of this Agreement
solely because (i) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities or (ii) any
Company-sponsored employee stock ownership plan, or any other employee benefit
plan of the Company, either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item thereon)
under the Exchange Act, disclosing beneficial ownership by it of shares of stock
of the Company, or because the Company reports that a Change of Control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership.
(d) ESCROW ARRANGEMENT. If within thirty (30) days after the
effective date of a Change of Control Executive's employment has not been
terminated, the Company shall deposit with an escrow agent, pursuant to an
escrow agreement between the Company and such escrow agent, a sum of money, or
other property permitted by such escrow agreement, which is substantially
sufficient in the opinion of the Company's management to fund the amounts due to
Executive set forth in SECTION 9(B) of this Agreement. The escrow agreement
shall provide that such agreement may not be terminated until the earlier of (i)
Executive's employment has terminated and all amounts due to Executive as set
forth in this Agreement have been paid to Executive or (ii) three (3) years
after the effective date of the Change of Control.
(e) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will
be imposed on the Executive under Code section 4999 as a result of the
Executive's receipt of the Change of Control Benefits, the Company shall
indemnify the Executive and hold him harmless against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes. To effect this
11
<PAGE>
indemnification, the Company shall pay to the Executive the Additional Amount
which is sufficient to indemnify and hold the Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on the Executive under section 4999 of the Code
with respect to the Change of Control Benefits; (ii) the additional (A) Excise
Tax under section 4999 of the Code, (B) hospital insurance tax under section
3111(b) of the Code and (C) federal, state and local income taxes for which the
Executive is or will be liable on account of the payment of the amount described
in subitem (i); and (iii) the further excise, hospital insurance and income
taxes for which the Executive is or will be liable on account of the payment of
the amount described in subitem (ii) and this subitem (iii) and any other
indemnification payment under this SECTION 9(E). The Additional Amount shall be
calculated and paid to the Executive at the time that the Termination Payment is
paid to the Executive. In calculating the Additional Amount, the highest
marginal rates of federal and applicable state and local income taxes applicable
to individuals and in effect for the year in which the Change of Control occurs
shall be used. Nothing in this paragraph shall give the Executive the right to
receive indemnification from the Company for federal, state or local income
taxes or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Change in Control Benefits, or (b) any additional payment,
benefit or compensation other than the Additional Amount. As specified in items
(ii) and (iii), above, all income, hospital insurance and additional Excise
Taxes resulting from additional compensation in the form of the Excise Tax
payment specified in item (i), above, shall be paid to the Executive.
The provisions of this SECTION 9(E) are illustrated by the following
example:
Assume that the Termination Payment and all other Change of Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an Excise Tax liability under Code
section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
10. NONCOMPETITION. During the Term, the Executive shall not, other than
through the Company or affiliates of the Company, own any interest in any
Multi-Family Residential Property (other than Multi-Family Residential Property
in which the Company or the Partnership has an ownership interest), as partner,
shareholder or otherwise, or engage in the Multi-Family Residential Business,
directly or indirectly, for his own account or for the account of others, either
as an officer, director, shareholder, owner, partner, promoter, employee,
consultant, advisor, agent, manager, or in any other capacity. For a period of
two (2) years after a Change of Control Termination, Executive shall not own any
interest in any Multi-Family Residential Property as partner, shareholder or
otherwise, or directly or indirectly, for his own account or for the account of
others, either as an officer, director, promoter, employee, consultant, advisor,
agent, manager, or in any other capacity, engage in the Multi-Family Residential
Business within 5 miles of any Multi-Family Residential Property owned by the
Company or the Partnership at the time of termination of employment.
12
<PAGE>
The Executive agrees that damages at law for violation of the restrictive
covenant contained herein would not be an adequate or proper remedy to the
Company, and that should the Executive violate or threaten to violate any of the
provisions of such covenant, the Company, its successors or assigns, shall be
entitled to obtain a temporary or permanent injunction, as appropriate, against
the Executive in any court having jurisdiction over the person and the subject
matter, prohibiting any further violation of any such covenants. The injunctive
relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
11. EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is
an employee of the Company, not an independent contractor. Any payments made to
Executive by the Company pursuant to this Agreement shall be treated for federal
and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
12. NOTICES. All notices or deliveries authorized or required pursuant to
this Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid, addressed to the parties at the following addresses
or to such other addresses as either may designate in writing to the other
party:
To the Company: 6584 Poplar Avenue
Suite 340
Memphis, Tennessee 38128
Attn: Chief Financial Officer
To the Executive: H. Eric Bolton
3290 Kenny Drive
Germantown, Tennessee 38139
13. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided, however, that any amendment or
termination of the covenant of noncompetition in SECTION 10 must be approved
13
<PAGE>
by a majority of the Directors of the Company other than the Executive, if the
Executive is then a director of the Company. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
14. ARBITRATION. Any controversy concerning or claim arising out of or
relating to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party seeking
such arbitration.
(a) THE ARBITRATORS. Any arbitration proceeding shall be conducted
by three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
(b) ARBITRATION PROCEDURES. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
15. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee.
16. ASSIGNMENT. The Executive acknowledges that his services are unique
and personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement, except with respect to certain
rights to receive payments as described in SECTION 7.
17. HEADINGS. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
18. SUCCESSORS; BINDING AGREEMENT. The Company will require any successor
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be
14
<PAGE>
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a beach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as Executive would be entitled to hereunder if Executive terminates his
employment for Good Reason. The Company's rights and obligations under this
Agreement shall inure to the benefit of and shall be binding upon the Company's
successors and assigns.
[The remainder of this page is intentionally left blank.]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
EXECUTIVE:
______________________________________
H. Eric Bolton
16
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") effective as of December ___,
1999, by and between Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Company"), and Simon R. Wadsworth (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
Executive Vice President and Chief Financial Officer of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following definitions:
"1994 PLAN" means the Company's Amended and Restated 1994 Restricted Stock
and Stock Option Plan.
"1999 PLAN" means the Company's 1999 Equity Compensation Plan.
"ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including additional
taxes on such Additional Amount) incurred by Executive as a result of Executive
receiving Change of Control Benefits as further described in SECTION 9(E) of
this Agreement.
"ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to this
Agreement.
"AWARD PLANS" has the meaning set forth in SECTION 4(B)of this Agreement.
"BASE SALARY" means the annual salary to be paid to Executive as set forth
in SECTION 4(A) of this Agreement.
"BENEFIT PLANS" has the meaning set forth in SECTION 4(C) of this
Agreement.
"BOARD" means the Board of Directors of the Company.
<PAGE>
"CHANGE OF CONTROL" means any of the following events which occur during
the Term of this Agreement:
(i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is, a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of such securities by the
acquiring person;
(ii) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
unless any such change is approved by the vote of at least 80% of the
members of the Board of Directors of the Company in office immediately
prior to such cessation;
(iii) the Company is merged, consolidated or reorganized into or with
another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal person,
and immediately after such merger, consolidation, reorganization or
exchange less than 80% of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such transaction are held, directly or indirectly, in the aggregate
by the holders of securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction;
(iv) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation or
other legal person and less than a majority of the combined voting power
of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in
the aggregate by the holders of securities entitled to vote generally in
the election of directors of the Company immediately prior to such sale;
(v) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate business
operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under
the Exchange Act) of the Company and its subsidiaries immediately prior
thereto;
2
<PAGE>
(vi) the Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K (or any successor, form or report or item therein) that a change
in control of the Company has occurred;
(vii) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(viii) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of the
preceding clauses in this sentence.
"CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation (except for
the Additional Amount) which the Executive receives or has the right to receive
from the Company or any of its affiliates as a result of Executive's
termination.
"CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause of
the Executive's employment by the Company, in anticipation of, on, or within
three (3) years after a Change of Control, (ii) the Executive's resignation for
Good Reason on or within three (3) years after a Change of Control, or (iii)
Executive's giving of a Termination Notice of Voluntary Termination during the
thirty days immediately following the Change of Control or during the thirty
days immediately following the one year anniversary of the Change of Control.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Mid-America Apartment Communities, Inc., a Tennessee
corporation, and any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
"COMPANY SHARES" means the shares of common stock of the Company or any
securities of a successor company which shall have replaced such common stock.
"COMPENSATION COMMITTEE" means the compensation committee of the Board.
"EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G of
the Code.
"EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant to
Code section 4999.
"EXECUTIVE" means the person identified in the preamble paragraph of this
Agreement.
"FAIR MARKET VALUE" means, on any give date, the closing sale price of the
common stock of the Company on the New York Stock Exchange on such date, or, if
the New York Stock
3
<PAGE>
Exchange shall be closed on such date, the next preceding date on which the New
York Stock Exchange shall have been open.
"GOOD REASON" means any of the following:
(i) a change in the Executive's status, position or responsibilities
(including reporting responsibilities) which, in the Executive's
reasonable judgment and without Executive's consent, represents a
reduction in or demotion of the Executive's status, position or
responsibilities as in effect immediately prior to a Change of Control;
the assignment to the Executive of any duties or responsibilities which,
in the Executive's reasonable judgment, are inconsistent with such status,
position or responsibilities; or any removal of the Executive from or
failure to reappoint or reelect the Executive to any of such positions,
except in connection with a Termination with Cause, as a result of the
Executive's death or Permanent Disability or by Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect on the date
hereof or as the same may be increased from time to time or modifying,
suspending, discontinuing, or terminating any Award Plan or Benefit Plan
in a manner which treats Executive differently than other similarly
situated employees or singles out or discriminates against Executive;
(iii) the relocation of the Company's principal executive offices to a
location outside a thirty-mile radius of Memphis, Tennessee or the
Company's requiring the Executive to be based at any place other than a
location within a thirty-mile radius of Memphis, Tennessee, except for
reasonably required travel on the Company's business;
(iv) the failure by the Company to continue to provide the Executive with
compensation and benefits provided for under this Agreement or benefits
substantially similar to those provided to the Executive under any of the
employee benefit plans in which the Executive is or becomes a participant,
or the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Change of Control;
(v) any material breach by the Company of any provision of this Agreement;
(vi) any purported termination of Executive's employment by the Company
which is not effected pursuant to the procedures set forth in SECTION 3;
or
(vii) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company to
assume and agree to perform this Agreement.
"MULTI-FAMILY RESIDENTIAL BUSINESS" means the business of acquiring,
developing, constructing, owning or operating multi-family residential apartment
communities.
4
<PAGE>
"MULTI-FAMILY RESIDENTIAL PROPERTY" means any real estate upon which the
Multi-Family Residential Business is being conducted.
"OPTION(S)" means any options issued pursuant to the 1994 Plan, 1999 Plan
or any other stock option plan adopted by the Company, any option granted with
respect to Partnership Units, or any option granted under the plan of any
successor company that replaces or assumes the Company's or the Partnership's
options.
"PARTNERSHIP" means Mid-America Apartments, L.P., a Tennessee limited
partnership.
"PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to redeem such
interests. The Company may elect to effectuate such redemption by either paying
cash or exchanging Company Shares for such interests.
"PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the services described in SECTION
2 of the Agreement that continues for a period of six (6) consecutive months.
"TERM" has the meaning assigned to it in SECTION 3 of this Agreement.
"TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be (i) in the case of Executive's Permanent Disability, 30 days
after a Termination Notice is given and Executive does not return to the
full-time performance of his duties within such 30 day period or (ii) in all
other instances, the date specified as the Termination Date in the Termination
Notice, which date shall not be less than thirty nor more than sixty days from
the date the Termination Notice is given.
"TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
"TERMINATION PAYMENT" has the meaning set forth in SECTION 9(B)(I) of this
Agreement.
"TERMINATION WITH CAUSE" means the termination of the Executive's
employment by act of the Board for any of the following reasons:
(i) the Executive's conviction for a felony;
(ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's property or
business opportunity;
(iii) the Executive's intentional breach of the noncompetition provisions
contained in SECTION 10 of this Agreement; or
5
<PAGE>
(iv) the Executive's ongoing willful neglect of or failure to perform his
duties hereunder or his ongoing willful failure or refusal to follow any
reasonable, unambiguous duly adopted written direction of the Board or any
duly constituted committee thereof that is not inconsistent with the
description of the Executive's duties set forth in SECTION 2, if such
willful neglect or failure is materially damaging or materially
detrimental to the business and operations of the Company; provided that
Executive shall have received written notice of such failure and shall
have continued to engage in such failure after 30 days following receipt
of such notice from the Board, which notice specifically identifies the
manner in which the Board believes that Executive has engaged in such
failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company. Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with his counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, Executive was
guilty of misconduct as set forth above, and of continuing such misconduct after
notice from the Board.
"TERMINATION WITHOUT CAUSE" means the termination of the Executive's
employment by the Company for any reason other than Termination With Cause, or
termination by the Company due to Executive's death or Permanent Disability.
"UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 ET SEQ., as amended.
"VOLUNTARY TERMINATION" means the Executive's voluntary termination of his
employment hereunder for any reason other than Good Reason. If the Executive
gives a Termination Notice of Voluntary Termination and, prior to the
Termination Date, the Executive voluntarily refuses or fails to provide
substantially all the services described in SECTION 2 hereof for a period
greater than two consecutive weeks, the Voluntary Termination shall be deemed to
be effective as of the date on which the Executive so ceases to carry out his
duties. Voluntary refusal to perform services shall not include taking vacation
otherwise permitted in accordance with SECTION 4 hereof, the Executive's failure
to perform services on account of his illness or the illness of a member of his
immediate family, provided such illness is adequately substantiated at the
reasonable request of the Company, or any other absence from service with the
written consent of the Board.
2. EMPLOYMENT; SERVICES. The Company shall employ the Executive, and the
Executive agrees to be so employed, in the capacity of Executive Vice President
and Chief Financial Officer of the Company to serve for the Term hereof, subject
to earlier termination as hereinafter provided. The Executive shall devote such
amount of his time and attention to the Company's affairs as are necessary to
perform his duties to the Company in his capacity as Executive Vice President
and
6
<PAGE>
Chief Financial Officer. The Executive shall have authority and responsibility
with respect to the day-to-day management of the Company and the financial
status of the Company, consistent with direction from the Company's Board.
3. TERM; TERMINATION.
(a) The term of the Executive's employment hereunder shall be one
year and shall commence on the date hereof and shall be extended automatically,
for so long as the Executive remains employed by the Company hereunder, the
first day of each month beginning January 1, 2000 for an additional one-month
period (such period, as it may be extended from time to time, being herein
referred to as the "Term"), unless terminated earlier in accordance with the
terms of this Agreement, to the effect that on the first day of each month, the
remaining term of this Agreement and the Executive's employment hereunder shall
be one year.
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay the
Executive for his services a Base Salary of $184,500.00, to be paid in
accordance with customary Company policies, such Base Salary being subject to
any increases approved by the Compensation Committee or the Board, as the case
may be.
(b) AWARD PLANS. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, or Options, and shall be eligible to
participate the 1994 Plan, 1999 Plan, and any other stock option, incentive
compensation, profit participation, bonus or extra compensation plan that is
7
<PAGE>
adopted by the Company and in which the Company's executive officers generally
participate (collectively, "AWARD PLANS").
(c) BENEFIT PLANS. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life, medical, dental, disability, insurance and welfare plan maintained
by the Company including, without limitation, the benefits contemplated by
SECTION 5 of this Agreement, that are maintained from time to time by the
Company for the benefit of Executive, the executives of the Company generally or
for the Company's employees generally, provided that Executive is eligible to
participate in such plan under the eligibility provisions thereof that are
generally applicable to the participants thereof (collectively, "BENEFIT
PLANS").
(d) VACATION. The Executive shall be entitled each calendar year to
vacation time, during which time his compensation shall be paid in full. The
time allotted for such vacation shall be three (3) weeks.
(e) CONTINUATION OF WELFARE BENEFITS. If Executive's employment is
terminated due to Executive's Permanent Disability, Termination Without Cause,
or termination for Good Reason, and if Executive is no longer eligible to
participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
one (1) year after the Termination Date. If Executive's employment is terminated
due to a Change of Control Termination, and if Executive is no longer eligible
to participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
two (2) years after the Termination Date.
(f) OVERALL QUALIFICATION. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. EXPENSES. The Company recognizes that the Executive will have to incur
certain out-of-pocket expenses, including but not limited to travel expenses,
related to his services and the Company's business and the Company agrees to
reimburse the Executive for all reasonable expenses necessarily incurred by him
in the performance of his duties upon presentation of a voucher or documentation
indicating the amount and business purposes of any such expenses, including, but
not limited to, expenses incurred in connection with the operation of
Executive's aircraft in the
8
<PAGE>
course of conducting the Company's business; provided that Executive complies
with the Company's policies and procedures regarding business expenses.
6. VOLUNTARY TERMINATION; TERMINATION WITH CAUSE. Except as otherwise
provided in SECTION 9 of this Agreement, if (i) the Executive shall cease being
an employee of the Company on account of a Voluntary Termination or (ii) there
shall be a Termination With Cause, the Executive shall not be entitled to any
compensation after the Termination Date of such Voluntary Termination or
Termination With Cause (except Base Salary and vacation accrued but unpaid on
the Termination Date of such event). In the event of a Voluntary Termination or
Termination With Cause, the Executive shall continue to be subject to the
noncompetition covenant contained in SECTION 10 hereof for the remainder of the
Term.
7. DEATH OR DISABILITY. In the event of the Executive's death or Permanent
Disability, the Company may elect to terminate Executive's employment with the
Company. Upon termination of Executive by the Company due to Executive's death
or Permanent Disability, the Company shall continue to pay the Executive or his
heirs, devisees, executors, legatees or personal representatives, as
appropriate, the semi-monthly payments of the Base Salary then in effect for one
year from the Termination Date. The Company shall also pay any amounts due
pursuant to the terms of any Benefit Plans and Award Plans in which Executive
was a participant, including, without limitation, the pro rata amount of any
bonus to be paid to Executive for the fiscal year in which Executive was
terminated. In addition, Executive shall be permitted to participate in, and
have all rights and benefits provided by, all Benefit Plans which Executive was
eligible to participate in immediately prior to the Termination Date (to the
extent such participation is possible under the laws then pertaining to such
Benefit Plans), for a minimum of one (1) year following the Termination Date.
8. TERMINATION WITHOUT CAUSE. RESIGNATION FOR GOOD REASON. The Company may
terminate Executive for any reason, or no reason at all, at any time and
Executive may terminate this Agreement at any time for Good Reason, provided
that, upon termination of this Agreement by the Executive for Good Reason or in
the event of a Termination Without Cause, except as otherwise provided in
SECTION 9 of this Agreement, the Company shall provide the compensation and
benefits set forth in this SECTION 8. Executive may terminate this Agreement for
Good Reason notwithstanding any incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) BASE SALARY, BENEFIT AND AWARD PLANS. The Company shall continue
to pay the Executive the semi-monthly payments of the Base Salary then in effect
for one year after the Termination Date. The Company shall also pay on the
Termination Date any amounts due pursuant to the terms of any Benefit Plans and
Award Plans in which Executive was a participant, including, without limitation,
the pro rata amount of any bonus to be paid to Executive for the fiscal year in
which Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the
9
<PAGE>
laws then pertaining to such Benefit Plans), for a minimum of one year following
the Termination Date.
(b) STOCK OPTIONS. All Options granted to Executive shall become
fully vested at the Termination Date. In lieu of Company Shares issuable upon
exercise of any outstanding and unexercised Options granted to Executive,
Executive may, at Executive's option, receive an amount in cash equal to the
product of (i) the Fair Market Value of Company Shares on the Termination Date
over the per share exercise price of each Option held by Executive, times (ii)
the number of Company Shares covered by each such Option. In the event Executive
does not elect to receive a cash payment for any outstanding and unexercised
Options granted to Executive, Executive shall have the right to exercise such
Options in accordance with the terms and conditions provided in the applicable
stock option plans as if Executive had continued his employment with the
Company, notwithstanding Executive's termination.
(c) LEGAL FEES. The Company shall also pay to Executive all legal
fees and expenses incurred by Executive as a result of a Termination Without
Cause or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
9. CHANGE OF CONTROL.
(a) TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL.
Notwithstanding any other provision in this Agreement, in the event of a Change
of Control Termination, the Company shall, on the Termination Date, pay the
Executive, in addition to any Base Salary earned but not paid through the
Termination Date and any amounts due pursuant to Award Plans and Benefit Plans
including, without limitation, the pro rata amount of Executive's anticipated
bonus for the fiscal year in which Executive is terminated, the compensation and
benefits set forth in SECTION 9(B).
(b) COMPENSATION AND BENEFITS.
(i) A Termination Payment shall be paid which is equal to the sum of
two and 99/100 (2.99) times the Executive's annual base salary in effect on the
Termination Date plus two and 99/100 (2.99) times the average annual cash bonus
paid to the Executive for the two (2) immediately preceding fiscal years, under
this Agreement or otherwise (but not including compensation under the Company's
Shareholder Value Plan) ("Termination Payment"). Notwithstanding SECTION 9(A),
the Termination Payment shall be calculated and paid immediately prior to the
closing of the transactions constituting a Change of Control if the Executive
receives notice prior to the Change of Control that his employment will be
terminated on or after the Change of Control.
(ii) Executive shall be permitted to participate in, and have all
rights and benefits provided by, all Benefit Plans which Executive was eligible
to participate in immediately prior to
10
<PAGE>
the Termination Date (to the extent such participation is possible under the
laws then pertaining to such Benefit Plans), for a minimum of two years
following the Termination Date.
(iii) In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
excess of the higher of the Fair Market Value of Company Shares on the
Termination Date, or the highest per share price for Company Shares actually
paid in connection with any Change of Control of the Company, over the per share
exercise price of each Option held by Executive, times (ii) the number of
Company Shares covered by each such Option. In the event Executive does not
elect to receive a cash payment for any outstanding and unexercised Options
granted to Executive, Executive shall have the right to exercise such Options in
accordance with the terms and conditions provided in the applicable stock option
plans.
(iv) The Company shall also pay to Executive all legal fees and
expenses incurred by Executive as a result of a termination described in SECTION
9(A) of this Agreement (including all such fees and expenses, if any, incurred
in contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
(c) CERTAIN TRANSACTIONS. Notwithstanding the provisions of
subparagraphs (i) or (vi) in the definition of change of control, unless
otherwise determined in a specific case by majority vote of the Board, a Change
of Control shall not be deemed to have occurred for purposes of this Agreement
solely because (i) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities or (ii) any
Company-sponsored employee stock ownership plan, or any other employee benefit
plan of the Company, either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item thereon)
under the Exchange Act, disclosing beneficial ownership by it of shares of stock
of the Company, or because the Company reports that a Change of Control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership.
(d) ESCROW ARRANGEMENT. If within thirty (30) days after the
effective date of a Change of Control Executive's employment has not been
terminated, the Company shall deposit with an escrow agent, pursuant to an
escrow agreement between the Company and such escrow agent, a sum of money, or
other property permitted by such escrow agreement, which is substantially
sufficient in the opinion of the Company's management to fund the amounts due to
Executive set forth in SECTION 9(B) of this Agreement. The escrow agreement
shall provide that such agreement may not be terminated until the earlier of (i)
Executive's employment has terminated and all amounts due to Executive as set
forth in this Agreement have been paid to Executive or (ii) three (3) years
after the effective date of the Change of Control.
11
<PAGE>
(e) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will
be imposed on the Executive under Code section 4999 as a result of the
Executive's receipt of the Change of Control Benefits, the Company shall
indemnify the Executive and hold him harmless against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes. To effect this
indemnification, the Company shall pay to the Executive the Additional Amount
which is sufficient to indemnify and hold the Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on the Executive under section 4999 of the Code
with respect to the Change of Control Benefits; (ii) the additional (A) Excise
Tax under section 4999 of the Code, (B) hospital insurance tax under section
3111(b) of the Code and (C) federal, state and local income taxes for which the
Executive is or will be liable on account of the payment of the amount described
in subitem (i); and (iii) the further excise, hospital insurance and income
taxes for which the Executive is or will be liable on account of the payment of
the amount described in subitem (ii) and this subitem (iii) and any other
indemnification payment under this SECTION 9(E). The Additional Amount shall be
calculated and paid to the Executive at the time that the Termination Payment is
paid to the Executive. In calculating the Additional Amount, the highest
marginal rates of federal and applicable state and local income taxes applicable
to individuals and in effect for the year in which the Change of Control occurs
shall be used. Nothing in this paragraph shall give the Executive the right to
receive indemnification from the Company for federal, state or local income
taxes or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Change in Control Benefits, or (b) any additional payment,
benefit or compensation other than the Additional Amount. As specified in items
(ii) and (iii), above, all income, hospital insurance and additional Excise
Taxes resulting from additional compensation in the form of the Excise Tax
payment specified in item (i), above, shall be paid to the Executive.
The provisions of this SECTION 9(E) are illustrated by the following
example:
Assume that the Termination Payment and all other Change of Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an Excise Tax liability under Code
section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
10. NONCOMPETITION. During the Term, the Executive shall not, other than
through the Company or affiliates of the Company, own any interest in any
Multi-Family Residential Property (other than Multi-Family Residential Property
in which the Company or the Partnership has an ownership interest), as partner,
shareholder or otherwise, or engage in the Multi-Family Residential Business,
directly or indirectly, for his own account or for the account of others, either
as an officer, director, shareholder, owner, partner, promoter, employee,
consultant, advisor, agent, manager, or in any other capacity. For a period of
two (2) years after a Change of Control Termination, Executive shall not own any
interest in any Multi-Family Residential Property as partner, shareholder
12
<PAGE>
or otherwise, or directly or indirectly, for his own account or for the account
of others, either as an officer, director, promoter, employee, consultant,
advisor, agent, manager, or in any other capacity, engage in the Multi-Family
Residential Business within 5 miles of any Multi-Family Residential Property
owned by the Company or the Partnership at the time of termination of
employment.
The Executive agrees that damages at law for violation of the restrictive
covenant contained herein would not be an adequate or proper remedy to the
Company, and that should the Executive violate or threaten to violate any of the
provisions of such covenant, the Company, its successors or assigns, shall be
entitled to obtain a temporary or permanent injunction, as appropriate, against
the Executive in any court having jurisdiction over the person and the subject
matter, prohibiting any further violation of any such covenants. The injunctive
relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
11. EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is
an employee of the Company, not an independent contractor. Any payments made to
Executive by the Company pursuant to this Agreement shall be treated for federal
and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
12. NOTICES. All notices or deliveries authorized or required pursuant to
this Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid, addressed to the parties at the following addresses
or to such other addresses as either may designate in writing to the other
party:
To the Company: 6584 Poplar Avenue, Suite 340
Memphis, Tennessee 38128
Attn: Chief Executive Officer
To the Executive: Simon R.C. Wadsworth
274 Grove Park Road
Memphis, Tennessee 38117
13
<PAGE>
13. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided, however, that any amendment or
termination of the covenant of noncompetition in SECTION 10 must be approved by
a majority of the Directors of the Company other than the Executive, if the
Executive is then a director of the Company. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
14. ARBITRATION. Any controversy concerning or claim arising out of or
relating to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party seeking
such arbitration.
(a) THE ARBITRATORS. Any arbitration proceeding shall be conducted
by three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
(b) ARBITRATION PROCEDURES. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
15. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee.
16. ASSIGNMENT. The Executive acknowledges that his services are unique
and personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement, except with respect to certain
rights to receive payments as described in SECTION 7.
17. HEADINGS. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
14
<PAGE>
18. SUCCESSORS; BINDING AGREEMENT. The Company will require any successor
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a beach of
this Agreement and shall entitle Executive to compensation from the Company in
the same amount and on the same terms as Executive would be entitled to
hereunder if Executive terminates his employment for Good Reason. The Company's
rights and obligations under this Agreement shall inure to the benefit of and
shall be binding upon the Company's successors and assigns.
[The remainder of this page is intentionally left blank.]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
MID-AMERICA APARTMENT COMMUNITIES, INC.
By: ___________________________________
Name: _________________________________
Title: ________________________________
EXECUTIVE:
_______________________________________
Simon R. Wadsworth
16
EXHIBIT 10.10
MASTER CREDIT FACILITY AGREEMENT
THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 10th day of
November, 1999 by and among (i) (a) MID-AMERICA APARTMENT COMMUNITIES, INC., a
Tennessee corporation (the "REIT), (b) MID-AMERICA APARTMENTS, L.P., a Tennessee
limited partnership ("OP"); the REIT and OP being collectively referred to as
the "BORROWER"), (c) PADDOCK CLUB BRANDON, A LIMITED PARTNERSHIP, a Georgia
limited partnership ("BRANDON"), (d) PADDOCK CLUB COLUMBIA, A LIMITED
PARTNERSHIP, a Georgia limited partnership ("COLUMBIA"), (e) PADDOCK PARK OCALA
II, A LIMITED PARTNERSHIP, a Georgia limited partnership ("OCALA"), and (f)
PADDOCK CLUB TALLAHASSEE, A LIMITED PARTNERSHIP, a Georgia limited partnership
("TALLAHASSEE"; BRANDON, COLUMBIA, OCALA AND TALLAHASSEE being collectively
referred to as the "GUARANTORS"; Borrower and the Guarantors being collectively
referred to as the "BORROWER PARTIES") and (ii) WMF WASHINGTON MORTGAGE CORP., a
Delaware corporation formerly known as Washington Mortgage Financial Group, Ltd.
("LENDER").
RECITALS
A. The REIT owns directly and indirectly 86% of the voting interests in
OP. The REIT owns, directly or indirectly, 100% of the ownership interest in
each of the Guarantors.
B. The Borrower Parties own one or more Multifamily Residential
Properties (capitalized terms used but not defined shall have the meanings
ascribed to such terms in Article I of this Agreement) as more particularly
described in EXHIBIT A to this Agreement.
C. The Borrower has requested that the Lender establish a $113,231,000
Credit Facility in favor of the Borrower, comprised initially of a $113,231,000
Variable Facility, all or part of which can be converted to a Fixed Facility in
accordance with, and subject to, the terms and conditions of this Agreement, and
a minimum of 25% (but in no event less than $28,307,750) of such Variable
Facility must be converted to a Fixed Facility not later than the date 18 months
after the Initial Closing Date.
D. The Guarantors have agreed to guaranty all of the obligations of the
Borrower under this Agreement and the other Loan Documents.
E. To secure the obligations of the Borrower Parties under this
Agreement and the other Loan Documents issued in connection with the Credit
Facility, the Borrower Parties shall create a Collateral Pool in favor of the
Lender. The Collateral Pool shall be comprised of (i) Security Instruments on
certain Multifamily Residential Properties owned by the Borrower Parties and
(ii) any other Security Documents executed by any Borrower Party pursuant to
this Agreement or any other Loan Documents.
<PAGE>
F. Each of the Security Documents shall be cross-defaulted (i.e., a
default under any Security Document, or under this Agreement, shall constitute a
default under each Security Document, and this Agreement) and
cross-collateralized (i.e., each Security Instrument shall secure all of the
Borrower Parties' obligations under this Agreement and the other Loan Documents
issued in connection with the Credit Facility) and it is the intent of the
parties to this Agreement that the Lender may accelerate any Note without the
necessity to accelerate any other Note and that in the exercise of its rights
and remedies under the Loan Documents, Lender may, except as provided in this
Agreement, exercise and perfect any and all of its rights in and under the Loan
Documents with regard to any Mortgaged Property without the necessity to
exercise and perfect its rights and remedies with respect to any other Mortgaged
Property and that any such exercise shall be without regard to the Allocable
Facility Amount assigned to such Mortgaged Property and that Lender may recover
an amount equal to the full amount outstanding in respect of any of the Notes in
connection with such exercise and any such amount shall be applied as determined
by Lender in its sole and absolute discretion.
G. Subject to the terms, conditions and limitations of this Agreement,
the Lender has agreed to establish the Credit Facility.
NOW, THEREFORE, the Borrower Parties and the Lender, in consideration of
the mutual promises and agreements contained in this Agreement, hereby agree as
follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"ACQUIRING PERSON" means a "person" or "group of persons" within
the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended.
"ADDITIONAL MORTGAGED PROPERTY" means each Multifamily
Residential Property owned by any Borrower Party (either in fee simple
or as tenant under a ground lease meeting all of the requirements of the
DUS Guide) and added to the Collateral Pool after the Initial Closing
Date pursuant to Article VI.
"ADVANCE" means a Variable Advance or a Fixed Facility Advance.
"ADVANCE CONFIRMATION INSTRUMENT" shall have the meaning set
forth in Section 4.02.
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management (other than property
management) and policies of that Person, whether through the ownership
of voting securities, partnership interests or by contract or otherwise.
-2-
<PAGE>
"AGGREGATE DEBT SERVICE COVERAGE RATIO FOR THE TRAILING 12 MONTH
PERIOD" means, for any specified date, the ratio (expressed as a
percentage) of--
(a) the aggregate of the Net Operating Income for the Trailing
12 Month Period for the Mortgaged Properties
TO
(b) the Facility Debt Service on the specified date.
"AGGREGATE LOAN TO VALUE RATIO" means, for any specified date,
the ratio (expressed as a percentage) of--
(a) the Advances Outstanding on the specified date,
TO
(b) the aggregate of the Valuations most recently obtained
prior to the specified date for all of the Mortgaged
Properties.
"AGREEMENT" means this Master Credit Facility Agreement, as it
may be amended, supplemented or otherwise modified from time to time,
including all Recitals and Exhibits to this Agreement, each of which is
hereby incorporated into this Agreement by this reference.
"ALLOCABLE FACILITY AMOUNT" means the portion of the Credit
Facility allocated to a particular Mortgaged Property by Lender in
accordance with this Agreement.
"AMORTIZATION PERIOD" means, with respect to each Fixed Facility
Advance, the period of not less than 25 years and not more than 30
years.
"APPLICABLE LAW" means (a) all applicable provisions of all
constitutions, statutes, rules, regulations and orders of all
governmental bodies, all Governmental Approvals and all orders,
judgments and decrees of all courts and arbitrators, (b) all zoning,
building, environmental and other laws, ordinances, rules, regulations
and restrictions of any Governmental Authority affecting the ownership,
management, use, operation, maintenance or repair of any Mortgaged
Property, including the Americans with Disabilities Act (if applicable),
the Fair Housing Amendment Act of 1988 and Hazardous Materials Laws, (c)
any building permits or any conditions, easements, rights-of-way,
covenants, restrictions of record or any recorded or unrecorded
agreement affecting or concerning any Mortgaged Property including
planned development permits, condominium declarations, and reciprocal
easement and regulatory agreements with any Governmental Authority, (d)
all laws, ordinances, rules and regulations, whether in the form of rent
control, rent stabilization or otherwise, that limit or impose
conditions on the amount of rent that may be collected from the units of
any Mortgaged Property, and (e) requirements of insurance companies or
similar organizations, affecting the operation or use of any Mortgaged
Property or the consummation of the transactions to be effected by this
Agreement or any of the other Loan Documents.
-3-
<PAGE>
"APPRAISAL" means an appraisal of a Multifamily Residential
Property or Multifamily Residential Properties conforming to the
requirements of Chapter 5 of Part III of the DUS Guide, and accepted by
the Lender.
"APPRAISED VALUE" means the value set forth in an Appraisal.
"BORROWER" means, individually and collectively, the REIT and OP.
"BORROWER PARTIES" means, individually and collectively, the
Borrower and the Guarantors.
"BUSINESS DAY" means a day on which Fannie Mae is open for
business.
"CALENDAR QUARTER" means, with respect to any year, any of the
following three month periods: (a) January-February-March; (b)
April-May-June; (c) July-August-September; and (d)
October-November-December.
"CAP RATE" means, for each Mortgaged Property, a capitalization
rate reasonably selected by the Lender for use in determining the
Valuations, as disclosed to the Borrower Parties from time to time.
"CASH MANAGEMENT AGREEMENT" means that certain Cash Management
Security, Pledge and Assignment Agreement between the Borrower Parties
and the Lender in the form attached as EXHIBIT C to this Agreement.
"CHANGE OF CONTROL" means the earliest to occur of: (a) the date
on which the REIT ceases for any reason whatsoever to be the sole
general partner or managing member of any other Borrower Party, or (b)
the date on which the REIT or OP shall cease for any reason to be the
holder of at least 75% of the voting interest of the other Borrower
Parties or to own at least 40% of the equity, profits or other limited
partnership interests in, or Voting Equity Capital (or any other
Securities or ownership interests) of the other Borrower Parties, or (c)
the date on which an Acquiring Person becomes (by acquisition,
consolidation, merger or otherwise), directly or indirectly, the
beneficial owner of more than 25% of the total Voting Equity Capital (or
of any other Securities or ownership interest) of any Borrower Party
then outstanding, or (d) the replacement (other than solely by reason of
retirement at age sixty-five or older, death or disability) of more than
50% (or such lesser percentage as is required for decision-making by the
board of directors or an equivalent governing body) of the members of
the board of directors or an equivalent governing body) of the REIT or
OP over a one-year period from the directors who constituted such board
of directors at the beginning of such period and such replacement shall
not have been approved by a vote of at least a majority of the board of
directors of the REIT or OP then still in office who either were members
of such board of directors at the beginning of such one-year period or
whose election as members of the board of directors was previously so
approved (it being understood and agreed that in the case of any entity
governed by a trustee, board of managers, or other similar governing
body, the foregoing clause (d) shall apply thereto by substituting such
governing body and the members thereof for the board of directors and
members thereof, respectively).
-4-
<PAGE>
"CLOSING DATE" means the Initial Closing Date and each date after
the Initial Closing Date on which the funding or other transaction
requested in a Request is required to take place.
"COLLATERAL" means, the Mortgaged Properties and other collateral
from time to time or at any time encumbered by the Security Instruments,
or any other property securing any of the Borrower Parties' obligations
under the Loan Documents.
"COLLATERAL ADDITION FEE" means, with respect to a Multifamily
Residential Property added to the Collateral Pool in accordance with
Article VI--
(i) 65 basis points, multiplied by
(ii) Allocable Facility Amount of the Multifamily
Residential Property, as determined by the Lender.
"COLLATERAL ADDITION LOAN DOCUMENTS" means the Security
Instrument covering an Additional Mortgaged Property and any other
documents, instruments or certificates required by the Lender in
connection with the addition of the Additional Mortgaged Property to the
Collateral Pool pursuant to Article VI.
"COLLATERAL ADDITION REQUEST" shall have the meaning set forth in
Section 6.02(a).
"COLLATERAL POOL" means the aggregate total of the Collateral.
"COLLATERAL RELEASE PROPERTY" shall have the meaning set forth in
Section 7.02(a).
"COLLATERAL RELEASE REQUEST" shall have the meaning set forth in
Section 7.02(a).
"COLLATERAL SUBSTITUTION FEE" means, with respect to any
substitution effected in accordance with Section 7.04, a fee equal to 65
basis points multiplied by the Allocable Facility Amount of the
Substituted Mortgage Property added to the Collateral Pool.
"COMMITMENT" means, at any time, the sum of the Fixed Facility
Commitment and the Variable Facility Commitment.
"COMPLETE FIXED FACILITY TERMINATION" shall have the meaning set
forth in Section 9.02(a).
"COMPLETE VARIABLE FACILITY TERMINATION" shall have the meaning
set forth in Section 9.02(a).
"COMPLIANCE CERTIFICATE" means a certificate of the Borrower
Parties in the form attached as EXHIBIT D to this Agreement.
"CONVERSION DOCUMENTS" has the meaning specified in Section
3.07(b).
"CONVERSION REQUEST" has the meaning specified in Section
3.07(a).
-5-
<PAGE>
"COUPON RATE" means, with respect to a Variable Advance, the
imputed interest rate determined by the Lender pursuant to Section 2.05
for the Variable Advance and, with respect to a Fixed Facility Advance,
the interest rate determined by the Lender pursuant to Section 3.05 for
the Fixed Facility Advance.
"COVERAGE AND LTV TESTS" mean, for any specified date, each of
the following financial tests:
(a) The Aggregate Debt Service Coverage Ratio for the Trailing
12 Month Period is not less than 140%.
(b) The Aggregate Loan to Value Ratio does not exceed 65%.
"CREDIT FACILITY" means the Fixed Facility and the Variable
Facility.
"CREDIT FACILITY EXPANSION" means an increase in the Commitment
made in accordance with Article VIII.
"CREDIT FACILITY EXPANSION LOAN DOCUMENTS" means amendments to
the Variable Facility Note or the Fixed Facility Note, as the case may
be, increasing the amount of such Note to the amount of the Commitment,
as expanded in accordance with Article VIII and amendments to the
Security Instruments, increasing the amount secured by such Security
Instruments to the amount of the Commitment.
"CREDIT FACILITY EXPANSION REQUEST" shall have the meaning set
forth in Section 8.02(a).
"CREDIT FACILITY TERMINATION REQUEST" shall have the meaning set
forth in Section 10.02(a).
"DEBT SERVICE COVERAGE RATIO" means, for any Mortgaged Property,
for any specified date, the ratio (expressed as a percentage) of --
(a) the aggregate of the Net Operating Income for the preceding
12 month period for the subject Mortgaged Property
TO
(b) the Facility Debt Service on the specified date, assuming,
for the purpose of calculating the Facility Debt Service
for this definition, that Advances Outstanding shall be the
Allocable Facility Amount for the subject Mortgaged
Property.
"DISCOUNT" means, with respect to any Variable Advance, an amount
equal to the excess of --
(i) the face amount of the MBS backed by the Variable Advance,
over
-6-
<PAGE>
(ii) the Price of the MBS backed by the Variable Advance.
"DUS GUIDE" means the Fannie Mae Multifamily Delegated
Underwriting and Servicing (DUS) Guide, as such Guide may be amended
from time to time, including exhibits to the DUS Guide and amendments in
the form of Lender Memos, Guide Updates and Guide Announcements (and, if
such Guide is no longer used by Fannie Mae, the term "DUS Guide" as used
in this Agreement means the Fannie Mae Multifamily Negotiated
Transactions Guide, as such Guide may be amended from time to time,
including amendments in the form of Lender Memos, Guide Updates and
Guide Announcements). All references to specific articles and sections
of, and exhibits to, the DUS Guide shall be deemed references to such
articles, sections and exhibits as they may be amended, modified,
updated, superseded, supplemented or replaced from time to time.
"DUS UNDERWRITING REQUIREMENTS" means the overall underwriting
requirements for Multifamily Residential Properties as set forth in the
DUS Guide.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"EVENT OF DEFAULT" means any event defined to be an "Event of
Default" under Article XVII.
"FACILITY DEBT SERVICE" means, as of any specified date, the sum
of:
(a) the amount of interest and principal amortization, during
the 12 month period immediately succeeding the specified
date, with respect to the Advances Outstanding on the
specified date, except that, for these purposes:
(i) each Variable Advance shall be deemed to require
level monthly payments of principal and interest (at
the Coupon Rate for the Variable Advance) in an
amount necessary to fully amortize the original
principal amount of the Variable Advance over a
30-year period, with such amortization deemed to
commence on the first day of the 12 month period; and
(ii) each Fixed Facility Advance shall require level
monthly payments of principal and interest (at the
Coupon Rate for the Fixed Facility Advance) in an
amount necessary to fully amortize the original
principal amount of the Fixed Facility Advance over a
30-year period, with such amortization to commence on
the first day of the 12 month period; and
(b) the amount of the Standby Fees payable to the Lender
pursuant to Section 16.01 during such 12 month period
(assuming, for these purposes, that the Advances
Outstanding throughout the 12 month period are always equal
to the amount of Advances Outstanding on the specified
date).
-7-
<PAGE>
EXHIBIT E to this Agreement contains an example of the determination of the
Facility Debt Service.
"FACILITY TERMINATION FEE" means, with respect to a reduction in either
the Variable Facility Commitment or the Fixed Facility Commitment pursuant to
Articles IX or X, an amount equal to the product obtained by multiplying--
(1) the reduction in the Variable Facility Commitment and any
undrawn portion of the Fixed Facility Commitment, by
(2) 24 basis points, by
(3) the present value factor calculated using the following
formula:
1 - (1 + R)-n
-----------
r
[r = Yield Rate
n = the number of years (counting any partial year as a full
year) remaining between the Closing Date for the reduction
in the Commitment and the Variable Facility Termination
Date or the Fixed Facility Termination Date, as the case
may be.
The "Yield Rate" means the rate, determined as of the Initial Closing
Date, on the U.S. Treasury security having a maturity closest to the
Variable Facility Termination Date or the Fixed Facility Termination
Date, as the case may be].
"FANNIE MAE" means the federally-chartered and stockholder-owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. ss. 1716 ET SEQ.
"FINANCIAL COVENANTS" means the covenants set forth in Article
XV.
"FIXED FACILITY" means the agreement of the Lender to make Fixed
Facility Advances to the Borrower pursuant to Section 3.01.
"FIXED FACILITY ADVANCE" means a loan made by the Lender to the
Borrower under the Fixed Facility Commitment.
"FIXED FACILITY AVAILABILITY PERIOD" means the period beginning
on the Initial Closing Date and ending on the date five years after the
Initial Closing Date.
"FIXED FACILITY COMMITMENT" means $0, plus such amount as the
Borrower may elect to add to the Fixed Facility Commitment in accordance
with Articles III or VIII.
"FIXED FACILITY FEE" means (i)(a) if at the time of the first
Fixed Facility Advance, the Borrower elects that payments in respect of
the Fixed Facility Advance shall not include payments of principal as
provided in the Fixed Facility Note, 57 basis
-8-
<PAGE>
points for a Fixed Facility Advance drawn from the Fixed Facility
Commitment converted from the Variable Commitment during the period
ending on the date 12 months after the Initial Closing Date, or (b) if
at the time of the first Fixed Facility Advance, the Borrower elects
that payments in respect of the Fixed Facility Advance shall include
payments of principal as provided in the Fixed Facility Note, 52 basis
points for a Fixed Facility Advance drawn from the Fixed Facility
Commitment converted from the Variable Commitment during the period
ending on the date 12 months after the Initial Closing Date, and (ii)
for any Fixed Facility Advance drawn from any portion of the Fixed
Facility Commitment, increased under Article VIII or converted from any
portion of the Variable Commitment after the period ending on the date
12 months after the Initial Closing Date, the number of basis points
determined at the time of such increase by the Lender as the Fixed
Facility Fee for such Fixed Facility Advances, provided that in no event
shall the Fixed Facility Fee for Fixed Facility Advances converted from
the Variable Commitment (expressed as a number of basis points) exceed
the Variable Facility Fee.
"FIXED FACILITY NOTE" means a promissory note, in the form
attached as EXHIBIT B to this Agreement, which will be issued by the
Borrower to the Lender, concurrently with the funding of each Fixed
Facility Advance, to evidence the Borrower's obligation to repay the
Fixed Facility Advance.
"FUTURE ADVANCE" means an Advance made after the Initial Closing
Date.
"FUTURE ADVANCE REQUEST" shall have the meaning set forth in
Section 5.02.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time, consistently applied.
"GENERAL CONDITIONS" shall have the meaning set forth in Article
XI.
"GEOGRAPHICAL DIVERSIFICATION REQUIREMENTS" means, prior to the
occurrence of an increase in the Commitment pursuant to Article VIII, a
requirement that the Collateral Pool consist of at least seven (7)
Mortgaged Properties located in at least five (5) states and, upon the
occurrence of any increase in the Commitment pursuant to Article VIII,
such requirements as to the geographical diversity of the Collateral
Pool as the Lender may determine and notify the Borrower of at the time
of the increase.
"GOVERNMENTAL APPROVAL" means an authorization, permit, consent,
approval, license, registration or exemption from registration or filing
with, or report to, any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any court, board, agency,
commission, office or authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.
"GROSS REVENUES" means, for any specified period, with respect to
any Multifamily Residential Property, all income in respect of such
Multifamily Residential Property as reflected on the certified operating
statement for such specified period as
-9-
<PAGE>
adjusted to exclude unusual income (e.g. temporary or nonrecurring
income), income not allowed under DUS guidelines as shown in Section
403.02 of Part III of the DUS Guide (e.g. interest income, furniture
income, etc.), and the value of any unreflected concessions.
"GUARANTORS" means, individually and collectively, BRANDON,
COLUMBIA, OCALA and TALLAHASSEE.
"GUARANTY" means that certain Guaranty executed by the Guarantors
in the form attached as EXHIBIT FF to this Agreement.
"HAZARDOUS MATERIALS", with respect to any Mortgaged Property,
shall have the meaning given that term in the Security Instrument
encumbering the Mortgaged Property.
"HAZARDOUS MATERIALS LAW", with respect to any Mortgaged
Property, shall have the meaning given that term in the Security
Instrument encumbering the Mortgaged Property.
"HAZARDOUS SUBSTANCE ACTIVITY" means any storage, holding,
existence, release, spill, leaking, pumping, pouring, injection,
escaping, deposit, disposal, dispersal, leaching, migration, use,
treatment, emission, discharge, generation, processing, abatement,
removal, disposition, handling or transportation of any Hazardous
Materials from, under, into or on any Mortgaged Property in violation of
Hazardous Materials Laws, including the discharge of any Hazardous
Materials emanating from any Mortgaged Property in violation of
Hazardous Materials Laws through the air, soil, surface water,
groundwater or property and also including the abandonment or disposal
of any barrels, containers and other receptacles containing any
Hazardous Materials from or on any Mortgaged Property in violation of
Hazardous Materials Laws, in each case whether sudden or nonsudden,
accidental or nonaccidental.
"IMPOSITIONS" means, with respect to any Mortgaged Property, all
(1) water and sewer charges which, if not paid, may result in a lien on
all or any part of the Mortgaged Property, (2) premiums for fire and
other hazard insurance, rent loss insurance and such other insurance as
Lender may require under any Security Instrument, (3) Taxes, and (4)
amounts for other charges and expenses which Lender at any time
reasonably deems necessary to protect the Mortgaged Property, to prevent
the imposition of liens on the Mortgaged Property, or otherwise to
protect Lender's interests.
"INDEBTEDNESS" means, with respect to any Person, as of any
specified date, without duplication, all:
(a) indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services (other than (i)
current trade liabilities incurred in the ordinary course of business
and payable in accordance with customary practices, and (ii) for
construction of improvements to property, if such person has a
non-contingent contract to purchase such property);
-10-
<PAGE>
(b) other indebtedness of such Person which is evidenced by
a note, bond, debenture or similar instrument;
(c) obligations of such Person under any lease of property,
real or personal, the obligations of the lessee in respect of which are
required by GAAP to be capitalized on a balance sheet of the lessee or
to be otherwise disclosed as such in a note to such balance sheet;
(d) obligations of such Person in respect of acceptances
(as defined in Article 3 of the Uniform Commercial Code of the District
of Columbia) issued or created for the account of such Person;
(e) liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise
become liable for the payment of such liabilities; and
(f) as to any Person ("GUARANTEEING PERSON"), any
obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) to induce the creation
of a primary obligation (as defined below) with respect to which the
guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing, or in effect
guaranteeing, any indebtedness, lease, dividend or other obligation
("PRIMARY OBLIGATIONS") of any third person ("PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including any obligation of the
guaranteeing person, whether or not contingent, to (1) purchase any such
primary obligation or any property constituting direct or indirect
security therefor, (2) advance or supply funds for the purchase or
payment of any such primary obligation or to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (3) purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (4) otherwise assure or hold
harmless the owner of any such primary obligation against loss in
respect of the primary obligation, provided, however, that the term
"Contingent Obligation" shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount
of any Contingent Obligation of any guaranteeing person shall be deemed
to be the lesser of (i) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent
Obligation is made and (ii) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Contingent Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of
such Contingent Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by
Owner in good faith.
"INITIAL ADVANCE" means the Variable Advance made on the Initial
Closing Date in the amount of $113,231,000.
"INITIAL ADVANCE REQUEST" shall have the meaning set forth in
Section 5.01.
-11-
<PAGE>
"INITIAL CLOSING DATE" means the date of this Agreement.
"INITIAL MORTGAGED PROPERTIES" means the Multifamily Residential
Properties described on Exhibit A to this Agreement and which represent
the Multifamily Residential Properties which are made part of the
Collateral Pool on the Initial Closing Date.
"INITIAL SECURITY INSTRUMENTS" means the Security Instruments
covering the Initial Mortgaged Properties.
"INITIAL VALUATION" means, when used with reference to specified
Collateral, the Valuation initially performed for the Collateral as of
the date on which the Collateral was added to the Collateral Pool. The
Initial Valuation for each of the Initial Mortgaged Properties is as set
forth in Exhibit A to this Agreement.
"INSURANCE POLICY" means, with respect to a Mortgaged Property,
the insurance coverage and insurance certificates evidencing such
insurance required to be maintained pursuant to the Security Instrument
encumbering the Mortgaged Property.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended. Each reference to the Internal Revenue Code shall be deemed
to include (a) any successor internal revenue law and (b) the applicable
regulations whether final, temporary or proposed.
"LEASE" means any lease, any sublease or subsublease, license,
concession or other agreement (whether written or oral and whether now
or hereafter in effect) pursuant to which any Person is granted a
possessory interest in, or right to use or occupy all or any portion of
any space in any Mortgaged Property, and every modification, amendment
or other agreement relating to such lease, sublease, subsublease or
other agreement entered into in connection with such lease, sublease,
subsublease or other agreement, and every guarantee of the performance
and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
"LENDER" shall have the meaning set forth in the first paragraph
of this Agreement, but shall refer to any replacement Lender if the
initial Lender is replaced pursuant to the terms of Section 19.04.
"LIEN" means any mortgage, deed of trust, deed to secure debt,
security interest or other lien or encumbrance (including both
consensual and non-consensual liens and encumbrances).
"LOAN DOCUMENTS" means this Agreement, the Notes, the Advance
Confirmation Instruments for the Variable Advances, the Guaranty, the
Security Documents, all documents executed by the Borrower Parties
pursuant to the General Conditions set forth in Article XI of this
Agreement and any other documents executed by a Borrower Party from time
to time in connection with this Agreement or the transactions
contemplated by this Agreement.
-12-
<PAGE>
"LOAN TO VALUE RATIO " means, for a Mortgaged Property, for any
specified date, the ratio (expressed as a percentage) of --
(a) the Allocable Facility Amount of the subject Mortgaged
Property on the specified date,
TO
(b) the Valuation most recently obtained prior to the specified
date for the subject Mortgaged Property.
"LOAN YEAR" means the 12-month period from the first day of the
first calendar month after the Initial Closing Date to and including the
last day before the first anniversary of the Initial Closing Date, and
each 12-month period thereafter.
"MATERIAL ADVERSE EFFECT" means, with respect to any
circumstance, act, condition or event of whatever nature (including any
adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), whether singly or in conjunction with any
other event or events, act or acts, condition or conditions, or
circumstance or circumstances, whether or not related, a material
adverse change in or a materially adverse effect upon any of (a) the
business, operations, property or condition (financial or otherwise) of
any Borrower Party, (b) the present or future ability of any Borrower
Party to perform the Obligations for which it is liable, (c) the
validity, priority, perfection or enforceability of this Agreement or
any other Loan Document or the rights or remedies of the Lender under
any Loan Document, or (d) the value of, or the Lender's ability to have
recourse against, any Mortgaged Property.
"MBS" means a mortgage-backed security which is "backed" by an
interest in the Notes and the Collateral Pool securing the Notes, which
interest permits the holder of the MBS to participate in the Notes and
the Collateral Pool to the extent of such Advance.
"MBS IMPUTED INTEREST RATE" shall have the meaning set forth in
Section 2.05(a).
"MBS ISSUE DATE" means the date on which a Fannie Mae MBS is
issued by Fannie Mae.
"MBS DELIVERY DATE" means the date on which a Fannie Mae MBS is
delivered by Fannie Mae.
"MBS PASS-THROUGH RATE" for a Fixed Facility Advance means the
interest rate as determined by the Lender (rounded to three places)
payable in respect of the Fannie Mae MBS issued pursuant to the MBS
Commitment backed by the Fixed Facility Advance as determined in
accordance with Section 4.01.
"MORTGAGED PROPERTIES" means, collectively, the Additional
Mortgaged Properties, the Substituted Mortgaged Properties and the
Initial Mortgaged Properties,
-13-
<PAGE>
but excluding each Collateral Release Property from and after the date
of the release of the Collateral Release Property from the Collateral
Pool.
"MULTIFAMILY RESIDENTIAL PROPERTY" means a residential property,
located in the United States, containing five or more dwelling units in
which not more than twenty percent (20%) of the net rentable area is or
will be rented to non-residential tenants, and conforming to the
requirements of Chapter 2 of Part III of the DUS Guide (Property
Requirements).
"NET OPERATING INCOME" means, for any specified period, with
respect to any Multifamily Residential Property, the aggregate net
income during such period equal to Gross Revenues during such period
less the aggregate Operating Expenses during such period. If a Mortgaged
Property is not owned by a Borrower Party or an Affiliate of a Borrower
Party for the entire specified period, the Net Operating Income for the
Mortgaged Property for the time within the specified period during which
the Mortgaged Property was owned by a Borrower Party or an Affiliate of
a Borrower Party shall be the Mortgaged Property's pro forma net
operating income determined by the Lender in accordance with the
underwriting procedures set forth in Chapter 4 of Part III of the DUS
Guide (Determination of Loan Amount).
"NOTE" means any Fixed Facility Note or the Variable Facility
Note.
"OBLIGATIONS" means the aggregate of the obligations of each of
the Borrower Parties under this Agreement and the other Loan Documents.
"OPERATING EXPENSES" means, for any period, with respect to any
Multifamily Residential Property, all expenses in respect of the
Multifamily Residential Property, as determined by the Lender based on
the certified operating statement for such specified period as adjusted
to provide for the following: (i) all appropriate types of expenses,
including a management fee and deposits to the Replacement Reserves
(whether funded or not), are included in the total operating expense
figure; (ii) upward adjustments to individual line item expenses to
reflect market norms or actual costs and correct any unusually low
expense items, which could not be replicated by a different owner or
manager (e.g., a market rate management fee will be included regardless
of whether or not a management fee is charged, market rate payroll will
be included regardless of whether shared payroll provides for economies,
etc.); and (iii) downward adjustments to individual line item expenses
to reflect unique or aberrant costs (e.g., non-recurring capital costs,
non-operating borrower expenses, etc.).
"ORGANIZATIONAL CERTIFICATE" means a certificate of the Borrower
Parties in the form attached as EXHIBIT F to this Agreement.
"ORGANIZATIONAL DOCUMENTS" means all certificates, instruments
and other documents pursuant to which an organization is organized or
operates, including but not limited to, (i) with respect to a
corporation, its articles of incorporation and bylaws, (ii) with respect
to a limited partnership, its limited partnership certificate and
partnership agreement, (iii) with respect to a general partnership or
joint venture, its partnership or
-14-
<PAGE>
joint venture agreement and (iv) with respect to a limited liability
company, its articles of organization and operating agreement.
"OUTSTANDING" means, when used in connection with promissory
notes, other debt instruments or Advances, for a specified date,
promissory notes or other debt instruments which have been issued, or
Advances which have been made, but have not been repaid in full as of
the specified date.
"OWNERSHIP INTERESTS" means, with respect to any entity, any
ownership interests in the entity and any economic rights (such as a
right to distributions, net cash flow or net income) to which the owner
of such ownership interests is entitled.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITS" means all permits, or similar licenses or approvals
issued and/or required by an applicable Governmental Authority or any
Applicable Law in connection with the ownership, use, occupancy,
leasing, management, operation, repair, maintenance or rehabilitation of
any Mortgaged Property or any Borrower Party's business.
"PERMITTED LIENS" means, with respect to a Mortgaged Property,
(i) the exceptions to title to the Mortgaged Property set forth in the
Title Insurance Policy for the Mortgaged Property which are approved by
the Lender, (ii) the Security Instrument encumbering the Mortgaged
Property, and (iii) any other Liens approved by the Lender.
"PERSON" means an individual, an estate, a trust, a corporation,
a partnership, a limited liability company or any other organization or
entity (whether governmental or private).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the
giving of notice or the passage of time, or both, would constitute an
Event of Default.
"PRICE" means, with respect to an Advance, the proceeds of the
sale of the MBS backed by the Advance.
"PROPERTY" means any estate or interest in any kind of property
or asset, whether real, personal or mixed, and whether tangible or
intangible.
"RATE CONFIRMATION FORM" shall have the meaning set forth in
Section 4.01(c).
"RATE SETTING DATE" shall have the meaning set forth in Section
4.01(b).
"RATE SETTING FORM" shall have the meaning set forth in Section
4.01(b).
"REIT" means Mid-America Apartment Communities, Inc., a Tennessee
corporation.
-15-
<PAGE>
"RELEASE FEE" means, with respect to each Mortgaged Property
released from the Collateral Pool pursuant to Article VII, a fee equal
to $15,000.
"RELEASE PRICE" shall have the meaning set forth in Section
7.02(c).
"RENT ROLL" means, with respect to any Multifamily Residential
Property, a rent roll prepared and certified by the owner of the
Multifamily Residential Property, on Fannie Mae Form 4243, as set forth
in Exhibit III-3 of the DUS Guide, or on another form approved by the
Lender and containing substantially the same information as Form 4243
requires.
"REPLACEMENT RESERVE AGREEMENT" means a Replacement Reserve and
Security Agreement, reasonably required by the Lender, and completed in
accordance with the requirements of the DUS Guide.
"REQUEST" means a Collateral Addition Request, a Collateral
Substitution Request, a Collateral Release Request, a Conversion
Request, a Credit Facility Expansion Request, a Credit Facility
Termination Request, a Future Advance Request, an Initial Advance
Request or a Variable Facility Termination Request.
"REVOLVING CREDIT ENDORSEMENT" means an endorsement to a Title
Insurance Policy which contains substantially the same coverages, and is
subject to substantially the same or fewer exceptions (or such other
exceptions as the Lender may approve), as the form attached as EXHIBIT H
to this Agreement.
"SECURITY" means a "security" as set forth in Section 2(1) of the
Securities Act of 1933, as amended.
"SECURITY DOCUMENTS" means the Security Instruments, the Cash
Management Agreement, the Replacement Reserve Agreements and any other
documents executed by a Borrower Party from time to time to secure any
of the Borrower Parties' obligations under the Loan Documents.
"SECURITY INSTRUMENT" means, for each Mortgaged Property, a
separate Multifamily Mortgage, Deed of Trust or Deed to Secure Debt,
Assignment of Leases and Rents and Security Agreement given by a
Borrower Party to or for the benefit of the Lender to secure the
obligations of the Borrower Parties under the Loan Documents. With
respect to each Mortgaged Property owned by a Borrower Party, the
Security Instrument shall be substantially in the form published by
Fannie Mae for use in the state in which the Mortgaged Property is
located. The amount secured by the Security Instrument shall be equal to
the Commitment in effect from time to time.
"SENIOR MANAGEMENT" means (i) the Chief Executive Officer,
Chairman of the Board, President, Chief Financial Officer and Chief
Operating Officer of the REIT or OP and (ii) any other individuals with
responsibility for any of the functions typically performed in a
corporation by the officers described in clause (i).
-16-
<PAGE>
"SINGLE-PURPOSE" means, with respect to a Person which is any
form of partnership or corporation or limited liability company, that
such Person at all times since its formation:
(i) has been a duly formed and existing partnership,
corporation or limited liability company, as the case may
be;
(ii) has been duly qualified in each jurisdiction in which
such qualification was at such time necessary for the
conduct of its business;
(iii) has complied with the provisions of its organizational
documents and the laws of its jurisdiction of formation
in all respects;
(iv) has observed all customary formalities regarding its
partnership or corporate existence, as the case may be;
(v) has accurately maintained its financial statements,
accounting records and other partnership or corporate
documents separate from those of any other Person;
(vi) has not commingled its assets or funds with those of any
other Person;
(vii) has accurately maintained its own bank accounts and books
and accounts separate from those of any other Person;
(viii) has paid its own liabilities from its own separate
assets;
(ix) has identified itself in all dealings with creditors
(other than trade creditors in the ordinary course of
business and creditors for the construction of
improvements to property on which such Person has a
non-contingent contract to purchase such property) under
its own name and as a separate and distinct entity;
(x) has not identified itself as being a division or a part
of any other Person;
(xi) has not identified any other Person as being a division
or a part of such Person;
(xii) has been adequately capitalized in light of its
contemplated business operations;
(xiii) has not assumed, guaranteed or become obligated for the
liabilities of any other Person (except in connection
with the Credit Facility or the endorsement of negotiable
instruments in the ordinary course of business) or held
out its credit as being available to satisfy the
obligations of any other Person;
(xiv) has not acquired obligations or securities of any other
Person;
-17-
<PAGE>
(xv) in relation to a Borrower Party, except for loans made in
the ordinary course of business to Affiliates, has not
made loans or advances to any other Person;
(xvi) has not entered into and was not a party to any
transaction with any Affiliate of such Person, except in
the ordinary course of business and on terms which are no
less favorable to such Person than would be obtained in a
comparable arm's-length transaction with an unrelated
third party;
(xvii) has conducted its own business in its own name;
(xviii) has paid the salaries of its own employees, if any, and
maintained a sufficient number of employees in light of
its contemplated business operations;
(xix) has allocated fairly and reasonably any overhead for
shared office space;
(xx) has not pledged its assets for the benefit of any other
entity or made any loans or advances to any person or
entity;
(xxi) has not engaged in a non-exempt prohibited transaction
described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code;
(xxii) has not acquired obligations or securities of its
partners or Affiliates; and
(xxiii) has corrected any known misunderstanding regarding its
separate identity.
"SMSA" means a "standard metropolitan statistical area," as
defined from time to time by the United States Office of Management and
Budget.
"STANDBY FEE" means, for any month, an amount equal to the
product obtained by multiplying: (i) 1/12, by (ii) 24 basis points, by
(iii) the Unused Capacity for such month.
"SUBSIDIARY" means, when used with reference to a specified
Person, (i) any Person that, directly or indirectly, through one or more
intermediaries, is controlled by the specified Person, (ii) any Person
of which the specified Person is, directly or indirectly, the owner of
more than 50% of any voting class of Ownership Interests or (iii) any
Person (A) which is a partnership and (B) of which the specified Person
is a general partner and owns more than 50% of the partnership
interests.
"SUBSTITUTED MORTGAGED PROPERTY" means each Multifamily
Residential Property owned by any Borrower Party (either in fee simple
or as tenant under a ground lease meeting all of the requirements of the
DUS Guide) and added to the Collateral Pool after the Initial Closing
Date in connection with substitution of Collateral as permitted by
Section 7.04 of this Agreement.
-18-
<PAGE>
"SURVEYS" means the as-built surveys of the Mortgaged Properties
prepared in accordance with the requirements of Section 113 of the DUS
Guide, or otherwise approved by the Lender.
"TAXES" means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all
assessments for schools, public betterments and general or local
improvements, which are levied, assessed or imposed by any public
authority or quasi-public authority, and which, if not paid, will become
a lien, on the Mortgaged Properties.
"TERM OF THIS AGREEMENT" shall be determined as provided in
Section 23.10 to this Agreement.
"TERMINATION DATE" means, at any time during which Fixed Facility
Advances are Outstanding, the latest maturity date for any Fixed
Facility Advance Outstanding, and, at any time during which Fixed
Facility Advances are not Outstanding, the Variable Facility Termination
Date. "TIE-IN ENDORSEMENT" means an endorsement to a Title Insurance
Policy which contains substantially the same coverages, and is subject
to substantially the same or fewer exceptions (or such other exceptions
as the Lender may approve), as the form attached as EXHIBIT J to this
Agreement.
"TITLE COMPANY" means Fidelity National Title Insurance Company
of New York.
"TITLE INSURANCE POLICIES" means the mortgagee's policies of
title insurance issued by the Title Company from time to time relating
to each of the Security Instruments, conforming to the requirements of
Section 111 of the DUS Guide, together with such endorsements,
coinsurance, reinsurance and direct access agreements with respect to
such policies as the Lender may, from time to time, consider necessary
or appropriate, whether or not required by the DUS Guide, including
Revolving Credit Endorsements, if available, and Tie-In Endorsements, if
available, and with a limit of liability under the policy (subject to
the limitations contained in Sections 6(a)(i) and 6(a)(iii) of the
Stipulations and Conditions of the policy) equal to the Commitment.
"TRAILING 12 MONTH PERIOD" means, for any specified date, the 12
month period ending with the last day of the most recent Calendar
Quarter for which financial statements have been delivered by the
Borrower Party to the Lender pursuant to Sections 13.04(c) and (d).
"TRANSFER" means (i) a sale, assignment, lease, pledge, transfer
or other disposition (whether voluntary or by operation of law) of, or
the granting or creating of a lien, encumbrance or security interest in,
any estate, rights, title or interest in a Mortgaged Property, or any
portion thereof, or (ii) a sale, assignment, pledge, transfer or other
disposition of any interest in a Borrower Party other than to another
Borrower Party, or (iii) the issuance or other creation of new ownership
interests in a Borrower Party other than (a) sales of the stock of the
REIT on the New York Stock Exchange or
-19-
<PAGE>
(b) private placements of ownership interests in a Borrower Party that
do not result in a Change of Control or any other partnership,
corporation, real estate investment trust or other entity that has a
direct or indirect ownership interest in a Borrower Party, or (iv) a
merger or consolidation of a Borrower Party into another entity or of
another entity into a Borrower Party other than into another Borrower
Party, or (v) the reconstitution of a Borrower Party from one type of
entity to another type of entity, or (vi) the amendment, modification or
any other change in the governing instrument or instruments of such
Person which has the effect of changing the relative powers, rights,
privileges, voting rights or economic interests of the ownership
interests in such Person. "Transfer" does not include (i) a conveyance
of the Mortgaged Property at a judicial or non-judicial foreclosure sale
under any Security Instrument or (ii) the Mortgaged Property becoming
part of a bankruptcy estate by operation of law under the United States
Bankruptcy Code.
"UNUSED CAPACITY" means, for any month, the sum of the daily
average during such month of the undrawn amount of the Variable Facility
Commitment available under Article II of this Agreement for the making
of Variable Advances, without regard to any unclosed Requests or to the
fact that a Request must satisfy conditions precedent.
"VALUATION" means, for any specified date, with respect to a
Multifamily Residential Property, (a) if an Appraisal of the Multifamily
Residential Property was more recently obtained than a Cap Rate for the
Multifamily Residential Property, the Appraised Value of such
Multifamily Residential Property, or (b) if a Cap Rate for the
Multifamily Residential Property was more recently obtained than an
Appraisal of the Multifamily Residential Property, the value derived by
dividing--
(i) the Net Operating Income of such Multifamily Residential
Property for the Trailing 12 Month Period, by
(ii) the most recent Cap Rate determined by the Lender.
Notwithstanding the foregoing, any Valuation for a Multifamily
Residential Property calculated for a date occurring before the first
anniversary of the date on which the Multifamily Residential Property
becomes a part of the Collateral Pool shall equal the Appraised Value of
such Multifamily Residential Property, unless the Lender determines that
changed market or property conditions warrant that the value be
determined as set forth in the preceding sentence.
"VARIABLE ADVANCE" means a loan made by the Lender to the
Borrower Parties under the Variable Facility Commitment.
"VARIABLE FACILITY" means the agreement of the Lender to make
Advances to the Borrower Parties pursuant to Section 2.01.
"VARIABLE FACILITY AVAILABILITY PERIOD" means the period
beginning on the Initial Closing Date and ending on the 90th day before
the Variable Facility Termination Date.
-20-
<PAGE>
"VARIABLE FACILITY COMMITMENT" means an aggregate amount of
$113,231,000, which shall be evidenced by the Variable Facility Note in
the form attached hereto as EXHIBIT I, plus such amount as the Borrower
may elect to add to the Variable Facility Commitment in accordance with
Article VIII, and less such amount as the Borrower may elect to convert
from the Variable Facility Commitment to the Fixed Facility Commitment
in accordance with Article III and less such amount by which the
Borrower may elect to reduce the Variable Facility Commitment in
accordance with Article IX.
"VARIABLE FACILITY FEE" means (i) 67 basis points per annum
(0.67%) for a Variable Advance drawn from the Variable Commitment
initially available under this Agreement, (ii) if the Variable Facility
Termination Date is extended pursuant to Section 2.07, for any Variable
Advance drawn from any portion of the Variable Commitment after the
original Variable Facility Availability Period, the number of basis
points per annum determined by the Lender as the Variable Facility Fee
for such period, which fee shall be set by Lender not less than 30 days
prior to the commencement of such period, and (iii) for any Variable
Advance drawn from any portion of the Variable Commitment increased
under Article VIII, the number of basis points per annum determined at
the time of such increase by the Lender as the Variable Facility Fee for
such Variable Advances.
"VARIABLE FACILITY NOTE" means, the promissory note, in the form
attached as EXHIBIT I to this Agreement, which has been issued by the
Borrower Parties to the Lender to evidence the Borrower Parties'
obligation to repay Variable Advances.
"VARIABLE FACILITY TERMINATION DATE" means the date five years
after the Initial Closing Date unless extended pursuant to Section 2.07.
"VOTING EQUITY CAPITAL" means Securities or partnership interests
of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the board of
directors (or Persons performing similar functions).
ARTICLE II
THE VARIABLE FACILITY COMMITMENT
SECTION 2.01 VARIABLE FACILITY COMMITMENT. Subject to the terms, conditions and
limitations of this Agreement, the Lender agrees to make Variable Advances to
the Borrower Parties from time to time during the applicable Variable Facility
Availability Period. The aggregate unpaid principal balance of the Variable
Advances Outstanding at any time shall not exceed the Variable Facility
Commitment. Subject to the terms, conditions and limitations of this Agreement,
the Borrower may re-borrow any amounts under the Variable Facility which it has
previously borrowed and repaid under the Variable Facility.
SECTION 2.02 REQUESTS FOR VARIABLE ADVANCES. The Borrower shall request a
Variable Advance by giving the Lender an Initial Advance Request in accordance
with Section 5.01 or a Future Advance Request in accordance with Section 5.02,
as applicable.
-21-
<PAGE>
SECTION 2.03 MATURITY DATE OF VARIABLE ADVANCES. Regardless of the date on which
a Variable Advance is made, the maturity date of each Variable Advance shall be
a date selected by the Borrower in its Request for the Variable Advance, which
date shall be the last day of a calendar month occurring:
(a) no earlier than the date which completes three full months
after the Closing Date for the Variable Advance; and
(b) no later than the date which completes nine full months
after the Closing Date for the Variable Advance.
For these purposes, a year shall be deemed to consist of 12 30-day months. For
example, the date which completes three full months after September 15 shall be
December 15; and the date which completes three full months after November 30
shall be February 28.
SECTION 2.04 INTEREST ON VARIABLE FACILITY ADVANCES.
(a) DISCOUNT. Each Variable Advance shall be a discount loan. The
original stated principal amount of a Variable Advance shall be the sum of the
Price of the Variable Advance and the Discount of the Variable Advance. The
Price and Discount of each Variable Advance shall be determined in accordance
with the procedures set out in Section 4.01. The proceeds of the Variable
Advance made available by the Lender to the Borrower will equal the Price of the
Variable Advance. The Borrower shall pay to the Lender, in advance of the Lender
making a Variable Advance requested by the Borrower, the entire Discount for the
Variable Advance.
(b) PARTIAL MONTH INTEREST. Notwithstanding anything to the
contrary in this Section, if a Variable Advance is not made on the first day of
a calendar month, and the MBS Issue Date for the MBS backed by the Variable
Advance is the first day of the month following the month in which the Variable
Advance is made, the Borrower shall pay interest on the original stated
principal amount of the Variable Advance for the partial month period commencing
on the Closing Date for the Variable Advance and ending on the last day of the
calendar month in which the Closing Date occurs, at a rate per annum equal to
the greater of (i) the Coupon Rate for the Variable Advance as determined in
accordance with Section 2.05(b) and (ii) a rate determined by the Lender, based
on the Lender's cost of funds and approved in advance, in writing, by the
Borrower, pursuant to the procedures mutually agreed upon by the Borrower and
the Lender.
(c) VARIABLE FACILITY FEE. In addition to paying the Discount and
the partial month interest, if any, the Borrower shall pay monthly installments
of the Variable Facility Fee to the Lender on account of each Variable Advance
over the whole number of calendar months the MBS backed by the Variable Advance
is to run from the MBS Issue Date to the maturity date of the MBS. The Variable
Facility Fee shall be payable in advance, in accordance with the terms of the
Variable Facility Note. The first installment shall be payable on or prior to
the Closing Date for the Variable Advance and shall apply to the first full
calendar month of
-22-
<PAGE>
the MBS backed by the Variable Advance. Subsequent installments shall be payable
on the first day of each calendar month, commencing on the first day of the
second full calendar month of such MBS, until the maturity of such MBS. Each
installment of the Variable Facility Fee shall be in an amount equal to the
product of multiplying (i) the Variable Facility Fee, by (ii) the amount of the
Variable Advance, by (iii) 1/12.
SECTION 2.05 COUPON RATES FOR VARIABLE ADVANCES. The Coupon Rate for a Variable
Advance shall be a rate, per annum, as follows:
(a) The Coupon Rate for a Variable Advance shall equal the sum of
(i) an interest rate as determined by the Lender pursuant to Section 4.01 of
this Agreement (rounded to three places) payable for the Fannie Mae MBS pursuant
to the MBS Commitment backed by the Variable Advance ("MBS Imputed Interest
Rate") and (ii) the Variable Facility Fee.
(b) Notwithstanding anything to the contrary in this Section, if
a Variable Advance is not made on the first day of a calendar month, and the MBS
Issue Date for the MBS backed by the Variable Advance is the first day of the
month following the month in which the Variable Advance is made, the Coupon Rate
for such Variable Advance for such period shall be the greater of (i) the rate
for the Variable Advance determined in accordance with subsection (a) of this
Section and (ii) a rate determined by the Lender, based on the Lender's cost of
funds, and approved in advance, in writing, by the Borrower, pursuant to
procedures mutually agreed upon by the Borrower and the Lender.
SECTION 2.06 VARIABLE FACILITY NOTE. The obligation of the Borrower to repay the
Variable Advances will be evidenced by the Variable Facility Note. The Variable
Facility Note shall be payable to the order of the Lender and shall be made in
the amount of the Variable Facility Commitment.
SECTION 2.07 EXTENSION OF VARIABLE FACILITY TERMINATION DATE. The Borrower shall
have the right to extend the Variable Facility Termination Date for one (1) five
(5) year period upon satisfaction of each of the following conditions:
(a) The Borrower provides written notice to the Lender not less
than thirty (30) nor more than ninety (90) days prior to the then effective
Variable Facility Termination Date requesting that the Variable Facility
Termination Date be extended.
(b) No Event of Default or Potential Event of Default exists on
either the date the notice required by paragraph (a) of this Section is given or
on the then effective Variable Facility Termination Date.
(c) All of the representations and warranties of the Borrower
Parties set forth in Article XII of this Agreement and the Other Loan Documents
are true and correct in all material respects on the date the notice required by
paragraph (a) of this Section is given and on the then effective Variable
Facility Termination Date.
(d) The Borrower Parties are in compliance with all of the
covenants set forth in Article XIII, Article XIV and Article XV on the date the
notice required by paragraph (a) of this Section is given and on the then
effective Variable Facility Termination Date.
-23-
<PAGE>
Upon receipt of the notice required in paragraph (a) of this Section and upon
compliance with the other conditions set forth above, the Variable Facility
Termination Date shall be extended for five (5) years on the terms and
conditions set forth in this Agreement and the Other Loan Documents, provided
that the maturity and pricing applicable to the Variable Facility during the
period after the then effective Variable Facility Termination Date shall be
acceptable to Lender in its discretion.
ARTICLE III
THE FIXED FACILITY COMMITMENT
SECTION 3.01 FIXED FACILITY COMMITMENT. Subject to the terms, conditions and
limitations set forth in this Article, the Lender agrees to make Fixed Facility
Advances to the Borrower from time to time during the Fixed Facility
Availability Period. The Borrower shall make Requests (and to the extent such
Requests are approved, borrow), for Fixed Facility Advances in an aggregate
amount of not less than $28,307,750 and having a minimum maturity of 5 years
from the date of such Advance not later than the date eighteen (18) months after
the Initial Closing Date. The aggregate original principal of the Fixed Facility
Advances shall not exceed the Fixed Facility Commitment. The borrowing of a
Fixed Facility Advance shall permanently reduce the Fixed Facility Commitment by
the original principal amount of the Fixed Facility Advance. At all times after
the date 18 months after the Initial Closing Date, the Fixed Facility Commitment
shall be at least 25% of the aggregate of the Fixed Facility Commitment and the
Variable Facility Commitment, but in no event less than $28,307,750. The
Borrower may not re-borrow any part of the Fixed Facility Advance which it has
previously borrowed and repaid.
SECTION 3.02 REQUESTS FOR FIXED FACILITY ADVANCES. The Borrower shall request a
Fixed Facility Advance by giving the Lender an Initial Advance Request in
accordance with Section 5.01 or a Future Advance Request in accordance with
Section 5.02, as applicable.
SECTION 3.03 MATURITY DATE OF FIXED FACILITY ADVANCES; AMORTIZATION PERIOD. The
maturity date of each Fixed Facility Advance shall be the maturity date selected
by the Borrower, provided that such Maturity Date shall not be earlier than the
date five (5) years after the date of such Advance and shall not be later than
the 10th anniversary of the Initial Closing Date. The principal of each Fixed
Facility Advance shall, at the election of the Borrower, which election shall be
made at the time of the first Conversion Request or Credit Facility Expansion
Request relating to a Fixed Facility Commitment (which election shall apply to
all Fixed Facility Advances) be amortized on a 30-year schedule during the
Amortization Period or shall require payments of interest only.
SECTION 3.04 INTEREST ON FIXED FACILITY ADVANCES.
(a) ADVANCES. Each Fixed Facility Advance shall bear interest at
a rate, per annum, equal to the sum of (i) the MBS Pass-Through Rate determined
for such Fixed Facility Advance and (ii) the Fixed Facility Fee.
-24-
<PAGE>
(b) PARTIAL MONTH INTEREST. Notwithstanding anything to the
contrary in this Section, if a Fixed Facility Advance is not made on the first
day of a calendar month, and the MBS Issue Date for the MBS backed by the Fixed
Facility Advance is the first day of the month following the month in which the
Fixed Facility Advance is made, the Borrower shall pay interest on the original
stated principal amount of the Fixed Facility Advance for the partial month
period commencing on the Closing Date for the Fixed Facility Advance and ending
on the last day of the calendar month in which the Closing Date occurs at a
rate, per annum, equal to the greater of (i) the interest rate for the Fixed
Facility Advance described in the first sentence of this Section and (ii) a rate
determined by the Lender, based on the Lender's cost of funds, and approved in
advance, in writing, by the Borrower, pursuant to procedures mutually agreed
upon by the Borrower and the Lender.
SECTION 3.05 COUPON RATES FOR FIXED FACILITY ADVANCES. The Coupon Rate for a
Fixed Facility Advance shall be the rate of interest applicable to such Fixed
Facility Advance pursuant to Section 3.04.
SECTION 3.06 FIXED FACILITY NOTE. The obligation of the Borrower to repay a
Fixed Facility Advance will be evidenced by a Fixed Facility Note. The Fixed
Facility Notes shall be payable to the order of the Lender and shall be made in
the original principal amount of each Fixed Facility Advance.
SECTION 3.07 CONVERSION OF COMMITMENT FROM VARIABLE FACILITY COMMITMENT TO FIXED
FACILITY COMMITMENT. The Borrower shall have the right, from time to time during
the Fixed Facility Availability Period, to convert all or a portion of a
Variable Facility Commitment to the Fixed Facility Commitment, in which event
the Variable Facility Commitment shall be reduced by, and the Fixed Facility
Commitment shall be increased by, the amount of the conversion.
(a) REQUEST. In order to convert all or a portion of the Variable
Facility Commitment to the Fixed Facility Commitment, the Borrower shall deliver
a written request for a conversion ("CONVERSION REQUEST") to the Lender, in the
form attached as EXHIBIT K to this Agreement. Each Conversion Request shall be
accompanied by a designation of the amount of the conversion and a designation
of any Variable Advances Outstanding which will be prepaid on or before the
Closing Date for the conversion as required by Section 3.08(c).
(b) CLOSING. If none of the limitations contained in Section 3.08 is
violated, and all conditions contained in Section 3.09 are satisfied, the Lender
shall permit the requested conversion, at a closing to be held at offices
designated by the Lender on a Closing Date selected by the Lender, and occurring
within 30 Business Days after the Lender's receipt of the Conversion Request (or
on such other date to which the Borrower and the Lender may agree), by executing
and delivering, all at the sole cost and expense of the Borrower, an amendment
to this Agreement, in the form attached as EXHIBIT L to this Agreement, together
with an amendment to each Security Document and other applicable Loan Documents,
in form and substance satisfactory to the Lender, reflecting the change in the
Fixed Facility Commitment and the Variable Facility Commitment. The documents
and instruments referred to in the preceding sentence are referred to in this
Article as the "CONVERSION DOCUMENTS."
-25-
<PAGE>
SECTION 3.08 LIMITATIONS ON RIGHT TO CONVERT. The right of the Borrower to
convert all or a portion of the Variable Facility Commitment to the Fixed
Facility Commitment is subject to the following limitations:
(a) CLOSING DATE. The Closing Date shall occur during the Fixed Facility
Availability Period.
(b) MINIMUM REQUEST. Each Request for a conversion shall be in the
minimum amount of $10,000,000.
(c) OBLIGATION TO PREPAY VARIABLE ADVANCES. If, after the conversion,
the aggregate unpaid principal balance of all Variable Advances Outstanding will
exceed the Variable Facility Commitment, the Borrower shall be obligated to
prepay, as a condition precedent to the conversion, an amount of Variable
Advances Outstanding which is at least equal to the amount of the excess.
SECTION 3.09 CONDITIONS PRECEDENT TO CONVERSION. The conversion of all or a
portion of the Variable Facility Commitment to the Fixed Facility Commitment is
subject to the satisfaction of the following conditions precedent on or before
the Closing Date:
(a) After giving effect to the requested conversion, the Coverage
and LTV Tests will be satisfied;
(b) Prepayment by the Borrower in full of any Variable Advances
Outstanding which the Borrower has designated for payment, together with any
associated prepayment premiums and other amounts due with respect to the
prepayment of such Variable Advances;
(c) The receipt by the Lender of an endorsement to each Title
Insurance Policy, amending the effective date of the Title Insurance Policy to
the Closing Date and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions approved by
the Lender;
(d) Receipt by the Lender of one or more counterparts of each
Conversion Document, dated as of the Closing Date, signed by each of the parties
(other than the Lender) who is a party to such Conversion Document; and
(e) The satisfaction of all applicable General Conditions set
forth in Article XI.
SECTION 3.10 DEFEASANCE. At such time as the Borrower elects to convert all or a
portion of the Variable Facility Commitment to a Fixed Facility Commitment
pursuant to Section 3.07 of this Agreement, or elects that any expansion of the
Commitment shall be a Fixed Facility Commitment, the Borrower shall select
defeasance or yield maintenance with respect to prepayments of Fixed Facility
Advances on the Conversion Request or Credit Facility Expansion Request for the
first Fixed Facility Commitment. If defeasance is selected, this Section 3.10
shall apply. The election of the Borrower as to defeasance or yield maintenance
in the first Conversion Request or Credit Facility Expansion Request relating to
a Fixed Facility
-26-
<PAGE>
Commitment shall apply to all Fixed Facility Advances during the term of this
Agreement. Fixed Facility Advances are not prepayable at any time, provided
that, notwithstanding the foregoing, the Borrower may prepay any Fixed Facility
Advance during the last ninety (90) days of the term of such Fixed Facility
Advance and provided that Fixed Facility Advances may be defeased pursuant to
the terms and conditions of this Section.
(a) CONDITIONS. Subject to Section 3.10(d), the Borrower shall
have the right to obtain the release of Mortgaged Properties from the
lien of the related Security Instruments (and all collateral derived
from such Mortgage Properties, including assignment of leases, fixture
filings and other documents and instruments evidencing a lien or
security interest in the Borrower Parties' assets [except the Substitute
Collateral] shall be released) upon the satisfaction of all of the
following conditions:
(1) DEFEASANCE NOTICE. The Borrower shall give Lender a
notice (the "DEFEASANCE NOTICE"), in the manner specified in
Section 3.10(g)(4), on a form provided by Lender, specifying a
Business Day (the "DEFEASANCE CLOSING DATE") which the Borrower
desires to consummate the Defeasance. The Defeasance Closing Date
specified by the Borrower may not be more than 45 calendar days,
nor less than 30 calendar days, after the date on which the
Defeasance Notice is received by Lender. The Borrower shall also
specify in the Defeasance Notice the name, address and telephone
number of the Borrower for notices pursuant to Section
3.10(g)(4). The form Defeasance Notice provided by Lender
specifies: (i) which Mortgaged Properties the Borrower proposes
to be released, provided that any Mortgaged Property securing
only Fixed Facility Advances must be among the Mortgaged
Properties proposed to be released; (ii) the name, address and
telephone number of Lender for notices pursuant to Section
3.10(g)(4); (iii) the account(s) to which payments to Lender are
to be made; (iv) whether a Fannie Mae Investment Security will be
offered for use as the Substitute Collateral and, if not, that
U.S. Treasury Securities will be the Substitute Collateral; (v)
whether the Successor Borrower will be designated by Lender or
the Borrower; and (vi) if a Fannie Mae Investment Security is
offered for use as the Substitute Collateral, the Defeasance
Notice shall also include the amount of the Defeasance Commitment
Fee.
Any applicable Defeasance Commitment fee must be paid by the
Borrower and received by Lender no later than the date and time
when Lender receives the Defeasance Notice from the Borrower.
(2) CONFIRMATION. After Lender has confirmed that the
Defeasance is then permitted as provided in Section 3.10(d), and
has confirmed that the terms of the Defeasance Notice are
reasonably acceptable to Lender, Lender shall, with reasonable
promptness, notify the Borrower of such confirmation by signing
the Defeasance Notice, attaching the Annual Yields for the
Mortgage Payments beginning on the first day of the second
calendar month after the Defeasance Closing Date and ending on
the Stated Maturity Date (if a Fannie Mae Investment Security is
offered as Substitute Collateral) and transmitting the signed
Defeasance Notice to the Borrower pursuant to Section 3.10(g)(4).
If,
-27-
<PAGE>
after Lender has notified the Borrower of its confirmation in
accordance with the foregoing, Lender does not receive the
Defeasance Commitment Fee within five (5) Business Days after the
Defeasance Notice Effective Date, then the Borrower's right to
obtain Defeasance pursuant to that Defeasance Notice shall
terminate.
(3) SUBSTITUTE COLLATERAL. On or before the Defeasance
Closing Date, the Borrower shall deliver to Lender a pledge and
security agreement, in form and substance satisfactory to Lender
in its sole discretion (the "PLEDGE AGREEMENT"), creating a first
priority perfected security interest in favor of Lender in
substitute collateral constituting an Investment Security (the
"SUBSTITUTE COLLATERAL"). The Pledge Agreement shall provide the
Borrower's authorization and direction that all interest on,
principal of and other amounts payable with respect to the
Substitute Collateral shall be paid directly to Lender to be
applied to Mortgage Payments due under the Fixed Facility Note
subject to Defeasance. If the Substitute Collateral is issued in
a certificated form and the Borrower has possession of the
certificate, the certificate shall be endorsed (either on the
certificate or on a separate writing attached thereto) by the
Borrower as directed by Lender and delivered to Lender. If the
Substitute Collateral is issued in an uncertificated form, or in
a certificated form but the Borrower does not have possession of
the certificate, the Borrower shall execute and deliver to Lender
all documents and instruments required by Lender to create in
Lender's favor a first priority perfected security interest in
such Substitute Collateral, including a securities account
control agreement or any other instrument or document required to
perfect a security interest in each Substitute Collateral.
(4) CLOSING DOCUMENTS. The Borrower shall deliver to
Lender on or before the Defeasance Closing Date the documents
described in Section 3.10(b).
(5) AMOUNTS PAYABLE BY THE BORROWER. On or before the
Defeasance Closing Date, the Borrower shall pay to Lender an
amount equal to the sum of:
(A) the Next Scheduled P&I Payment;
(B) all other sums then due and payable under
the Fixed Facility Note subject to
Defeasance, the Security Instruments related
to the Mortgaged Properties to be released;
and
(C) all reasonable costs and expenses incurred
by Lender or Servicer in connection with the
Defeasance, including the fees and
disbursements of Lender's or Servicer's
legal counsel.
(6) DEFEASANCE DEPOSIT. If a Fannie Mae Investment
Security will be the Substitute Collateral, then, on or before
3:00 p.m., Washington, D.C. time, on
-28-
<PAGE>
the Defeasance Closing Date, the Borrower shall pay the
Defeasance Deposit (reduced by the Defeasance Commitment Fee) to
Lender to be used by Lender to purchase the Fannie Mae Investment
Security as the Borrower's agent.
(7) COVENANTS, REPRESENTATIONS AND WARRANTIES. On the
Defeasance Closing Date, all of the covenants of the Borrower
Parties set forth in Articles XIII, XIV and XV of this Agreement
and all of the representations and warranties of the Borrower
Parties set forth in Article XII of this Agreement are true and
correct in all material respects.
(8) GEOGRAPHICAL DIVERSIFICATION. If, as a result of the
Defeasance, Lender determines that the geographical
diversification of the Collateral Pool is compromised (whether or
not the Geographical Diversification Requirement is met), Lender
may require that the Borrower add or substitute Multifamily
Residential Properties to the Collateral Pool in a number and
having a valuation required to restore the Geographical
Diversification of the Collateral Pool to a level at least as
diverse as before the Defeasance.
(b) CLOSING DOCUMENTS. The documents required to be delivered to
Lender on or before the Defeasance Closing Date pursuant to Section
3.10(a)(4) are:
(1) an opinion of counsel for the Borrower, in form and
substance satisfactory to Lender, to the effect that Lender has a
valid and perfected lien and security interest of first priority
in the Substitute Collateral and the principal and interest
payable thereunder;
(2) an opinion of counsel for the Borrower, in form and
substance satisfactory to Lender, that the Defeasance, including
both Borrowers granting to Lender of a lien and security interest
in the Substitute Collateral and the assignment and assumption by
Successor Borrower, and each of them, when considered in
combination and separately, are not subject to avoidance under
any applicable federal or state laws, including Sections 547 and
548 of the U.S. Bankruptcy Code;
(3) if a Fannie Mae Investment Security is not used as
Substitute Collateral, and unless waived by Lender, a certificate
in form and substance satisfactory to Lender, issued by an
independent certified public accountant, or financial
institution, approved by Lender, to the effect that the
Substitute Collateral will generate the Scheduled Defeasance
Payments;
(4) unless waived by Lender, an opinion of counsel for the
Borrower in form and substance satisfactory to Lender, that the
Defeasance will not result in a "sale or exchange" of any Fixed
Facility Note within the meaning of Section 1001(c) of the
Internal Revenue Code and the temporary and final regulations
promulgated thereunder;
(5) such other opinions, certificates, documents or
instruments as Lender may reasonably request; and
-29-
<PAGE>
(6) three counterparts of the executed Assignment and
Assumption Agreement described in Section 3.10(e).
(c) RELEASE. Upon the Borrower's compliance with the requirements
of Sections 3.10(a)(1) through (6), the Mortgaged Properties shall be
released from the lien of the Security Instruments (and all collateral
derived from such Mortgaged Properties, including assignments of leases,
fixture filings and other documents and instruments evidencing a lien or
security interest in the Borrower Parties' assets [except the Substitute
Collateral] shall be released). Lender shall, with reasonable
promptness, execute and deliver to the Borrower, at the Borrower's cost
and expense, any additional documents reasonably requested by the
Borrower Parties in order to evidence or confirm the release of Lender's
liens and security interests described in the immediately preceding
sentence.
(d) DEFEASANCE NOT ALLOWED. The Borrower shall not have the right
to obtain Defeasance at any of the following times:
(1) before the third anniversary of the date of the
relevant Fixed Facility Note;
(2) after the expiration of the Defeasance Period; or
(3) after Lender has accelerated the maturity of the
unpaid principal balance of, accrued interest on, and other
amounts payable under, any Note pursuant to Paragraph 6 of such
Note.
(e) ASSIGNMENT AND ASSUMPTION. Upon the Borrower's compliance
with the requirements of Section 3.10(a), the Borrower shall assign all
its obligations and rights under the relevant Fixed Facility Note,
together with the Substitute Collateral, to a successor entity (the
"SUCCESSOR BORROWER") designated by Lender or, if not so designated by
Lender, designated by the Borrower and acceptable to Lender in its sole
discretion. The Borrower Parties and Successor Borrower shall execute
and deliver to Lender an assignment and assumption agreement on a form
provided by Lender (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"). The
Assignment and Assumption Agreement shall provide for (i) the transfer
and assignment by the Borrower to Successor Borrower of the Substitute
Collateral, subject to the lien and security interest in favor of
Lender, (ii) the assumption by Successor Borrower of all liabilities and
obligations of the Borrower under the relevant Fixed Facility Note, and
(iii) the release by Lender of the Borrower Parties from all liabilities
and obligations under the relevant Fixed Facility Note and all
Obligations related thereto. Lender shall, at the Borrower's request and
expense, execute and deliver releases, reconveyances and security
interest terminations with respect to the released Mortgage Properties
and all other collateral held by Lender (except the Defeasance Deposit).
The Assignment and Assumption Agreement shall be executed by Lender with
a counterpart to be returned by Lender to the Borrower and Successor
Borrower thereafter; provided, however, in all events that it shall not
be a condition of Defeasance that the Assignment and Assumption
Agreement be executed by Lender, or any Successor Borrower that is
designated by Lender.
-30-
<PAGE>
(f) Agent. If the Defeasance Notice provides that Lender will
make available a Fannie Mae Investment Security for purchase by the
Borrower for use as the Substitute Collateral, the Borrower hereby
authorizes Lender to use, and appoints Lender as its agent and
attorney-in-fact for the purpose of using, the Defeasance Deposit
(including any portion thereof that constitutes the Defeasance
Commitment Fee) to purchase a Fannie Mae Investment Security.
(g) ADMINISTRATIVE PROVISIONS.
(1) FANNIE MAE SECURITY LIQUIDATED DAMAGES. If the
Borrower timely pays the Defeasance Commitment Fee, and Lender
and the Borrower timely transmits a signed facsimile copy of the
Defeasance Notice pursuant to Section 3.10(a)(2), but the
Borrower fails to perform its other obligations under Sections
3.10(a) and Section 3.10(e), Lender shall have the right to
retain the Defeasance Commitment Fee as liquidated damages for
the Borrower's default, as Lender's sole and exclusive remedy,
and, except as provided in Section 3.10(g)(2), the Borrower shall
be released from all further obligations under this Section 3.10.
The Borrower acknowledges that, from and after the date on which
Lender has executed the Defeasance Notice under Section
3.10(a)(2) and the Borrower has delivered the Defeasance
Commitment Fee, Lender will incur financing costs in arranging
and preparing for the purchase of the Substitute Collateral and
in arranging and preparing for the release of the Mortgaged
Properties from the lien of the Security Instruments in reliance
on the executed Defeasance Notice. The Borrower agrees that the
Defeasance Commitment Fee represents a fair and reasonable
estimate, taking into account all circumstances existing on the
date of this Agreement, of the damages Lender will incur by
reason of the Borrower's default.
(2) THIRD PARTY COSTS. In the event that the Defeasance is
not consummated on the Defeasance Closing Date for any reason,
the Borrower agrees to reimburse Lender and Servicer for all
reasonable third party costs and expenses (other than financing
costs covered by Section 4.0l(g)(1) above), including attorneys'
fees and expenses, incurred by Lender in reliance on the executed
Defeasance Notice, within 10 Business Days after the Borrower
receives a written demand for payment, accompanied by a
statement, in reasonable detail, of Lender's and Servicer's third
party costs and expenses.
(3) PAYMENTS. All payments required to be made by the
Borrower to Lender or Servicer pursuant to this Section 3.10
shall be made by wire transfer of immediately available finds to
the account(s) designated by Lender or Servicer, as the case may
be, in the Defeasance Notice.
(4) NOTICE. The Defeasance Notice delivered pursuant to
this Section 4.0l(g)(4) shall be in writing and shall be sent by
telecopier or facsimile machine which automatically generates a
transmission report that states the date and time of the
transmission, the length of the document transmitted and the
telephone number of the recipient's telecopier or facsimile
machine (or shall be sent by any
-31-
<PAGE>
distribution media, whether currently existing or hereafter
developed, including electronic mail and internet distribution,
as approved by Lender). Any notice so sent addressed to the
parties at their respective addresses designated in the
Defeasance Notice pursuant to Section 3.10(a), shall be deemed to
have been received on the date and time indicated on the
transmission report of recipient. To be effective, the Borrower
must send the Defeasance Notice (as described above) so that
Lender receives the Defeasance Notice no earlier than 11:00 a.m.
and no later than 3:00 p.m. Washington, D.C. time on a Business
Day.
(h) DEFINITIONS. For purposes of this Section 3.10, the following
terms shall have the following meanings:
(1) The term "ANNUAL YIELD" means the yield for the
theoretical zero coupon U.S. Treasury Security as calculated from
the current "on-the-run" U.S. Treasury yield curve with a term to
maturity that most closely matches the Applicable Defeasance Term
for the Mortgage Payment, as published by Fannie Mae on MORNET(R)
(or in an alternative electronic format) at 2:00 p.m. Washington,
D.C. time on the Business Day that Lender receives the Defeasance
Notice in accordance with Section 3.10(g)(4). If the publication
of yields on MORNET(R) is unavailable, Lender shall determine
yields from another source reasonably determined by Lender.
(2) The term "APPLICABLE DEFEASANCE TERM" means, in the
case of each Mortgage Payment, the number of calendar months,
based on a year containing 12 calendar months with 30 days each,
in the period beginning on the first day of the first calendar
month after the Defeasance Closing Date to the date on which such
Mortgage Payment is due and payable.
(3) The term "DEFEASANCE" means the transaction in which
all (but not less than all) of the Mortgaged Properties are
released from the lien of the Security Instruments and Lender
receives, as substitute collateral, a valid and perfected lien
and security interest of first priority in the Substitute
Collateral and the principal and interest payable thereunder.
(4) The term "DEFEASANCE COMMITMENT FEE" means the amount
specified in the Defeasance Notice as the Borrower's good faith
deposit to ensure performance of its obligations under this
Section, which shall equal two percent (2%) of the aggregate
unpaid principal balance of the Fixed Facility Note subject to
Defeasance as of the Defeasance Notice Effective Date, if the
Successor Borrower is designated by the Borrower under Section
3.10(e), or one percent (1%) of the aggregate unpaid principal
balance of the Fixed Facility Note subject to Defeasance as of
the Defeasance Notice Effective Date if the Successor Borrower is
designated by Lender under Section 3.10(e). No Defeasance
Commitment Fee will be applicable if U.S. Treasury Securities are
specified in the Defeasance Notice as the applicable Investment
Security.
-32-
<PAGE>
(5) The term "Defeasance Deposit" means an amount equal to
the sum of the present value of each Mortgage Payment that
becomes due and payable during the period beginning on the first
day of the second calendar month after the Defeasance Closing
Date and ending on the Stated Maturity Date, where the present
value of each Mortgage Payment is determined using the following
formula:
the amount of the Mortgage payment
----------------------------------
(1 + (the Annual Yield/12))n
For this purpose, the last Mortgage Payment due and payable on
the Stated Maturity Date shall include the amounts that would
constitute the unpaid principal balance of the Fixed Facility
Note subject to Defeasance on the Stated Maturity Date if all
prior Mortgage Payments were paid on their due dates and "n"
shall equal the Applicable Defeasance Term.
(6) The term "DEFEASANCE PERIOD" means the period
beginning on the earliest permitted date determined under Section
3.10(d)(l) and ending on the 90th day before the Stated Maturity
Date.
(7) The term "DEFEASANCE NOTICE EFFECTIVE DATE" means the
date on which Lender provides confirmation of the Defeasance
Notice pursuant to Section 3.10(a)(2).
(8) The term "FANNIE MAE INVESTMENT SECURITY" means any
bond, debenture, note, participation certificate or other similar
obligation issued by Fannie Mae in connection with the Defeasance
which provides for Scheduled Defeasance Payments beginning in the
second calendar month after the Defeasance Closing Date.
(9) The term "INVESTMENT SECURITY" means:
(A) If offered by Lender pursuant to the Defeasance
Notice, a Fannie Mae Investment Security purchased in the
manner described in Sections 3.10(a)(6) and 3.10(f), and
(B) If no Fannie Mae Investment Security is offered
by Lender pursuant to the Defeasance Notice, U.S. Treasury
Securities.
(10) The term "MORTGAGE PAYMENT" means the amount of each
regularly scheduled monthly payment of principal and interest due
and payable under the Fixed Facility Note subject to Defeasance
during the period beginning on the first day of the second
calendar month after the Defeasance Closing Date and ending on
the Stated Maturity Date, and the amount that would constitute
the aggregate unpaid principal balance of the Fixed Facility Note
subject to Defeasance on the Stated Maturity Date if all prior
Mortgage Payments were paid on their due dates.
-33-
<PAGE>
(11) The term "NEXT SCHEDULED P&I PAYMENT" means an amount
equal to the monthly installment of principal and interest due
under the Fixed Facility Note subject to Defeasance on the first
day of the first calendar month after the Defeasance Closing
Date.
(12) The term "SCHEDULED DEFEASANCE PAYMENTS" means
payments prior and as close as possible to (but in no event later
than) the successive scheduled dates on which Mortgage Payments
are required to be paid under the Fixed Facility Note subject to
Defeasance and in amounts equal to or greater than the scheduled
Mortgage Payments due and payable on such dates under the Fixed
Facility Note subject to Defeasance.
(13) The term "STATED MATURITY DATE" means the Maturity
Date specified in the Fixed Facility Note subject to Defeasance
determined without regard to Lender's exercise of any right of
acceleration of the Fixed Facility Note subject to Defeasance.
(14) The term "U.S. TREASURY SECURITIES" means direct,
non-callable and non-redeemable obligations of the United States
of America which provided for Scheduled Defeasance Payments
beginning in the second calendar month after the Defeasance
Closing Date.
ARTICLE IV
RATE SETTING FOR THE ADVANCES
SECTION 4.01 RATE SETTING FOR AN ADVANCE. Rates for an Advance shall be set in
accordance with the following procedures:
(a) PRELIMINARY, NONBINDING QUOTE. At the Borrower's request the
Lender shall quote to the Borrower an estimate of the MBS Pass-Through Rate (for
a proposed Fixed Facility Advance) or MBS Imputed Interest Rate (for a proposed
Variable Advance) for a Fannie Mae MBS backed by a proposed Advance. The
Lender's quote shall be based on (i) a solicitation of bids from institutional
investors selected by the Lender and (ii) the proposed terms and amount of the
Advance selected by the Borrower. The quote shall not be binding upon the
Lender.
(b) RATE SETTING. If the Borrower satisfies all of the conditions
to the Lender's obligation to make the Advance in accordance with Article V,
then the Borrower may propose a MBS Pass-Through Rate (for a Fixed Facility
Advance) or MBS Imputed Interest Rate (for a Variable Advance) by submitting to
the Lender by facsimile transmission a completed and executed document, in the
form attached as EXHIBIT M to this Agreement ("RATE SETTING FORM"), before 1:00
p.m. Washington, D.C. time on any Business Day ("RATE SETTING DATE"). The Rate
Setting Form contains various factual certifications required by the Lender and
specifies:
-34-
<PAGE>
(i) for a Variable Advance, the amount, term, MBS Issue
Date, Variable Facility Fee, the proposed maximum Coupon Rate ("MAXIMUM
ANNUAL COUPON RATE") and Closing Date for the Advance; and
(ii) for a Fixed Facility Advance, the amount, term, MBS
Issue Date, Fixed Facility Fee, Maximum Annual Coupon Rate, Price (which
will be in a range between 99-1/2 and 100-1/2), Yield Maintenance
Period, Amortization Period, if applicable, interest only and Closing
Date for the Advance.
(c) RATE CONFIRMATION. Within one Business Day after receipt of
the completed and executed Rate Setting Form, the Lender shall solicit bids from
institutional investors selected by the Lender based on the information in the
Rate Setting Form and, provided the actual Coupon Rate (if the low bid were
accepted) would be at or below the Maximum Annual Coupon Rate, shall obtain a
commitment ("MBS COMMITMENT") for the purchase of a Fannie Mae MBS having the
bid terms described in the related Rate Setting Form, and shall immediately
deliver to the Borrower by facsimile transmission a completed document, in the
form attached as EXHIBIT N to this Agreement ("RATE CONFIRMATION FORM"). The
Rate Confirmation Form will confirm:
(i) for a Variable Advance, the amount, term, MBS Issue
Date, MBS Delivery Date, MBS Imputed Interest Rate, Variable Facility
Fee, Coupon Rate, Discount, Price, and Closing Date for the Advance; and
(ii) for a Fixed Facility Advance, the amount, term, MBS
Issue Date, MBS Delivery Date, MBS Pass-Through Rate, Fixed Facility
Fee, Coupon Rate, Price, Yield Maintenance Period, Specified U.S.
Treasury Security, Amortization Period and Closing Date for the Advance.
SECTION 4.02 ADVANCE CONFIRMATION INSTRUMENT FOR VARIABLE ADVANCES. On or before
the Closing Date for a Variable Advance, the Borrower Parties execute and
deliver to the Lender an instrument ("ADVANCE CONFIRMATION INSTRUMENT"), in the
form attached as EXHIBIT O to this Agreement, confirming the amount, term, MBS
Issue Date, MBS Delivery Date, MBS Imputed Interest Rate, Variable Facility Fee,
Coupon Rate, Discount, Price and Closing Date for the Advance, and the
Borrower's obligation to repay the Advance in accordance with the terms of the
Notes and this Agreement. Upon the funding of the Variable Advance, the Lender
shall note the date of funding in the appropriate space at the foot of the
Advance Confirmation Instrument and deliver a copy of the completed Advance
Confirmation Instrument to the Borrower. The Lender's failure to do so shall not
invalidate the Advance Confirmation Instrument or otherwise affect in any way
any obligation of the Borrower to repay Variable Advances in accordance with the
Advance Confirmation Instrument, the Variable Facility Note or the other Loan
Documents, but is merely meant to facilitate evidencing the date of funding and
to confirm that the Advance Confirmation Instrument is not effective until the
date of funding.
SECTION 4.03 BREAKAGE AND OTHER COSTS. In the event that the Lender obtains an
MBS Commitment and the Lender fails to fulfill the MBS Commitment because the
Advance is not made (for a reason other than the default of the Lender to make
the Advance), the Borrower shall pay all reasonable out-of-pocket costs payable
to the potential investor and other
-35-
<PAGE>
reasonable costs, fees and damages incurred by the Lender in connection with its
failure to fulfill the MBS Commitment. The Lender reserves the right to require
that the Borrower post a deposit at the time the MBS Commitment is obtained. The
deposit referred to in the preceding sentence shall be refundable to the
Borrower upon the delivery of the related MBS.
ARTICLE V
MAKING THE ADVANCES
SECTION 5.01 INITIAL ADVANCE. The Borrower may make a request ("INITIAL ADVANCE
REQUEST") for the Lender to make the Initial Advance. If all conditions
contained in this Section are satisfied on or before the Closing Date for the
Initial Advance, the Lender shall make the Initial Advance on the Initial
Closing Date or on another date selected by the Borrower and approved by the
Lender. The obligation of the Lender to make the Initial Advance is subject to
the following conditions precedent:
(a) Receipt by the Lender of the Initial Advance Request;
(b) Receipt by the Lender of one or more counterparts of the Cash
Management Agreement, dated as of the Initial Closing Date;
(c) The delivery to the Title Company, for filing and/or
recording in all applicable jurisdictions, of all applicable Loan Documents
required by the Lender, including duly executed and delivered original copies of
the Variable Facility Note, a Fixed Facility Note, the Guaranty, the Initial
Security Instruments covering the Initial Mortgaged Properties and UCC-1
Financing Statements covering the portion of the Collateral comprised of
personal property, and other appropriate instruments, in form and substance
satisfactory to the Lender and in form proper for recordation, as may be
necessary in the opinion of the Lender to perfect the Liens created by the
applicable Security Instruments and any other Loan Documents creating a Lien in
favor of the Lender, and the payment of all taxes, fees and other charges
payable in connection with such execution, delivery, recording and filing;
(d) If the Advance is a Variable Advance, the receipt by the
Lender of the first installment of Variable Facility Fee for the Variable
Advance and the entire Discount for the Variable Advance payable by the Borrower
pursuant to Section 2.04;
(e) The receipt by the Lender of the Initial Origination Fee
pursuant to Section 16.02(a), the Initial Due Diligence Fee pursuant to Section
16.03(a), all legal fees and expenses payable pursuant to Section 16.04(a) and
all legal fees and expenses payable in connection with the Initial Advance
pursuant to Section 16.04(b); and
(f) The satisfaction of all applicable General Conditions set
forth in Article XI.
SECTION 5.02 FUTURE ADVANCES. In order to obtain a Future Advance, the Borrower
may from time to time deliver a written request for a Future Advance ("FUTURE
ADVANCE REQUEST") to the Lender, in the form attached as EXHIBIT P to this
Agreement. Each Future Advance Request
-36-
<PAGE>
shall be accompanied by (a) a designation of the amount of the Future Advance
requested, and (b) a designation of the maturity date of the Advance. Each
Future Advance Request shall be in the minimum amount of $3,000,000. If all
conditions contained in Section 5.03 are satisfied, the Lender shall make the
requested Future Advance, at a closing to be held at offices designated by the
Lender on a Closing Date selected by the Lender, and occurring on a date
selected by the Borrower, which date shall be not more than three (3) Business
Days, after the Borrower's receipt of the Rate Confirmation Form (or on such
other date to which the Borrower and the Lender may agree). The Lender reserves
the right to require that the Borrower post a deposit at the time the MBS
Commitment is obtained as an additional condition to the Lender's obligation to
make the Future Advance. The deposit referred to in the preceding sentence shall
be refundable to the Borrower upon the delivery of the related MBS.
SECTION 5.03 CONDITIONS PRECEDENT TO FUTURE ADVANCES. The obligation of the
Lender to make a requested Future Advance is subject to the following conditions
precedent:
(a) The receipt by the Lender of a Future Advance Request;
(b) The Lender has delivered the Rate Setting Form for the Future
Advance to the Borrower;
(c) After giving effect to the requested Future Advance, the
Coverage and LTV Tests will be satisfied;
(d) If the Advance is a Fixed Facility Advance, delivery of a
Fixed Facility Note, duly executed by the Borrower, in the amount of the
Advance, reflecting all of the terms of the Fixed Facility Advance;
(e) If the Advance is a Variable Advance, delivery of the Advance
Confirmation Instrument, duly executed by the Borrower;
(f) For any Title Insurance Policy not containing a Revolving
Credit Endorsement, the receipt by the Lender of an endorsement to the Title
Insurance Policy, amending the effective date of the Title Insurance Policy to
the Closing Date and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions approved by
the Lender;
(g) If the Advance is a Variable Advance, the receipt by the
Lender of the first installment of Variable Facility Fee for the Variable
Advance and the entire Discount for the Variable Advance payable by the Borrower
pursuant to Section 2.04;
(h) The receipt by the Lender of all legal fees and expenses
payable by the Borrower in connection with the Future Advance pursuant to
Section 16.04(b); and
(i) The satisfaction of all applicable General Conditions set
forth in Article XI.
SECTION 5.04 DETERMINATION OF ALLOCABLE FACILITY AMOUNT AND
VALUATIONS. The Lender shall determine the Allocable Facility Amount and
Valuation for each Mortgaged Property on the
-37-
<PAGE>
Initial Closing Date. Once each Calendar Quarter, within 20 Business Days after
the Borrower has delivered to the Lender the reports required in Section 13.04,
the Lender shall determine the Aggregate Debt Service Coverage Ratio for the
Trailing 12 Month period and the Aggregate Loan to Value Ratio. If the Lender
reasonably decides that changed market or property conditions warrant, the
Lender may (i) request an Appraisal of the relevant Mortgaged Properties and/or
(ii) determine new Allocable Facility Amounts and Valuations at any other times.
The Lender shall also redetermine Allocable Facility Amounts as necessary to
take account of any addition, release or substitution of Collateral or other
event which invalidates the outstanding determinations. The Lender shall
determine Cap Rates when determining Valuations on the basis of its internal
survey and analysis of cap rates for comparable sales in the vicinity of the
Mortgaged Property, with such adjustments as the Lender deems appropriate and
shall not be obligated to use any information provided by the Borrower. The
Lender shall promptly disclose its determinations to the Borrower. Until
redetermined, the Allocable Facility Amounts and Valuations determined by the
Lender shall remain in effect. In performing a Valuation of a Multifamily
Residential Property to be added to the Collateral Pool, the Lender shall be
entitled to obtain an Appraisal. The Lender shall also have the right to obtain
an Appraisal in connection with the redetermination of a Valuation of a
Mortgaged Property, but only if the Lender is unable to determine a Cap Rate for
such Mortgaged Property and then only if the Lender has not obtained an
Appraisal for such Mortgaged Property within the prior year.
ARTICLE VI
ADDITIONS OF COLLATERAL
SECTION 6.01 RIGHT TO ADD COLLATERAL. Subject to the terms and conditions of
this Article, the Borrower Parties shall have the right, from time to time
during the Term of this Agreement, to add Multifamily Residential Properties to
the Collateral Pool in accordance with the provisions of this Article.
SECTION 6.02 PROCEDURE FOR ADDING COLLATERAL. The procedure for adding
Collateral set forth in this Section 6.02 shall apply to all additions of
Collateral in connection with this Agreement, including but not limited to
additions of Collateral in connection with substitutions of Collateral and
expansion of the Credit Facility.
(a) REQUEST. The Borrower Parties may, not more than four (4)
times per Calendar Year, deliver a written request ("COLLATERAL ADDITION
REQUEST") to the Lender, in the form attached as EXHIBIT Q to this Agreement, to
add one or more Multifamily Residential Properties to the Collateral Pool. Each
Collateral Addition Request shall be accompanied by the following:
(i) The information relating to the proposed Additional
Mortgaged Property required by the form attached as EXHIBIT R to this
Agreement ("COLLATERAL ADDITION DESCRIPTION PACKAGE"), as amended from
time to time to include information required under the DUS Guide; and
(ii) The payment of all Additional Collateral Due
Diligence Fees pursuant to Section 16.03(b).
-38-
<PAGE>
(b) ADDITIONAL INFORMATION. The Borrower Parties shall promptly
deliver to the Lender any additional information concerning the proposed
Additional Mortgaged Property that the Lender may from time to time reasonably
request.
(c) UNDERWRITING. The Lender shall evaluate the proposed
Additional Mortgaged Property, and shall make underwriting determinations as to
the Aggregate Debt Service Coverage Ratios for the Trailing 12 Month Period and
the Aggregate Loan to Value Ratio applicable to the Collateral Pool, on the
basis of the lesser of (i) if purchased by the relevant Borrower Party within 12
months of the related Collateral Addition Request, the acquisition price of the
proposed Additional Mortgaged Property or (ii) a Valuation made with respect to
the proposed Additional Mortgaged Property, and otherwise in accordance with
Fannie Mae's DUS Underwriting Requirements. Within 30 days after receipt of (i)
the Collateral Addition Request for the Additional Mortgaged Property and (ii)
all reports, certificates and documents set forth on EXHIBIT S to this
Agreement, including a zoning analysis undertaken in accordance with Section 206
of the DUS Guide, the Lender shall notify the Borrower Parties whether or not it
shall consent to the addition of the proposed Additional Mortgaged Property to
the Collateral Pool and, if it shall so consent, shall set forth the Aggregate
Debt Service Coverage Ratios for the Trailing 12 Month Period and the Aggregate
Loan to Value Ratio which it estimates shall result from the addition of the
proposed Additional Mortgaged Property to the Collateral Pool. If the Lender
declines to consent to the addition of the proposed Additional Mortgaged
Property to the Collateral Pool, the Lender shall include, in its notice, a
brief statement of the reasons for doing so. Within five Business Days after
receipt of the Lender's notice that it shall consent to the addition of the
proposed Additional Mortgaged Property to the Collateral Pool, the Borrower
Parties shall notify the Lender whether or not it elects to cause the proposed
Additional Mortgaged Property to be added to the Collateral Pool. If the
Borrower Parties fail to respond within the period of five Business Days, it
shall be conclusively deemed to have elected not to cause the proposed
Additional Mortgaged Property to be added to the Collateral Pool.
(d) CLOSING. If, pursuant to subsection (c), the Lender consents
to the addition of the proposed Additional Mortgaged Property to the Collateral
Pool, the Borrower Parties timely elect to cause the proposed Additional
Mortgaged Property to be added to the Collateral Pool and all conditions
contained in Section 6.03 are satisfied, the Lender shall permit the proposed
Additional Mortgaged Property to be added to the Collateral Pool, at a closing
to be held at offices designated by the Lender on a Closing Date selected by the
Lender, and occurring within 30 Business Days after the Lender's receipt of the
Borrower Parties' election (or on such other date to which the Borrower Parties
and the Lender may agree).
SECTION 6.03 CONDITIONS PRECEDENT TO ADDITION OF AN ADDITIONAL MORTGAGED
PROPERTY TO THE COLLATERAL POOL. The addition of an Additional Mortgaged
Property to the Collateral Pool on the Closing Date applicable to the Additional
Mortgaged Property is subject to the satisfaction of the following conditions
precedent:
(a) The proposed Additional Mortgaged Property has a Debt
Service Coverage Ratio for the Trailing 12 Month Period of not less than 140%
and a Loan to Value Ratio of not more than 65% and immediately after giving
effect to the requested addition, the Coverage and LTV Tests will be satisfied,
and in the case of any substitution effected pursuant
-39-
<PAGE>
to Section 7.04 of this Agreement, the Coverage and LTV Tests are not adversely
affected after giving effect to the proposed substitution;
(b) The receipt by the Lender of the Collateral Addition Fee and
all legal fees and expenses payable by the Borrower Parties in connection with
the Collateral Addition pursuant to Section 16.04(b);
(c) The delivery to the Title Company, with fully executed
instructions directing the Title Company to file and/or record in all applicable
jurisdictions, all applicable Collateral Addition Loan Documents required by the
Lender, including duly executed and delivered original copies of any Security
Instruments and UCC-1 Financing Statements covering the portion of the
Additional Mortgaged Property comprised of personal property, and other
appropriate documents, in form and substance satisfactory to the Lender and in
form proper for recordation, as may be necessary in the opinion of the Lender to
perfect the Lien created by the applicable additional Security Instrument, and
any other Collateral Addition Loan Document creating a Lien in favor of the
Lender, and the payment of all taxes, fees and other charges payable in
connection with such execution, delivery, recording and filing;
(d) If required by the Lender, amendments to the Notes and the
Security Instruments, reflecting the addition of the Additional Mortgaged
Property to the Collateral Pool and, as to any Security Instrument so amended,
the receipt by the Lender of an endorsement to the Title Insurance Policy
insuring the Security Instrument, amending the effective date of the Title
Insurance Policy to the Closing Date and showing no additional exceptions to
coverage other than the exceptions shown on the Initial Closing Date and other
exceptions approved by the Lender;
(e) If the Title Insurance Policy for the Additional Mortgaged
Property contains a Tie-In Endorsement, an endorsement to each other Title
Insurance Policy containing a Tie-In Endorsement, adding a reference to the
Additional Mortgaged Property; and
(f) The satisfaction of all applicable General Conditions set
forth in Article XI.
ARTICLE VII
RELEASES OF COLLATERAL
SECTION 7.01 RIGHT TO OBTAIN RELEASES OF COLLATERAL. Subject to the terms and
conditions of this Article, the Borrower shall have the right to obtain a
release of Collateral from the Collateral Pool in accordance with the provisions
of this Article.
SECTION 7.02 PROCEDURE FOR OBTAINING RELEASES OF COLLATERAL.
(a) REQUEST. In order to obtain a release of Collateral from the
Collateral Pool, the Borrower may, not more than once each calendar month,
deliver a written request for the release of Collateral from the Collateral Pool
("COLLATERAL RELEASE REQUEST") to the Lender, in the form attached as EXHIBIT T
to this Agreement. The Collateral Release Request shall not result in a
termination of all or any part of the Credit Facility. The Borrower may only
terminate all or any part of the Credit Facility by delivering a Variable
Facility Termination
-40-
<PAGE>
Request or Credit Facility Termination Request pursuant to Articles IX or X. The
Collateral Release Request shall be accompanied by (and shall not be effective
unless it is accompanied by) the name, address and location of the Mortgaged
Property to be released from the Collateral Pool ("COLLATERAL RELEASE
PROPERTY").
(b) CLOSING. If all conditions contained in Section 7.03 are
satisfied, the Lender shall cause the Collateral Release Property to be released
from the Collateral Pool, at a closing to be held at offices designated by the
Lender on a Closing Date selected by the Lender, and occurring within 30 days
after the Lender's receipt of the Collateral Release Request (or on such other
date to which the Borrower and the Lender may agree, by executing and
delivering, and causing all applicable parties to execute and deliver, all at
the sole cost and expense of the Borrower, instruments, in the form customarily
used by the Lender for releases in the jurisdiction governing the perfection of
the security interest being released, releasing the applicable Security
Instrument as a Lien on the Collateral Release Property, and UCC-3 Termination
Statements terminating the UCC-1 Financing Statements perfecting a Lien on the
portion of the Collateral Release Property comprised of personal property and
such other documents and instruments as the Borrower may reasonably request
evidencing the release of the applicable Collateral from any lien securing the
Obligations (including a termination of any restriction on the use of any
accounts relating to the Collateral Release Property) and the release and return
to the Borrower of any and all escrowed amounts relating thereto. The
instruments referred to in the preceding sentence are referred to in this
Article as the "COLLATERAL RELEASE DOCUMENTS." The Borrower shall prepare the
Collateral Release Documents and submit them to Lender for its review.
(c) RELEASE PRICE. The "RELEASE PRICE" for each Mortgaged
Property means (1) during the period Section 22.01(a) of this Agreement is in
effect the greater of (i) the Allocable Facility Amount for the Mortgaged
Property to be released and (ii) the amount, if any, of Advances Outstanding
which are required to be repaid by the Borrower to the Lender in connection with
the proposed release of the Mortgaged Property from the Collateral Pool, so
that, immediately after the release, the Coverage and LTV Tests will be
satisfied and neither the Aggregate Debt Service Coverage Ratios for the
Trailing 12 Month Period will be reduced nor the Aggregate Loan to Value Ratio
for the Trailing 12 Month Period will be increased as a result of such release
and (2) at all times after Section 22.01(a) of this Agreement is no longer in
effect the greater of (i) 125% of the Allocable Facility Amount for the
Mortgaged Property to be released and (ii) the amount, if any, of Advances
Outstanding which are required to be repaid by the Borrower to the Lender in
connection with the proposed release of the Mortgaged Property from the
Collateral Pool, so that, immediately after the release, the Coverage and LTV
Tests will be satisfied and neither the Aggregate Debt Service Coverage Ratios
for the Trailing 12 Month Period will be reduced nor the Aggregate Loan to Value
Ratio for the Trailing 12 Month Period will be increased as a result of such
release. In addition to the Release Price, the Borrower shall pay to the Lender
all associated prepayment premiums and other amounts due under the Notes and any
Advance Confirmation Instruments evidencing the Advances being repaid.
(d) APPLICATION OF RELEASE PRICE. The Release Price shall be
applied against the Variable Advances Outstanding until there are no further
Variable Advances Outstanding, and thereafter shall be held by the Lender (or
its appointed collateral agent) as substituted
-41-
<PAGE>
Collateral ("SUBSTITUTED CASH COLLATERAL"), in accordance with a security
agreement and other documents in form and substance acceptable to the Lender
(or, at the Borrower's option, may be applied against the prepayment of Fixed
Facility Advances, so long as the prepayment is permitted under the Fixed
Facility Note for the Fixed Facility Advance). Any portion of the Release Price
held as Substituted Cash Collateral may be released if, immediately after giving
effect to the release, each of the conditions set forth in Section 7.03(a) below
shall have been satisfied. If, on the date on which the Borrower pays the
Release Price, Variable Advances are Outstanding but are not then due and
payable, the Lender shall hold the payments as additional Collateral for the
Credit Facility, until the next date on which Variable Advances are due and
payable, at which time the Lender shall apply the amounts held by it to the
amounts of the Variable Advances due and payable.
SECTION 7.03 CONDITIONS PRECEDENT TO RELEASE OF COLLATERAL RELEASE PROPERTY FROM
THE COLLATERAL. The obligation of the Lender to release a Collateral Release
Property from the Collateral Pool by executing and delivering the Collateral
Release Documents on the Closing Date, are subject to the satisfaction of the
following conditions precedent on or before the Closing Date:
(a) Immediately after giving effect to the requested release the
Coverage and LTV Tests will be satisfied, and in the case of any substitution
effected pursuant to Section 7.04 of this Agreement, the Coverage and LTV Tests
are not adversely affected after giving effect to the proposed substitution;
(b) Receipt by the Lender of the Release Price;
(c) Receipt by the Lender of the Release Fee for the Collateral
Release Property and all legal fees and expenses payable by the Borrower in
connection with the release pursuant to Section 16.04(b);
(d) Receipt by the Lender on the Closing Date of one or more
counterparts of each Collateral Release Document, dated as of the Closing Date,
signed by each of the parties (other than the Lender) who is a party to such
Collateral Release Document;
(e) If required by the Lender, amendments to the Notes and the
Security Instruments, reflecting the release of the Collateral Release Property
from the Collateral Pool and, as to any Security Instrument so amended, the
receipt by the Lender of an endorsement to the Title Insurance Policy insuring
the Security Instrument, amending the effective date of the Title Insurance
Policy to the Closing Date and showing no additional exceptions to coverage
other than the exceptions shown on the Initial Closing Date and other exceptions
approved by the Lender;
(f) If the Lender determines the Collateral Release Property to
be one phase of a project, and one or more other phases of the project are
Mortgaged Properties which will remain in the Collateral Pool ("REMAINING
MORTGAGED PROPERTIES"), the Lender must determine that the Remaining Mortgaged
Properties can be operated separately from the Collateral Release Property and
any other phases of the project which are not Mortgaged Properties. In making
this determination, the Lender shall evaluate whether the Remaining Mortgaged
Properties
-42-
<PAGE>
comply with the terms of Sections 203 and 208 of the DUS Guide, which, as of the
date of this Agreement, require, among other things, that a phase which
constitutes collateral for a loan made in accordance with the terms of the DUS
Guide (i) have adequate ingress and egress to existing public roadways, either
by location of the phase on a dedicated, all-weather road or by access to such a
road by means of a satisfactory easement, (ii) have access which is sufficiently
attractive and direct from major thoroughfares to be conducive to continued good
marketing, (iii) have a location which is not (A) inferior to other phases, (B)
such that inadequate maintenance of other phases would have a significant
negative impact on the phase, and (C) such that the phase is visible only after
passing through the other phases of the project and (iv) comply with such other
issues as are dictated by prudent practice;
(g) Receipt by the Lender of endorsements to the Tie-In
Endorsements of the Title Insurance Policies, if deemed necessary by the Lender,
to reflect the release;
(h) Receipt by the Lender on the Closing Date of a writing, dated
as of the Closing Date, signed by the Borrower Parties, in the form attached as
EXHIBIT U to this Agreement, pursuant to which the Borrower Parties confirm that
their obligations under the Loan Documents are not adversely affected by the
release of the Collateral Release Property from the Collateral;
(i) The remaining Mortgaged Properties in the Collateral Pool
shall satisfy the then-existing Geographical Diversification Requirements; and
(j) The satisfaction of all applicable General Conditions set
forth in Article XI.
SECTION 7.04 SUBSTITUTIONS.
(a) RIGHT TO SUBSTITUTE COLLATERAL. Subject to the terms, conditions and
limitations of this Section 7.04 and Articles VI and VII, the Borrower Parties
shall have the right, from time to time during the Term of this Agreement, to
add one or more Multifamily Residential Properties to the Collateral Pool in
substitution of one or more Mortgaged Properties then in the Collateral Pool in
accordance with the provisions of this Section 7.04 ("Substituted Mortgaged
Property").
(b) PROCEDURE FOR SUBSTITUTING COLLATERAL.
(i) REQUEST. The Borrower Parties may deliver a written request
("COLLATERAL SUBSTITUTION REQUEST") to the Lender, in the form attached
as EXHIBIT Z to this Agreement, to add one or more Multifamily
Residential Properties to the Collateral Pool in substitution of one or
more Mortgaged Properties then in the Collateral Pool. Each Collateral
Substitution Request shall be accompanied by the following:
(x) The information relating to the proposed Substituted
Mortgaged Property required by the form attached as EXHIBIT DD to
this Agreement ("COLLATERAL SUBSTITUTION DESCRIPTION PACKAGE"),
as amended from time to time to include information required
under the DUS guide; and
-43-
<PAGE>
(y) A statement whether the addition of the proposed
Substituted Mortgaged Property will occur simultaneously with the
release of the proposed Collateral Release Property and, if not,
the Borrower Parties shall specify the proposed date on which the
proposed Substituted Mortgaged Property will be added to the
Collateral Pool which, in no event, shall be a date which is more
than 90 days after the proposed date of the release of the
proposed Collateral Release Property.
(ii) ADDITIONAL INFORMATION. The Borrower Parties shall promptly
deliver to the Lender any additional information concerning the proposed
Substituted Mortgaged Property and the proposed Collateral Release
Property that the Lender may from time to time reasonably request.
(iii) UNDERWRITING. The Lender shall evaluate the proposed
Substituted Mortgaged Property, and shall make underwriting
determinations as to (a) the Aggregate Debt Service Coverage Ratios and
the Aggregate Loan to Value Ratio immediately prior to and immediately
after giving effect to the proposed substitution, and (b) the Valuation
and the Net Operating Income for the Trailing 12 Month Period for both
the proposed Substituted Mortgaged Property and the proposed Collateral
Release Property. Notwithstanding anything to the contrary contained
herein, for purposes of making such underwriting determines with respect
to the proposed Substituted Mortgaged Property, such determinations
shall be made on the basis of a Valuation made with respect to the
proposed Substituted Mortgaged Property, and otherwise in accordance
with Fannie Mae's DUS Underwriting Requirements. Within 30 days after
receipt of (a) the Collateral Substitution Request for the proposed
Substituted Mortgaged Property and the proposed Collateral Release
Property and (b) all reports, certificates and documents set forth on
EXHIBIT EE to this Agreement, including a zoning analysis undertaken in
accordance with Section 206 of the DUS Guide, the Lender shall notify
the Borrower Parties whether or not the proposed Substituted Mortgaged
Property meets the Coverage and LTV Tests and DUS Underwriting
Requirements required by this Section 7.04(b)(iii), and therefore
whether or not it shall consent to the addition of the proposed
Substituted Mortgaged Property to the Collateral Pool in substitution of
the proposed Collateral Release Property and, if it shall so consent,
shall set forth the Aggregate Debt Service Coverage Ratios and the
Aggregate Loan to Value Ratio which it estimates shall result from the
substitution of the proposed Substituted Mortgaged Property into the
Collateral Pool in replacement of the proposed Collateral Release
Property. If the proposed Substituted Mortgaged Property does not meet
the Coverage and LTV Tests and DUS Underwriting Requirements required by
this Section 7.04(b)(iii), and therefore the Lender does not consent to
the substitution of the proposed Additional Mortgaged Property into the
Collateral Pool in replacement of the proposed Collateral Release
Property, the Lender shall include, in its notice, a brief statement of
the reasons for doing so. Within five Business Days after receipt of the
Lender's notice that it shall consent to the substitution of the
proposed Additional Mortgaged Property into the Collateral Pool in
replacement of the proposed Collateral Release Property, the Borrower
Parties shall notify the Lender whether or not they elect to cause such
substitution to occur. If the Borrower Parties fail to respond within
the period of five Business Days, they shall be conclusively deemed to
have elected not to cause the proposed substitution to occur.
-44-
<PAGE>
(iv) CLOSING. If, pursuant to this Section 7.04, the Lender
consents to the substitution of the proposed Additional Mortgaged
Property into the Collateral Pool in replacement of the proposed
Collateral Release Property, the Borrower Parties timely elect to cause
such substitution to occur and all conditions contained in Section
7.04(c) are satisfied, the Lender shall permit the proposed Additional
Mortgaged Property to be substituted into the Collateral Pool in
replacement of the proposed Collateral Release Property, at a closing to
be held at offices designated by the Lender on a Closing Date selected
by the Lender, and occurring --
(x) if the substitution of the proposed Substituted
Collateral Property is to occur simultaneously with the release
of the proposed Collateral Released Property, within 30 days
after the Lender's receipt of the Borrower Parties' election (or
on such other date to which the Borrower Parties and the Lender
may agree); or
(y) if the substitution of the proposed Substituted
Collateral Property is to occur subsequent to the release of the
Collateral Release Property, within 90 days after the release of
the Collateral Release Property in accordance with Section
7.02(c).
If, in the case of clause (y), the addition of the proposed Substituted
Collateral Property to the Collateral Pool does not occur within 90 days
or such longer period as approved by Lender, in its sole discretion,
after the release of the Collateral Release Property in accordance with
such clause (y), then the Borrower Parties shall have waived their right
to substitute such Collateral Release Property with the proposed
Substituted Mortgaged Property, the Release Price shall be determined
pursuant to Section 7.02(c) and the Borrower Parties shall comply with
the requirement set forth in Section 7.03. Such Release Price, or the
applicable portion thereof, shall be credited under this Agreement
and/or be immediately due and payable by the Borrower Parties to the
Lender to reduce the Advances Outstanding as required by, and in the
manner set forth in, Section 7.02(d).
(c) CONDITIONS PRECEDENT TO SUBSTITUTION OF A SUBSTITUTED MORTGAGED
PROPERTY INTO THE COLLATERAL POOL. The substitution of a Substituted Mortgaged
Property into the Collateral Pool in replacement of a Collateral Release
Property on the Closing Date is subject to the satisfaction of the following
conditions precedent:
(i) The proposed Substituted Mortgaged Property has a Debt
Service Coverage Ratio for the Trailing 12 Month Period of not less than
140% and a Loan to Value Ratio of not more than 65% and immediately
after giving effect to the requested addition, the Coverage and LTV
Tests will be satisfied;
(ii) The Lender shall have made the determination, as a part of
the underwriting evaluations made in accordance with Section
7.04(b)(iii), that (a) the Aggregate Debt Service Coverage Ratio
immediately after giving effect to the proposed substitution will be
equal to or higher than the Aggregate Debt Service Coverage Ratio
immediately prior to the proposed substitution, and (ii) the Aggregate
Loan to Value Ratio immediately after giving effect to the proposed
substitution will be equal to or less
-45-
<PAGE>
than the Aggregate Loan to Ratio immediately prior to giving effect to
the proposed substitution;
(iii) With respect to the release of the proposed Collateral
Release Property, the Borrower Parties shall have complied with Section
7.03 (other than clause (b) with respect to the requirement pertaining
to Release Price);
(iv) The receipt by the Lender of the Collateral Substitution Fee
and all legal fees and expenses payable by the Borrower Parties in
connection with the substitution pursuant to Section 16.04(b).
(v) The delivery to the Title Company, with fully executed
instructions directing the Title Company to file and/or record in all
applicable jurisdictions, all applicable Collateral Substitution Loan
Documents required by Lender, including duly executed and delivered
original copies of any Security Instruments and UCC-1 Financing
Statements covering the portion of the Substituted Mortgaged Property
comprised of personal property, and other appropriate documents, in form
and substance satisfactory to the Lender and in form proper for
recordation, as may be necessary in the opinion of the Lender to perfect
the Lien created by the applicable additional Security Instrument, and
any other Collateral Substitution Loan Document creating a Lien in favor
of the Lender, and the payment of all taxes, fees and other charges
payable in connection with such execution, delivery, recording and
filing;
(vi) If required by the Lender, amendments to the Notes and the
Security Instruments, reflecting the addition of the Substituted
Mortgaged Property to the Collateral Pool and, as to any Security
Instrument so amended, the receipt by the Lender of an endorsement to
the Title Insurance Policy insuring the Security Instrument, amending
the effective date of the Title Insurance Policy to the Closing Date and
showing no additional exceptions to coverage other than Permitted Liens;
(vii) If the Title Insurance Policy for the Substituted Mortgaged
Property contains a Tie-In Endorsement, and endorsement to each other
Title Insurance Policy containing a Tie-In Endorsement, adding a
reference to the Substituted Mortgaged Property;
(viii) The delivery to the Lender of additional collateral or the
repayment of Advances Outstanding to the extent required pursuant to
Section 7.04(d); and
(ix) The satisfaction of all General Conditions set forth in
Article XI.
(d) RESTRICTION ON BORROWINGS. In the case that the substitution of the
proposed Substituted Mortgaged Property is not to occur simultaneously with the
release of the proposed Collateral Release Property, from and after the release
of the proposed Collateral Release Property until the addition of the proposed
Substituted Mortgaged Property into the Collateral Pool in accordance with this
Section 7.04, the Borrower shall not be permitted to have the aggregate unpaid
principal balance of Loans Outstanding to be in excess of an amount equal to the
then-existing Commitment minus the Allocable Credit Facility Amount attributable
to the Collateral Release Property that was released, unless the Borrower shall
have delivered to the
-46-
<PAGE>
Lender additional collateral reasonably acceptable to the Lender in an amount at
least equal to such Allocable Credit Facility Amount. In the event that the
aggregate unpaid principal balance of Advances Outstanding exceeds such amount
(and additional collateral in an amount at least equal to the applicable
Allocable Credit Facility Amount has not been delivered by the Borrower to the
Lender), as a condition precedent to the substitution of a Substituted Mortgaged
Property into the Collateral Pool, the Borrower shall pay such excess.
Notwithstanding the foregoing, in no event shall the value of the additional
collateral exceed 15% of the principal balance of the Loans Outstanding. Any
payment received by the Lender under this Section 7.04(d) shall be applied
against Loans Outstanding in the manner prescribed for Release Prices pursuant
to Section 7.02. The additional collateral shall be released to the Borrower
upon the addition of the applicable Substituted Mortgaged Property to the
Collateral Pool in accordance with this Section 7.05.
ARTICLE VIII
EXPANSION OF CREDIT FACILITY
SECTION 8.01 RIGHT TO INCREASE COMMITMENT. Subject to the terms, conditions and
limitations of this Article, the Borrower shall have the right, at any time or
from time to time during the Fixed Facility Availability Period, to increase the
Fixed Facility Commitment, the Variable Facility Commitment, or both. Either
Commitment may be increased by the addition of Collateral to the Collateral Pool
and/or increases in the value of the Mortgaged Properties. No increase in the
Commitments shall be made in respect of Valuations of the Mortgaged Properties
in excess of the Initial Valuations of any Mortgaged Property until such time as
each of the Multifamily Residential Properties listed on EXHIBIT CC to this
Agreement has achieved 85% occupancy as determined by Lender. Notwithstanding
the preceding sentence, the Commitments may be increased in respect of an
increased Valuation of the Mortgaged Property known as Montgomery when such
Mortgaged Property has achieved at least 90% occupancy for not less than ninety
(90) consecutive days. Nothing in this paragraph shall limit the Borrower's
right to increase the Commitments as a result of additions of Mortgaged
Properties to the Collateral Pool. The Borrower's right to increase the
Commitment is subject to the following limitations:
(a) MAXIMUM AMOUNT OF INCREASE IN COMMITMENT. The maximum amount
by which the Commitment may be increased is $81,769,000.
(b) MINIMUM REQUEST. Each Request for an increase in the
Commitment shall be in the minimum amount of $10,000,000.
(c) TERMS AND CONDITIONS. The terms and conditions of this
Agreement shall apply to any increase in the Commitment closed not later than
the date 12 months after the Initial Closing Date. The terms and conditions
(including pricing) applicable to any increase in the Commitment after the date
12 months after the Initial Closing Date shall be acceptable to Lender in its
discretion.
SECTION 8.02 PROCEDURE FOR OBTAINING INCREASES IN COMMITMENT.
-47-
<PAGE>
(a) REQUEST. In order to obtain an increase in the Commitment,
the Borrower shall deliver a written request for an increase (a "CREDIT FACILITY
EXPANSION REQUEST") to the Lender, in the form attached as EXHIBIT V to this
Agreement. Each Credit Facility Expansion Request shall be accompanied by the
following:
(i) A designation of the amount of the proposed increase;
(ii) A designation of the increase in the Fixed Facility
Credit Commitment and the Variable Facility Credit Commitment;
(iii) If any Multifamily Residential Properties are
proposed to be added to the Collateral Pool, a list of such Multifamily
Residential Properties and evidence of compliance with the requirements
of Article VI in connection with such addition.
(iv) A request that the Lender inform the Borrower of any
change in the Geographical Diversification Requirements; and
(v) A request that the Lender inform the Borrower of the
Fixed Facility Fee and the Variable Facility Fee to apply to Advances
drawn from such increase in the Commitment.
(b) CLOSING. If all conditions contained in Section 8.03 are
satisfied, the Lender shall permit the requested increase in the Commitment, at
a closing to be held at offices designated by the Lender on a Closing Date
selected by the Lender, and occurring within fifteen (15) Business Days after
the Lender's receipt of the Credit Facility Expansion Request (or on such other
date to which the Borrower and the Lender may agree).
SECTION 8.03 CONDITIONS PRECEDENT TO INCREASE IN COMMITMENT. The right of the
Borrower to increase the Commitment is subject to the satisfaction of the
following conditions precedent on or before the Closing Date:
(a) After giving effect to the requested increase the Coverage
and LTV Tests will be satisfied;
(b) Payment by the Borrower of the Expansion Origination Fee in
accordance with Section 16.02(b) and all legal fees and expenses payable by the
Borrower in connection with the expansion of the Commitment pursuant to Section
16.04(b);
(c) The receipt by the Lender of an endorsement to each Title
Insurance Policy, amending the effective date of the Title Insurance Policy to
the Closing Date, increasing the limits of liability to the Commitment, as
increased under this Article, showing no additional exceptions to coverage other
than the exceptions shown on the Initial Closing Date (or, if applicable, the
last Closing Date with respect to which the Title Insurance Policy was endorsed)
and other exceptions approved by the Lender, together with any reinsurance
agreements required by the Lender;
-48-
<PAGE>
(d) The receipt by the Lender of fully executed original copies
of all Credit Facility Expansion Loan Documents, each of which shall be in full
force and effect, and in form and substance satisfactory to the Lender in all
respects;
(e) if determined necessary by the Lender, the Borrower's
agreement to such geographical diversification requirements as the Lender may
determine; and
(f) The satisfaction of all applicable General Conditions set
forth in Article XI.
ARTICLE IX
PARTIAL TERMINATION OF FACILITIES
SECTION 9.01 RIGHT TO COMPLETE OR PARTIAL TERMINATION OF FACILITIES. Subject to
the terms and conditions of this Article, the Borrower shall have the right to
permanently reduce the Variable Facility Commitment and the Fixed Facility
Commitment in accordance with the provisions of this Article.
SECTION 9.02 PROCEDURE FOR COMPLETE OR PARTIAL TERMINATION OF FACILITIES.
(a) REQUEST. In order to permanently reduce the Variable Facility
Commitment or the Fixed Facility Commitment, the Borrower may deliver a written
request for the reduction ("FACILITY TERMINATION REQUEST") to the Lender, in the
form attached as EXHIBIT W to this Agreement. A permanent reduction of the
Variable Facility Commitment to $0 shall be referred to as a "COMPLETE VARIABLE
FACILITY TERMINATION." A permanent reduction of the Fixed Facility Commitment to
$0 shall be referred to as a "COMPLETE FIXED FACILITY TERMINATION." The Facility
Termination Request shall be accompanied by the following:
(i) A designation of the proposed amount of the reduction
in the Variable Facility Commitment or Fixed Facility Commitment, as the
case may be; and
(ii) Unless there is a Complete Variable Facility
Termination, or a Complete Fixed Facility Termination, a designation by
the Borrower of any Variable Advances which will be prepaid or Fixed
Advances which will be prepaid or defeased, as the case may be.
Any release of Collateral, whether or not made in connection with a Facility
Termination Request, must comply with all conditions to a release which are set
forth in Article VII.
(b) CLOSING. If all conditions contained in Section 9.03 are
satisfied, the Lender shall permit the Variable Facility Commitment or Fixed
Facility Commitment as the case may be, to be reduced to the amount designated
by the Borrower, at a closing to be held at offices designated by the Lender on
a Closing Date selected by the Lender, within fifteen (15) Business Days after
the Lender's receipt of the Facility Termination Request (or on such other date
to which the Borrower and the Lender may agree), by executing and delivering a
counterpart of an amendment to this Agreement, in the form attached as EXHIBIT X
to this Agreement, evidencing the reduction in the Facility Commitment. The
document referred to in the preceding sentence is referred to in this Article as
the "FACILITY TERMINATION DOCUMENT."
-49-
<PAGE>
SECTION 9.03 CONDITIONS PRECEDENT TO COMPLETE OR PARTIAL TERMINATION OF
FACILITIES. The right of the Borrower to reduce the Facility Commitment and the
obligation of the Lender to execute the Facility Termination Document, are
subject to the satisfaction of the following conditions precedent on or before
the Closing Date:
(a) Payment by the Borrower in full of all of the Variable
Advances Outstanding and Fixed Facility Advances Outstanding, as the case may
be, required to be paid in order that the aggregate unpaid principal balance of
all Variable Advances Outstanding and Fixed Facility Advances Outstanding, as
the case may be, is not greater than the Variable Facility Commitment and Fixed
Facility Commitment, as the case may be, including any associated prepayment
premiums or other amounts due under the Notes (but if the Borrower is not
required to prepay all of the Variable Advances or Fixed Facility Advances
Outstanding, as the case may be, the Borrower shall have the right to select
which of the Variable Advances or Fixed Facility Advances, as the case may be,
shall be repaid);
(b) Payment by the Borrower of the Facility Termination Fee;
(c) Receipt by the Lender on the Closing Date of one or more
counterparts of the Facility Termination Document, dated as of the Closing Date,
signed by each of the parties (other than the Lender) who is a party to such
Facility Termination Document; and
(d) The satisfaction of all applicable General Conditions set
forth in Article XI.
ARTICLE X
TERMINATION OF CREDIT FACILITY
SECTION 10.01 RIGHT TO TERMINATE CREDIT FACILITY. Subject to the terms and
conditions of this Article, the Borrower shall have the right to terminate this
Agreement and the Credit Facility and receive a release of all of the Collateral
from the Collateral Pool in accordance with the provisions of this Article.
SECTION 10.02 PROCEDURE FOR TERMINATING CREDIT FACILITY.
(a) REQUEST. In order to terminate this Agreement and the Credit
Facility, the Borrower shall deliver a written request for the termination
("CREDIT FACILITY TERMINATION REQUEST") to the Lender, in the form attached as
EXHIBIT Y to this Agreement.
(b) CLOSING. If all conditions contained in Section 10.03 are
satisfied, this Agreement shall terminate, and the Lender shall cause all of the
Collateral to be released from the Collateral Pool, at a closing to be held at
offices designated by the Lender on a Closing Date selected by the Lender,
within 30 Business Days after the Lender's receipt of the Credit Facility
Termination Request (or on such other date to which the Borrower and the Lender
may agree), by executing and delivering, and causing all applicable parties to
execute and deliver, all at the sole cost and expense of the Borrower, (i)
instruments, in the form customarily used by the Lender for releases in the
jurisdictions in which the Mortgaged Properties are located, releasing all of
the Security Instruments as a Lien on the Mortgaged Properties, (ii) UCC-3
Termination Statements terminating all of the UCC-1 Financing Statements
perfecting a Lien on the personal
-50-
<PAGE>
property located on the Mortgaged Properties, in form customarily used in the
jurisdiction governing the perfection of the security interest being released,
(iii) such other documents and instruments as the Borrower may reasonably
request evidencing the release of the Collateral from any lien securing the
Obligations (including a termination of any restriction on the use of any
accounts relating to the Collateral) and the release and return to the Borrower
of any and all escrowed amounts relating thereto, (iv) instruments releasing the
Borrower Parties from their obligations under this Agreement and any and all
other Loan Documents, and (v) the Notes, each marked paid and canceled. The
instruments referred to in the preceding sentence are referred to in this
Article as the "FACILITY TERMINATION DOCUMENTS."
SECTION 10.03 CONDITIONS PRECEDENT TO TERMINATION OF CREDIT FACILITY. The right
of the Borrower to terminate this Agreement and the Credit Facility and to
receive a release of all of the Collateral from the Collateral Pool and the
Lender's obligation to execute and deliver the Facility Termination Documents on
the Closing Date are subject to the following conditions precedent:
(a) Payment by the Borrower in full of all of the Notes
Outstanding on the Closing Date, including any associated prepayment premiums or
other amounts due under the Notes and all other amounts owing by the Borrower to
the Lender under this Agreement;
(b) Defeasance by the Borrower, in accordance with the
provisions of Section 3.10 of this Agreement, with respect to all Fixed Facility
Notes Outstanding on the Closing Date;
(c) Payment of the Facility Termination Fee; and
(d) The satisfaction of all applicable General Conditions
set forth in Article XI.
ARTICLE XI
GENERAL CONDITIONS PRECEDENT TO ALL REQUESTS
The obligation of the Lender to close the transaction requested in a
Request shall be subject to the following conditions precedent ("GENERAL
CONDITIONS") in addition to any other conditions precedent set forth in this
Agreement:
SECTION 11.01 CONDITIONS APPLICABLE TO ALL REQUESTS. Each of the following
conditions precedent shall apply to all Requests:
(a) PAYMENT OF EXPENSES. The payment by the Borrower of the
Lender's reasonable fees and expenses payable in accordance with this Agreement.
(b) NO MATERIAL ADVERSE CHANGE. Except in connection with a
Credit Facility Termination Request, there has been no material adverse change
in the financial condition, business or prospects of the Borrower Parties or in
the physical condition, operating performance or value of any of the Mortgaged
Properties since the Initial Closing Date (or, with respect to the conditions
precedent to the Initial Advance, from the condition, business or
-51-
<PAGE>
prospects reflected in the financial statements, reports and other information
obtained by the Lender during its review of the Borrower Parties and the Initial
Mortgaged Properties).
(c) NO DEFAULT. Except in connection with a Credit Facility
Termination Request, there shall exist no Event of Default or Potential Event of
Default on the Closing Date for the Request and, after giving effect to the
transaction requested in the Request, no Event of Default or Potential Event of
Default shall have occurred.
(d) NO INSOLVENCY. Except in connection with a Credit Facility
Termination Request, receipt by the Lender on the Closing Date for the Request
of evidence satisfactory to the Lender that no Borrower Party is insolvent
(within the meaning of any applicable federal or state laws relating to
bankruptcy or fraudulent transfers) or will be rendered insolvent by the
transactions contemplated by the Loan Documents, including the making of a
Future Advance, or, after giving effect to such transactions, will be left with
an unreasonably small capital with which to engage in its business or
undertakings, or will have intended to incur, or believe that it has incurred,
debts beyond its ability to pay such debts as they mature or will have intended
to hinder, delay or defraud any existing or future creditor.
(e) NO UNTRUE STATEMENTS. The Loan Documents shall not contain
any untrue or misleading statement of a material fact and shall not fail to
state a material fact necessary in order to make the information contained
therein not misleading.
(f) REPRESENTATIONS AND WARRANTIES. Except in connection with a
Credit Facility Termination Request, all representations and warranties made by
any Borrower Party in the Loan Documents shall be true and correct in all
material respects on the Closing Date for the Request with the same force and
effect as if such representations and warranties had been made on and as of the
Closing Date for the Request.
(g) NO CONDEMNATION OR CASUALTY. Except in connection with a
Credit Facility Termination Request, there shall not be pending or threatened
any condemnation or other taking, whether direct or indirect, against any
Mortgaged Property and there shall not have occurred any casualty to any
improvements located on any Mortgaged Property, which casualty would have a
material adverse effect on the continued operations of such Mortgaged Property.
(h) DELIVERY OF CLOSING DOCUMENTS. The receipt by the Lender of
the following, each dated as of the Closing Date for the Request, in form and
substance satisfactory to the Lender in all respects:
(i) A Compliance Certificate;
(ii) An Organizational Certificate; and
(iii) Such other documents, instruments, approvals (and,
if requested by the Lender, certified duplicates of executed copies
thereof) and opinions as the Lender may reasonably request.
(i) COVENANTS. Except in connection with a Credit Facility
Termination Request, the Borrower Parties are in full compliance with each of
the covenants set forth in
-52
<PAGE>
Articles XIII, XIV and XV of this Agreement, without giving effect to any notice
and cure rights of the Borrower Parties.
SECTION 11.02 DELIVERY OF CLOSING DOCUMENTS RELATING TO INITIAL ADVANCE REQUEST,
COLLATERAL ADDITION REQUEST, CREDIT FACILITY EXPANSION REQUEST OR FUTURE ADVANCE
REQUEST. With respect to the closing of the Initial Advance Request, a
Collateral Addition Request, or a Credit Facility Expansion Request, it shall be
a condition precedent that the Lender receives each of the following, each dated
as of the Closing Date for the Request, in form and substance satisfactory to
the Lender in all respects:
(a) LOAN DOCUMENTS. Fully executed original copies of each Loan
Document required to be executed in connection with the Request, duly executed
and delivered by the parties thereto (other than the Lender), each of which
shall be in full force and effect.
(b) OPINION. Favorable opinions of counsel to the Borrower
Parties, as to the due organization and qualification of the Borrower Parties,
the due authorization, execution, delivery and enforceability of each Loan
Document executed in connection with the Request and such other matters as the
Lender may reasonably require.
SECTION 11.03 DELIVERY OF PROPERTY-RELATED DOCUMENTS. With respect to each of
the Mortgaged Properties to be made part of the Collateral Pool on the Closing
Date for the Initial Advance Request or a Collateral Addition Request, it shall
be a condition precedent that the Lender receive each of the following, each
dated as of the Closing Date for the Initial Advance Request or Collateral
Addition Request, as the case may be, in form and substance satisfactory to the
Lender in all respects:
(a) A favorable opinion of local counsel to the Borrower Parties
or the Lender as to the enforceability of the Security Instrument, and any other
Loan Documents, executed in connection with the Request.
(b) A commitment for the Title Insurance Policy applicable to the
Mortgaged Property and a pro forma Title Insurance Policy based on the
Commitment.
(c) The Insurance Policy (or a certified copy of the Insurance
Policy) applicable to the Mortgaged Property.
(d) The Survey applicable to the Mortgaged Property.
(e) Evidence satisfactory to the Lender of compliance of the
Mortgaged Property with property laws as required by Sections 205 and 206 of
Part III of the DUS Guide.
(f) An Appraisal of the Mortgaged Property.
(g) A Replacement Reserve Agreement, providing for the
establishment of a replacement reserve account, to be pledged to the Lender, in
which the owner shall (unless waived by the Lender) periodically deposit amounts
for replacements for improvements at the Mortgaged Property and as additional
security for the Borrower Parties' obligations under the Loan Documents.
-53-
<PAGE>
(h) A Completion/Repair and Security Agreement, together with
required escrows, on the standard form required by the DUS Guide.
(i) An Assignment of Management Agreement, on the standard form
required by the DUS Guide.
(j) An Assignment of Leases and Rents, if the Lender determines
one to be necessary or desirable, provided that the provisions of any such
assignment shall be substantively identical to those in the Security Instrument
covering the Collateral, with such modifications as may be necessitated by
applicable state or local law.
(k) With respect to a Collateral Addition Request, an amendment
to the Cash Management Agreement executed by the Borrower Parties on the Initial
Closing Date, adding the Borrower Parties as a party and adding a Property
Account for the Mortgaged Property.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES
SECTION 12.01 REPRESENTATIONS AND WARRANTIES OF THE BORROWER PARTIES. Each
Borrower Party hereby represents and warrants to the Lender, with respect to
itself, as follows:
(a) DUE ORGANIZATION; QUALIFICATION.
(1) The REIT is qualified to transact business and is in
good standing in the State of Tennessee. The Borrower Parties are
qualified to transact business and is in good standing in the State in
which they are organized and in each other jurisdiction in which such
qualification and/or standing is necessary to the conduct of its
business and where the failure to be so qualified would adversely affect
the validity of, the enforceability of, or the ability of the Borrower
Parties to perform the Obligations under this Agreement and the other
Loan Documents. The Borrower Parties are qualified to transact business
and are in good standing in each State in which they own a Mortgaged
Property.
(2) The Borrower Parties' principal place of business,
principal office and office where they keep their books and records as
to the Collateral is located at the address set out in Section 23.08.
(b) POWER AND AUTHORITY. The Borrower Parties have the requisite
power and authority (i) to own their properties and to carry on their business
as now conducted and as contemplated to be conducted in connection with the
performance of the Obligations hereunder and under the other Loan Documents and
(ii) to execute and deliver this Agreement and the other Loan Documents and to
carry out the transactions contemplated by this Agreement and the other Loan
Documents.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and the other Loan Documents have been duly authorized by all
necessary action and proceedings by or on behalf of the Borrower Parties, and no
further approvals or filings of any kind, including any approval of or filing
with any Governmental Authority, are required by
-54-
<PAGE>
or on behalf of the Borrower Parties as a condition to the valid execution,
delivery and performance by the Borrower Parties of this Agreement or any of the
other Loan Documents.
(d) VALID AND BINDING OBLIGATIONS. This Agreement and the other
Loan Documents have been duly authorized, executed and delivered by the Borrower
Party and constitute the legal, valid and binding obligations of the Borrower
Party, enforceable against the Borrower Party in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles affecting the enforcement of creditors' rights generally or by
equitable principles or by the exercise of discretion by any court.
(e) NON-CONTRAVENTION; NO LIENS. Neither the execution and
delivery of this Agreement and the other Loan Documents, nor the fulfillment of
or compliance with the terms and conditions of this Agreement and the other Loan
Documents nor the performance of the Obligations:
(1) does or will conflict with or result in any breach or
violation of any Applicable Law enacted or issued by any Governmental
Authority or other agency having jurisdiction over the Borrower Party,
any of the Mortgaged Properties or any other portion of the Collateral
or other assets of the Borrower Party, or any judgment or order
applicable to the Borrower Party or to which the Borrower Party, any of
the Mortgaged Properties or other assets of the Borrower Party are
subject;
(2) does or will conflict with or result in any material
breach or violation of, or constitute a default under, any of the terms,
conditions or provisions of the Borrower Party's Organizational
Documents, any indenture, existing agreement or other instrument to
which the Borrower Party is a party or to which the Borrower Party, any
of the Mortgaged Properties or any other portion of the Collateral or
other assets of the Borrower Party are subject;
(3) does or will result in or require the creation of any
Lien on all or any portion of the Collateral or any of the Mortgaged
Properties, except for the Permitted Liens; or
(4) does or will require the consent or approval of any
creditor of the Borrower Party, any Governmental Authority or any other
Person except such consents or approvals which have already been
obtained.
(f) PENDING LITIGATION OR OTHER PROCEEDINGS. There is no pending
or, to the best knowledge of the Borrower Party, threatened action, suit,
proceeding or investigation, at law or in equity, before any court, board, body
or official of any Governmental Authority or arbitrator against or affecting any
Mortgaged Property or any other portion of the Collateral or other assets of the
Borrower Party, which, if decided adversely to the Borrower Party, would have,
or may reasonably be expected to have, a Material Adverse Effect. The Borrower
Party is not in default with respect to any order of any Governmental Authority.
(g) SOLVENCY. The Borrower Party is not insolvent and will not be
rendered insolvent by the transactions contemplated by this Agreement or the
other Loan Documents and
-55-
<PAGE>
after giving effect to such transactions, the Borrower Party will not be left
with an unreasonably small amount of capital with which to engage in its
business or undertakings, nor will the Borrower Party have incurred, have
intended to incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature. The Borrower Party did not receive less than a
reasonably equivalent value in exchange for incurrence of the Obligations. There
(i) is no contemplated, pending or, to the best of the Borrower Party's
knowledge, threatened bankruptcy, reorganization, receivership, insolvency or
like proceeding, whether voluntary or involuntary, affecting the Borrower Party
or any of the Mortgaged Properties and (ii) has been no assertion or exercise of
jurisdiction over the Borrower Party or any of the Mortgaged Properties by any
court empowered to exercise bankruptcy powers.
(h) NO CONTRACTUAL DEFAULTS. There are no defaults by the
Borrower Party or, to the knowledge of the Borrower Party, by any other Person
under any contract to which the Borrower Party is a party relating to any
Mortgaged Property, including any management, rental, service, supply, security,
maintenance or similar contract, other than defaults which do not permit the
non-defaulting party to terminate the contract and which do not have, and are
not reasonably be expected to have, a Material Adverse Effect. Neither the
Borrower Party nor, to the knowledge of the Borrower Party, any other Person,
has received notice or has any knowledge of any existing circumstances in
respect of which it could receive any notice of default or breach in respect of
any contracts affecting or concerning any Mortgaged Property.
(i) COMPLIANCE WITH THE LOAN DOCUMENTS. The Borrower Party is in
compliance with all provisions of the Loan Documents to which it is a party or
by which it is bound. The representations and warranties made by the Borrower
Party in the Loan Documents are true, complete and correct as of the Closing
Date and do not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) ERISA. The Borrower Party is in compliance in all material
respects with all applicable provisions of ERISA and has not incurred any
liability to the PBGC on a Plan under Title IV of ERISA. None of the assets of
the Borrower Party constitute plan assets (within the meaning of Department of
Labor Regulation ss. 2510.3-101) of any employee benefit plan subject to Title I
of ERISA.
(k) FINANCIAL INFORMATION. The financial projections relating to
the Borrower Party and delivered to the Lender on or prior to the date hereof,
if any, were prepared on the basis of assumptions believed by the Borrower
Party, in good faith at the time of preparation, to be reasonable and the
Borrower Party is not aware of any fact or information that would lead it to
believe that such assumptions are incorrect or misleading in any material
respect; provided, however, that no representation or warranty is made that any
result set forth in such financial projections shall be achieved. The financial
statements of the Borrower Party which have been furnished to the Lender are
complete and accurate in all material respects and present fairly the financial
condition of the Borrower Party, as of its date in accordance with GAAP, applied
on a consistent basis, and since the date of the most recent of such financial
statements no event has occurred which would have, or may reasonably be expected
to have a Material Adverse Effect, and there has not been any material
transaction entered into by the Borrower Party other than
-56-
<PAGE>
transactions in the ordinary course of business. The Borrower Party has no
material contingent obligations which are not otherwise disclosed in its most
recent financial statements.
(l) ACCURACY OF INFORMATION. No information, statement or report
furnished in writing to the Lender by the Borrower Party in connection with this
Agreement or any other Loan Document or in connection with the consummation of
the transactions contemplated hereby and thereby contains any material
misstatement of fact or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading; and the representations and warranties of the
Borrower Party and the statements, information and descriptions contained in the
Borrower Party's closing certificates, as of the Closing Date, are true, correct
and complete in all material respects, do not contain any untrue statement or
misleading statement of a material fact, and do not omit to state a material
fact required to be stated therein or necessary to make the certifications,
representations, warranties, statements, information and descriptions contained
therein, in light of the circumstances under which they were made, not
misleading; and the estimates and the assumptions contained herein and in any
certificate of the Borrower Party delivered as of the Closing Date are
reasonable and based on the best information available to the Borrower Party.
(m) NO CONFLICTS OF INTEREST. To the best knowledge of the
Borrower Party, no member, officer, agent or employee of the Lender has been or
is in any manner interested, directly or indirectly, in that Person's own name,
or in the name of any other Person, in the Loan Documents, the Borrower Party or
any Mortgaged Property, in any contract for property or materials to be
furnished or used in connection with such Mortgaged Property or in any aspect of
the transactions contemplated by the Loan Documents.
(n) GOVERNMENTAL APPROVALS. No Governmental Approval not already
obtained or made is required for the execution and delivery of this Agreement or
any other Loan Document or the performance of the terms and provisions hereof or
thereof by the Borrower Party.
(o) GOVERNMENTAL ORDERS. The Borrower Party is not presently
under any cease or desist order or other orders of a similar nature, temporary
or permanent, of any Governmental Authority which would have the effect of
preventing or hindering performance of its duties hereunder, nor are there any
proceedings presently in progress or to its knowledge contemplated which would,
if successful, lead to the issuance of any such order.
(p) NO RELIANCE. The Borrower Party acknowledges, represents and
warrants that it understands the nature and structure of the transactions
contemplated by this Agreement and the other Loan Documents, that it is familiar
with the provisions of all of the documents and instruments relating to such
transactions; that it understands the risks inherent in such transactions,
including the risk of loss of all or any of the Mortgaged Properties; and that
it has not relied on the Lender or Fannie Mae for any guidance or expertise in
analyzing the financial or other consequences of the transactions contemplated
by this Agreement or any other Loan Document or otherwise relied on the Lender
or Fannie Mae in any manner in connection with interpreting, entering into or
otherwise in connection with this Agreement, any other Loan Document or any of
the matters contemplated hereby or thereby.
-57-
<PAGE>
(q) COMPLIANCE WITH APPLICABLE LAW. The Borrower Party is in
compliance with Applicable Law, including all Governmental Approvals, if any,
except for such items of noncompliance that, singly or in the aggregate, have
not had and are not reasonably expected to cause, a Material Adverse Effect.
(r) CONTRACTS WITH AFFILIATES. Except as otherwise approved in
writing by the Lender, the Borrower Party has not entered into and is not a
party to any contract, lease or other agreement with any Affiliate of the
Borrower Party for the provision of any service, materials or supplies to any
Mortgaged Property (including any contract, lease or agreement for the provision
of property management services, cable television services or equipment, gas,
electric or other utilities, security services or equipment, laundry services or
equipment or telephone services or equipment). The Lender hereby approves the
property management agreements set forth on EXHIBIT AA to this Agreement.
(s) LINES OF BUSINESS. The Borrower Party is not engaged in any
businesses other than the acquisition, ownership, development, construction,
leasing, financing or management of Multifamily Residential Properties, and the
conduct of these businesses does not violate the Organizational Documents
pursuant to which it is formed.
(t) STATUS AS A REAL ESTATE INVESTMENT TRUST. The REIT is
qualified, and is taxed as, a real estate investment trust under Subchapter M of
the Internal Revenue Code, and is not engaged in any activities which would
jeopardize such qualification and tax treatment.
(u) YEAR 2000 COMPLIANCE. The Borrower Party has conducted a
comprehensive review and assessment of its computer systems and applications and
made inquiry of the Borrower Party's key suppliers and vendors with respect to
the so-called "year 2000 problem" (the risk that computer applications may not
be able to properly perform date-sensitive functions after December 31, 1999)
and, based on that review and inquiry, the Borrower Party does not believe that
the "year 2000 problem" will result in a material adverse change in the ability
of the Borrower Party and its Subsidiaries to manage and operate their
properties and pay and perform their obligations hereunder.
SECTION 12.02 REPRESENTATIONS AND WARRANTIES OF THE BORROWER PARTIES. The
Borrower Parties hereby represent and warrant to the Lender as follows with
respect to each of the Mortgaged Properties:
(a) TITLE. The relevant Borrower Party has good, valid,
marketable and indefeasible title to each Mortgaged Property (either in fee
simple or as tenant under a ground lease meeting all of the requirements of the
DUS Guide), free and clear of all Liens whatsoever except the Permitted Liens.
Each Security Instrument, if and when properly recorded in the appropriate
records, together with any Uniform Commercial Code financing statements required
to be filed in connection therewith, will create a valid, perfected first lien
on the Mortgaged Property intended to be encumbered thereby (including the
Leases related to such Mortgaged Property and the rents and all rights to
collect rents under such Leases), subject only to Permitted Liens. Except for
any Permitted Liens, there are no Liens or claims for work, labor or materials
affecting any Mortgaged Property which are or may be prior to, subordinate to,
or of
-58-
<PAGE>
equal priority with, the Liens created by the Loan Documents. The Permitted
Liens do not have, and may not reasonably be expected to have, a Material
Adverse Effect.
(b) IMPOSITIONS. The Borrower Parties have filed all property and
similar tax returns required to have been filed by it with respect to each
Mortgaged Property and has paid and discharged, or caused to be paid and
discharged, all installments for the payment of all Taxes due to date, and all
other material Impositions imposed against, affecting or relating to each
Mortgaged Property other than those which have not become due, together with any
fine, penalty, interest or cost for nonpayment pursuant to such returns or
pursuant to any assessment received by it, provided, however, that if the
Borrower Parties contest in good faith and by appropriate proceeding the
validity or applicability of any Imposition, provides to the Lender security in
such amount and in such form as the Lender may reasonably require, then
compliance with the Imposition in question shall be suspended during the
pendency of such contest. The Borrower Parties have no knowledge of any new
proposed Tax, levy or other governmental or private assessment or charge in
respect of any Mortgaged Property which has not been disclosed in writing to the
Lender.
(c) ZONING. Each Mortgaged Property complies in all material
respects with all Applicable Laws affecting such Mortgaged Property. Without
limiting the foregoing, all material Permits, including certificates of
occupancy, to the extent issued by the relevant jurisdiction, have been issued
and are in full force and effect. Neither the Borrower Parties nor, to the
knowledge of the Borrower Parties, any former owner of any Mortgaged Property,
has received any written notification or threat of any actions or proceedings
regarding the noncompliance or nonconformity of any Mortgaged Property with any
Applicable Laws or Permits, nor are the Borrower Parties otherwise aware of any
such pending actions or proceedings.
(d) LEASES. The Borrower Parties have delivered to the Lender a
true and correct copy of their form apartment lease for each Mortgaged Property
(and, with respect to leases executed prior to the date on which the Borrower
Parties first owned the Mortgaged Property, the form apartment lease used for
such leases), and each Lease with respect to such Mortgaged Property is in the
form thereof, with no material modifications thereto, except as previously
disclosed in writing to the Lender. Except as set forth in a Rent Roll, no Lease
for any unit in any Mortgaged Property (i) is for a term in excess of one year,
including any renewal or extension period unless such renewal or extension
period is subject to termination by the Borrower Parties upon not more than 30
days' written notice, (ii) provides for prepayment of more than one month's
rent, or (iii) was entered into in other than the ordinary course of business.
(e) RENT ROLL. The Borrower Parties have executed and delivered
to the Lender a Rent Roll for each Mortgaged Property, each dated as of and
delivered within 30 days prior to the Closing Date. Each Rent Roll sets forth
each and every unit subject to a Lease which is in full force and effect as of
the date of such Rent Roll. The information set forth on each Rent Roll is true,
correct and complete in all material respects as of its date and there has
occurred no material adverse change in the information shown on any Rent Roll
from the date of each such Rent Roll to the Closing Date. Except as disclosed in
the Rent Roll with respect to
-59-
<PAGE>
each Mortgaged Property or otherwise previously disclosed in writing to the
Lender, no Lease is in effect as of the date of the Rent Roll with respect to
such Mortgaged Property.
(f) STATUS OF LANDLORD UNDER LEASES. Except for any assignment of
leases and rents which is a Permitted Lien or which is to be released in
connection with the consummation of the transactions contemplated by this
Agreement, the relevant Borrower Party is the owners and holders of the
landlord's interest under each of the Leases of units in each Mortgaged Property
and there are no prior outstanding assignments of any such Lease, or any portion
of the rents, additional rents, charges, issues or profits due and payable or to
become due and payable thereunder.
(g) ENFORCEABILITY OF LEASES. Each Lease constitutes the legal,
valid and binding obligation of the Borrower Parties and, to the knowledge of
the Borrower Parties, of each of the other parties thereto, enforceable in
accordance with its terms, subject only to bankruptcy, insolvency,
reorganization or other similar laws relating to creditors' rights generally,
and equitable principles, and except as disclosed in writing to the Lender, no
notice of any default by the Borrower Parties which remains uncured has been
sent by any tenant under any such Lease, other than defaults which do not have,
and are not reasonably expected to have, a Material Adverse Effect on the
Mortgaged Property subject to the Lease.
(h) NO LEASE OPTIONS. All premises demised to tenants under
Leases are occupied by such tenants as tenants only. No Lease contains any
option or right to purchase, right of first refusal or any other similar
provisions. No option or right to purchase, right of first refusal, purchase
contract or similar right exists with respect to any Mortgaged Property.
(i) INSURANCE. The Borrower Parties have delivered to the Lender
true and correct certified copies of all Insurance Policies currently in effect
as of the date of this Agreement with respect to the Mortgaged Property which it
owns. Each such Insurance Policy complies in all material respects with the
requirements set forth in the Loan Documents.
(j) TAX PARCELS. Each Mortgaged Property is on one or more
separate tax parcels, and each such parcel (or parcels) is (or are) separate and
apart from any other property.
(k) ENCROACHMENTS. Except as disclosed on the Survey with respect
to each Mortgaged Property, none of the improvements located on any Mortgaged
Property encroaches upon the property of any other Person or upon any easement
encumbering the Mortgaged Property, nor lies outside of the boundaries and
building restriction lines of such Mortgaged Property and no improvement located
on property adjoining such Mortgaged Property lies within the boundaries of or
in any way encroaches upon such Mortgaged Property.
(l) INDEPENDENT UNIT. Except for Permitted Liens and as disclosed
on EXHIBIT BB to this Agreement, or as disclosed in a Title Insurance Policy or
Survey for the Mortgaged Property, each Mortgaged Property is an independent
unit which does not rely on any drainage, sewer, access, parking, structural or
other facilities located on any Property not included either in such Mortgaged
Property or on public or utility easements for the (i) fulfillment of any
zoning, building code or other requirement of any Governmental Authority that
has jurisdiction over such Mortgaged Property, (ii) structural support, or (iii)
the fulfillment
-60-
<PAGE>
of the requirements of any Lease or other agreement affecting such Mortgaged
Property. The relevant Borrower Party, directly or indirectly, has the right to
use all amenities, easements, public or private utilities, parking, access
routes or other items necessary or currently used for the operation of each
Mortgaged Property. All public utilities are installed and operating at each
Mortgaged Property and all billed installation and connection charges have been
paid in full. Each Mortgaged Property is either (x) contiguous to or (y)
benefits from an irrevocable unsubordinated easement permitting access from such
Mortgaged Property to a physically open, dedicated public street, and has all
necessary permits for ingress and egress and is adequately serviced by public
water, sewer systems and utilities. No building or other improvement not located
on a Mortgaged Property relies on any part of the Mortgaged Property to fulfill
any zoning requirements, building code or other requirement of any Governmental
Authority that has jurisdiction over the Mortgaged Property, for structural
support or to furnish to such building or improvement any essential building
systems or utilities.
(m) CONDITION OF THE MORTGAGED PROPERTIES. Except as disclosed in
any third party report delivered to the Lender prior to the date on which a
Borrower Party's Mortgaged Property is added to the Collateral Pool, or
otherwise disclosed in writing by the relevant Borrower Party to the Lender
prior to such date, each Mortgaged Property is in good condition, order and
repair, there exist no structural or other material defects in such Mortgaged
Property (whether patent or, to the best knowledge of the relevant Borrower
Party, latent or otherwise) and the relevant Borrower Party has not received
notice from any insurance company or bonding company of any defects or
inadequacies in such Mortgaged Property, or any part of it, which would
adversely affect the insurability of such Mortgaged Property or cause the
imposition of extraordinary premiums or charges for insurance or of any
termination or threatened termination of any policy of insurance or bond. No
claims have been made against any contractor, architect or other party with
respect to the condition of any Mortgaged Property or the existence of any
structural or other material defect therein. No Mortgaged Property has been
materially damaged by casualty which has not been fully repaired or for which
insurance proceeds have not been received or are not expected to be received
except as previously disclosed in writing to the Lender. There are no
proceedings pending for partial or total condemnation of any Mortgaged Property
except as disclosed in writing to the Lender.
SECTION 12.03 REPRESENTATIONS AND WARRANTIES OF THE LENDER. The Lender hereby
represents and warrants to the Borrower Parties as follows:
(a) DUE ORGANIZATION. The Lender is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) POWER AND AUTHORITY. The Lender has the requisite power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement.
(c) DUE AUTHORIZATION. The execution and delivery by the Lender
of this Agreement, and the consummation by it of the transactions contemplated
thereby, and the performance by it of its obligations thereunder, have been duly
and validly authorized by all necessary action and proceedings by it or on its
behalf.
ARTICLE XIII
-61-
<PAGE>
AFFIRMATIVE COVENANTS OF THE BORROWER PARTIES
Each Borrower Party, with respect to itself, agrees and covenants with the
Lender that, at all times during the Term of this Agreement:
SECTION 13.01 COMPLIANCE WITH AGREEMENTS. The Borrower Party shall comply with
all the terms and conditions of each Loan Document to which it is a party or by
which it is bound; provided, however, that the Borrower Party's failure to
comply with such terms and conditions shall not be an Event of Default until the
expiration of the applicable notice and cure periods, if any, specified in the
applicable Loan Document.
SECTION 13.02 MAINTENANCE OF EXISTENCE. The Borrower Party shall maintain its
existence and continue to be a limited partnership or corporation, as the case
may be, organized under the laws of the state of its organization. The Borrower
Party shall continue to be duly qualified to do business in each jurisdiction in
which such qualification is necessary to the conduct of its business and where
the failure to be so qualified would adversely affect the validity of, the
enforceability of, or the ability to perform, its obligations under this
Agreement or any other Loan Document.
SECTION 13.03 MAINTENANCE OF REIT STATUS. During the Term of this Agreement, the
REIT shall qualify, and be taxed as, a real estate investment trust under
Subchapter M of the Internal Revenue Code, and will not be engaged in any
activities which would jeopardize such qualification and tax treatment.
SECTION 13.04 FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. The
Borrower Party shall keep and maintain at all times complete and accurate books
of accounts and records in sufficient detail to correctly reflect (x) all of the
Borrower Party's financial transactions and assets and (y) the results of the
operation of each Mortgaged Property and copies of all written contracts, Leases
and other instruments which affect each Mortgaged Property (including all bills,
invoices and contracts for electrical service, gas service, water and sewer
service, waste management service, telephone service and management services).
In addition, the Borrower Parties shall furnish, or cause to be furnished, to
the Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within 90 days after the close of its fiscal year during the Term of this
Agreement, the audited balance sheet of the REIT and its Subsidiaries as of the
end of such fiscal year, the audited statement of income, equity and retained
earnings of the REIT and its Subsidiaries for such fiscal year and the audited
statement of cash flows of the REIT and its Subsidiaries for such fiscal year,
all in reasonable detail and stating in comparative form the respective figures
for the corresponding date and period in the prior fiscal year, prepared in
accordance with GAAP, consistently applied, and accompanied by a certificate of
the REIT's independent certified public accountants to the effect that such
financial statements have been prepared in accordance with GAAP, consistently
applied, and that such financial statements fairly present the results of its
operations and financial condition for the periods and dates indicated, with
such certification to be free of exceptions and qualifications as to the scope
of the audit or as to the going concern nature of the business.
-62-
<PAGE>
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in
any event within 45 days after each of the first three fiscal quarters of each
fiscal year during the Term of this Agreement, the unaudited balance sheet of
the REIT and its Subsidiaries as of the end of such fiscal quarter, the
unaudited statement of income and retained earnings of the REIT and its
Subsidiaries and the unaudited statement of cash flows of the REIT and its
Subsidiaries for the portion of the fiscal year ended with the last day of such
quarter, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the previous fiscal year,
accompanied by a certificate of the Chief Financial Officer of the REIT to the
effect that such financial statements have been prepared in accordance with
GAAP, consistently applied, and that such financial statements fairly present
the results of its operations and financial condition for the periods and dates
indicated subject to year end adjustments in accordance with GAAP.
(c) QUARTERLY PROPERTY STATEMENTS. As soon as available, and in
any event within 45 days after each Calendar Quarter, a statement of income and
expenses of each Mortgaged Property accompanied by a certificate of the Chief
Financial Officer of the REIT to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property for the period indicated.
(d) ANNUAL PROPERTY STATEMENTS. On an annual basis within
forty-five (45) days of the end of its fiscal year, an annual statement of
income and expenses of each Mortgaged Property accompanied by a certificate of
the Chief Financial Officer of the REIT to the effect that each such statement
of income and expenses fairly, accurately and completely presents the operations
of each such Mortgaged Property for the period indicated.
(e) UPDATED RENT ROLLS. Upon the Lender's request (but not more
frequently than quarterly), a current Rent Roll for each Mortgaged Property,
showing the name of each tenant, and for each tenant, the space occupied, the
lease expiration date, the rent payable, the rent paid and any other information
requested by the Lender and accompanied by a certificate of the Chief Financial
Officer of the REIT to the effect that each such Rent Roll fairly, accurately
and completely presents the information required therein.
(f) SECURITY DEPOSIT INFORMATION. Upon the Lender's request, an
accounting of all security deposits held in connection with any Lease of any
part of any Mortgaged Property, including the name and identification number of
the accounts in which such security deposits are held, the name and address of
the financial institutions in which such security deposits are held and the name
and telephone number of the person to contact at such financial institution,
along with any authority or release necessary for the Lender to access
information regarding such accounts.
(g) SECURITY LAW REPORTING INFORMATION. So long as the REIT is a
reporting company under the Securities and Exchange Act of 1934, promptly upon
becoming available, (a) copies of all financial statements, reports and proxy
statements sent or made available generally by any Borrower Party, or any of its
Affiliates, to their respective security holders, (b) all regular and periodic
reports and all registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or a similar form) and prospectuses, if any,
filed by any Borrower Party, or any of its Affiliates, with the Securities and
Exchange Commission or other Governmental Authorities, and (c) all statements
made available generally by any Borrower Party, or any of their Affiliates, to
the public concerning material developments in the business of the REIT or other
party.
-63-
<PAGE>
(h) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies
of any reports or management letters submitted to the Borrower Party by its
independent certified public accountants in connection with the examination of
its financial statements made by such accountants (except for reports otherwise
provided pursuant to subsection (a) above); provided, however, that the Borrower
Party shall only be required to deliver such reports and management letters to
the extent that they relate to any Borrower Party or any Mortgaged Property.
(i) ANNUAL BUDGETS. Promptly, and in any event within 60 days
after the start of its fiscal year, an annual budget for each Mortgaged Property
for such fiscal year, setting forth an estimate of all of the costs and
expenses, including capital expenses, of maintaining and operating each
Mortgaged Property.
(j) REIT PLANS AND PROJECTIONS. If prepared by the REIT, within
90 days after the beginning of each fiscal year, copies of (1) the REIT's
business plan for the current and the succeeding two fiscal years, (2) the
REIT's annual budget (including capital expenditure budgets) and projections for
each Mortgaged Property; and (3) the REIT's financial projections for the
current and the succeeding two fiscal years, as prepared by the REIT's Chief
Financial Officer and in a format and with such detail as the Lender may
require.
(k) STRATEGIC PLAN. Within 90 days after the end of each fiscal
year of the REIT, the REIT shall deliver to the Lender a written narrative
discussing the REIT's publicly disclosed short and long range plans, including
its plans for operations, mergers, acquisitions and management, and accompanied
by supporting financial projections and schedules, certified by a member of
Senior Management as true, correct and complete ("STRATEGIC PLAN") If the REIT's
or any other Borrower Party's Strategic Plan materially changes, then such
person shall deliver to the Lender the Strategic Plan as so changed.
(l) ANNUAL RENTAL AND SALES COMPARABLE ANALYSIS. Within 30 days
after the Lender's request, a rental and sales comparable analysis of the local
real estate market in which each Mortgaged Property is located, in a form
approved by the Lender.
(m) FEDERAL TAX RETURNS. Upon request of Lender, the Federal Tax
Returns of the REIT.
(n) OTHER REPORTS. Promptly upon receipt thereof, all schedules,
financial statements or other similar reports delivered by the Borrower Party
pursuant to the Loan Documents or requested by the Lender with respect to the
Borrower Party's business affairs or condition (financial or otherwise) or any
of the Mortgaged Properties.
(o) CERTIFICATION. All certifications required to be delivered
pursuant to this Section 13.04 shall run directly to and be for the benefit of
Lender and Fannie Mae.
SECTION 13.05 CERTIFICATE OF COMPLIANCE. The Borrower Party shall deliver to the
Lender concurrently with the delivery of the financial statements and/or reports
required to be delivered
-64-
<PAGE>
pursuant to Section 13.04 (a) and (b) above a certificate signed by the Chief
Financial Officer of the REIT stating that, to the best knowledge of such
individual following reasonable inquiry, (i) setting forth in reasonable detail
the calculations required to establish whether each Borrower Party was in
compliance with the requirements of Sections 15.02 through 15.08 on the date of
such financial statements, and (ii) stating that, to the best knowledge of such
individual following reasonable inquiry, no Event of Default or Potential Event
of Default has occurred, or if an Event of Default or Potential Event of Default
has occurred, specifying the nature thereof in reasonable detail and the action
which the relevant Borrower Party is taking or proposes to take with respect
thereto. Any certificate required by this Section 13.05 shall run directly to
and be for the benefit of Lender and Fannie Mae.
SECTION 13.06 MAINTAIN LICENSES. The Borrower Party shall procure and maintain
in full force and effect all licenses, Permits, charters and registrations which
are material to the conduct of its business and shall abide by and satisfy all
terms and conditions of all such licenses, Permits, charters and registrations.
SECTION 13.07 ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. To
the extent permitted by law and in addition to the applicable requirements of
the Security Instruments, the Borrower Party shall permit the Lender:
(a) to inspect, make copies and abstracts of, and have reviewed
or audited, such of the Borrower Party's books and records as may relate to the
Obligations or any Mortgaged Property;
(b) to discuss the Borrower Party's affairs, finances and
accounts with any of the Borrower Party's officers, partners and employees;
(c) to discuss the Mortgage Properties' conditions, operations or
maintenance with the managers of such Mortgaged Properties and the officers and
employees of the Borrower Party;
(d) to discuss the Borrower Party's affairs, finances and
accounts with its independent public accountants; and
(e) to receive any other information that the Lender deems
reasonably necessary or relevant in connection with any Advance, any Loan
Document or the Obligations.
Notwithstanding the foregoing, prior to an Event of Default or Potential Event
of Default and in the absence of an emergency, all inspections shall be
conducted at reasonable times during normal business hours upon reasonable
notice to the Borrower Parties.
SECTION 13.08 INFORM THE LENDER OF MATERIAL EVENTS. The Borrower Party shall
promptly inform the Lender in writing of any of the following (and shall deliver
to the Lender copies of any related written communications, complaints, orders,
judgments and other documents relating to the following) of which the Borrower
Party has actual knowledge:
(a) DEFAULTS. The occurrence of any Event of Default or any
Potential Event of Default under this Agreement or any other Loan Document;
-65-
<PAGE>
(b) REGULATORY PROCEEDINGS. The commencement of any rulemaking or
disciplinary proceeding or the promulgation of any proposed or final rule which
would have, or may reasonably be expected to have, a Material Adverse Effect;
(c) LEGAL PROCEEDINGS. The commencement or threat of, or
amendment to, any proceedings by or against the Borrower Party in any Federal,
state or local court or before any Governmental Authority, or before any
arbitrator, which, if adversely determined, would have, or at the time of
determination may reasonably be expected to have, a Material Adverse Effect;
(d) BANKRUPTCY PROCEEDINGS. The commencement of any proceedings
by or against the Borrower Party under any applicable bankruptcy,
reorganization, liquidation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator, trustee or other
similar official is sought to be appointed for it;
(e) REGULATORY SUPERVISION OR PENALTY. The receipt of notice from
any Governmental Authority having jurisdiction over the Borrower Party that (A)
the Borrower Party is being placed under regulatory supervision, (B) any
license, Permit, charter, membership or registration material to the conduct of
the Borrower Party's business or the Mortgaged Properties is to be suspended or
revoked or (C) the Borrower Party is to cease and desist any practice, procedure
or policy employed by the Borrower Party, as the case may be, in the conduct of
its business, and such cessation would have, or may reasonably be expected to
have, a Material Adverse Effect;
(f) ENVIRONMENTAL CLAIM. The receipt from any Governmental
Authority or other Person of any notice of violation, claim, demand, abatement,
order or other order or direction (conditional or otherwise) for any damage,
including personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, pollution, contamination or other adverse
effects on the environment, removal, cleanup or remedial action or for fines,
penalties or restrictions, resulting from or based upon (a) the existence or
occurrence, or the alleged existence or occurrence, of a Hazardous Substance
Activity or (b) the violation, or alleged violation, of any Hazardous Materials
Laws in connection with any Mortgaged Property or any of the other assets of a
Borrower Party;
(g) MATERIAL ADVERSE EFFECTS. The occurrence of any act,
omission, change or event which has a Material Adverse Effect, subsequent to the
date of the most recent audited financial statements of the Borrower Parties
delivered to the Lender pursuant to Section 13.04;
(h) ACCOUNTING CHANGES. Any material change in any Borrower
Party's accounting policies or financial reporting practices;
(i) LEGAL AND REGULATORY STATUS. The occurrence of any act,
omission, change or event, including any Governmental Approval, the result of
which is to change or alter in any way the legal or regulatory status of any
Borrower Party; and
(j) DEFAULT ON INDEBTEDNESS. The occurrence of any event that
results in or could result in (i) any imminent default, default or waiver of
default in respect of any
-66-
<PAGE>
Indebtedness having an unpaid principal balance of $1,000,000 or more, (ii) the
failure of any Borrower Party to pay when due or within any applicable grace
period any Indebtedness of any Borrower Party, or (iii) any Indebtedness of any
Borrower Party becoming due and payable before its normal maturity by reason of
a default or event of default, however described, or any other event of default
shall occur and continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness.
SECTION 13.09 INTENTIONALLY OMITTED.
SECTION 13.10 INSPECTION. The Borrower Party shall permit any Person designated
by the Lender: (i) to make entries upon and inspections of the Mortgaged
Properties; and (ii) to otherwise verify, examine and inspect the amount,
quantity, quality, value and/or condition of, or any other matter relating to,
any Mortgaged Property; PROVIDED, HOWEVER, that prior to an Event of Default or
Potential Event of Default and in the absence of an emergency, all such entries,
examinations and inspections shall be conducted at reasonable times during
normal business hours upon reasonable notice to the Borrower Party.
SECTION 13.11 COMPLIANCE WITH APPLICABLE LAWS. The Borrower Party shall comply
in all material respects with all Applicable Laws now or hereafter affecting any
Mortgaged Property or any part of any Mortgaged Property or requiring any
alterations, repairs or improvements to any Mortgaged Property. The Borrower
Party shall procure and continuously maintain in full force and effect, and
shall abide by and satisfy all material terms and conditions of all Permits.
SECTION 13.12 WARRANTY OF TITLE. The relevant Borrower Party shall warrant and
defend (a) the title to each Mortgaged Property and every part of each Mortgaged
Property, subject only to Permitted Liens, and (b) the validity and priority of
the lien of the applicable Loan Documents, subject only to Permitted Liens, in
each case against the claims of all Persons whatsoever. The Borrower Parties
shall reimburse the Lender for any losses, costs, damages or expenses (including
reasonable attorneys' fees and court costs) incurred by the Lender if an
interest in any Mortgaged Property, other than with respect to a Permitted Lien,
is claimed by others.
SECTION 13.13 DEFENSE OF ACTIONS. The Borrower Party shall appear in and defend
any action or proceeding purporting to affect the security for this Agreement or
the rights or power of the Lender hereunder, and shall pay all costs and
expenses, including the cost of evidence of title and reasonable attorneys'
fees, in any such action or proceeding in which the Lender may appear. If the
Borrower Party fails to perform any of the covenants or agreements contained in
this Agreement, or if any action or proceeding is commenced that is not
diligently defended by the Borrower Party which affects in any material respect
the Lender's interest in any Mortgaged Property or any part thereof, including
eminent domain, code enforcement or proceedings of any nature whatsoever under
any Applicable Law, whether now existing or hereafter enacted or amended, then
the Lender may, but without obligation to do so and without notice to or demand
upon the Borrower Party and without releasing the Borrower Party from any
Obligation, make such appearances, disburse such sums and take such action as
the Lender deems necessary or appropriate to protect the Lender's interest,
including disbursement of attorney's fees, entry upon such Mortgaged Property to
make repairs or take other action to protect the security of said Mortgaged
Property, and payment, purchase, contest or compromise of any encumbrance,
charge or lien which in the judgment of the Lender appears to be prior or
superior to the Loan
-67-
<PAGE>
Documents. In the event (i) that any Security Instrument is foreclosed in whole
or in part or that any Loan Document is put into the hands of an attorney for
collection, suit, action or foreclosure, or (ii) of the foreclosure of any
mortgage, deed to secure debt, deed of trust or other security instrument prior
to or subsequent to any Security Instrument or any Loan Document in which
proceeding the Lender is made a party or (iii) of the bankruptcy of the Borrower
Party or an assignment by the Borrower Party for the benefit of their respective
creditors, the Borrower Party shall be chargeable with and agrees to pay all
reasonable costs of collection and defense, including actual attorneys' fees in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.
SECTION 13.14 ALTERATIONS TO THE MORTGAGED PROPERTIES. Except as otherwise
provided in the Loan Documents, the Borrower Party shall have the right to
undertake any alteration, improvement, demolition, removal or construction
(collectively, "ALTERATIONS") to the Mortgaged Property which it owns without
the prior consent of the Lender; PROVIDED, HOWEVER, that in any case, no such
Alteration shall be made to any Mortgaged Property without the prior written
consent of the Lender if (i) such Alteration could reasonably be expected to
adversely affect the value of such Mortgaged Property or its operation as a
multifamily housing facility in substantially the same manner in which it is
being operated on the date such property became Collateral, (ii) the
construction of such Alteration could reasonably be expected to result in
interference to the occupancy of tenants of such Mortgaged Property such that
tenants in occupancy with respect to five percent (5%) or more of the Leases
would be permitted to terminate their Leases or to abate the payment of all or
any portion of their rent, or (iii) such Alteration will be completed in more
than 12 months from the date of commencement or in the last year of the Term of
this Agreement. Notwithstanding the foregoing, the Borrower Party must obtain
the Lender's prior written consent to construct Alterations with respect to the
Mortgaged Property costing in excess of, with respect to any Mortgaged Property,
the number of units in such Mortgaged Property multiplied by $2,000, but in any
event, costs in excess of $350,000 and the Borrower Party must give prior
written notice to the Lender of its intent to construct Alterations with respect
to such Mortgaged Property costing in excess of $150,000; provided, however,
that the preceding requirements shall not be applicable to Alterations made,
conducted or undertaken by the Borrower Party as part of the Borrower Party's
routine maintenance and repair of the Mortgaged Properties as required by the
Loan Documents.
SECTION 13.15 ERISA. The Borrower Party shall at all times remain in compliance
in all material respects with all applicable provisions of ERISA and similar
requirements of the PBGC.
SECTION 13.16 LOAN DOCUMENT TAXES. If any tax, assessment or Imposition (other
than a franchise tax or excise tax imposed on or measured by, the net income or
capital (including branch profits tax) of the Lender (or any transferee or
assignee thereof, including a participation holder)) ("LOAN DOCUMENT TAXES") is
levied, assessed or charged by the United States, or any State in the United
States, or any political subdivision or taxing authority thereof or therein upon
any of the Loan Documents or the obligations secured thereby, the interest of
the Lender in the Mortgaged Properties, or the Lender by reason of or as holder
of the Loan Documents, the Borrower Party shall pay all such Loan Document Taxes
to, for, or on account of the Lender (or provide funds to the Lender for such
payment, as the case may be) as they become due and
-68-
<PAGE>
payable and shall promptly furnish proof of such payment to the Lender, as
applicable. In the event of passage of any law or regulation permitting,
authorizing or requiring such Loan Document Taxes to be levied, assessed or
charged, which law or regulation in the opinion of counsel to the Lender may
prohibit the Borrower Party from paying the Loan Document Taxes to or for the
Lender, the Borrower Party shall enter into such further instruments as may be
permitted by law to obligate the Borrower Party to pay such Loan Document Taxes.
SECTION 13.17 FURTHER ASSURANCES. The Borrower Party, at the request of the
Lender, shall execute and deliver and, if necessary, file or record such
statements, documents, agreements, UCC financing and continuation statements and
such other instruments and take such further action as the Lender from time to
time may request as reasonably necessary, desirable or proper to carry out more
effectively the purposes of this Agreement or any of the other Loan Documents or
to subject the Collateral to the lien and security interests of the Loan
Documents or to evidence, perfect or otherwise implement, to assure the lien and
security interests intended by the terms of the Loan Documents or in order to
exercise or enforce its rights under the Loan Documents.
SECTION 13.18 MONITORING COMPLIANCE. Upon the request of the Lender, from time
to time, the Borrower Party shall promptly provide to the Lender such documents,
certificates and other information as may reasonably be deemed necessary to
enable the Lender to perform its functions under the Servicing Agreement.
SECTION 13.19 LEASES. Each unit in each Mortgaged Property will be leased
pursuant to the form lease delivered to, and acceptable to, the Lender, with no
material modifications to such approved form lease, except as disclosed in
writing to the Lender.
SECTION 13.20 INTENTIONALLY OMITTED.
SECTION 13.21 TRANSFER OF OWNERSHIP INTERESTS OF THE BORROWER PARTIES.
(a) PROHIBITION ON TRANSFERS. Subject to paragraph (b) of this
Section 13.21, the Borrower Parties shall not cause or permit a Transfer or a
Change of Control.
(b) PERMITTED TRANSFERS. Notwithstanding the provisions (a) of
this Section 13.21, the following Transfers by the Borrower Parties are
permitted without the consent of the Lender:
(i) A Transfer that occurs by inheritance, devise, or
bequest or by operation of law upon the death of a natural person who is
an owner of a Mortgaged Property or the owner of a direct or indirect
ownership interest in the Borrower Parties.
(ii) The grant of a leasehold interest in individual
dwelling units or commercial spaces in accordance with the Security
Instrument.
(iii) A sale or other disposition of obsolete or worn out
personal property which is contemporaneously replaced by comparable
personal property of equal or greater value which is free and clear of
liens, encumbrances and security interests other than those created by
the Loan Documents.
-69-
<PAGE>
(iv) The creation of a mechanic's or materialmen's lien or
judgment lien against a Mortgaged Property which is released of record
or otherwise remedied to Lender's satisfaction within 30 days of the
date of creation.
(v) The grant of an easement, if prior to the granting of
the easement the Borrower Parties cause to be submitted to Lender all
information required by Lender to evaluate the easement, and if Lender
consents to such easement based upon Lender's determination that the
easement will not materially affect the operation of the Mortgaged
Property or Lender's interest in the Mortgaged Property and Borrower
Parties pay to Lender, on demand, all reasonable costs and expenses
incurred by Lender in connection with reviewing Borrower Parties'
request. Lender shall not unreasonably withhold its consent to or
withhold its agreement to subordinate the lien of a Security Instrument
to (A) the grant of a utility easement serving a Mortgaged Property to a
publicly operated utility, or (B) the grant of an easement related to
expansion or widening of roadways, provided that any such easement is in
form and substance reasonably acceptable to Lender and does not
materially and adversely affect the access, use or marketability of a
Mortgaged Property.
(vi) The Transfer of shares of common stock, limited
partnership interests or other beneficial or ownership interest or other
forms of securities in the REIT or the OP, and the issuance of all
varieties of convertible debt, equity and other similar securities of
the REIT or the OP, and the subsequent Transfer of such securities;
provided, however, that no Change in Control occurs as a result of such
Transfer, either upon such Transfer or upon the subsequent conversion to
equity or such convertible debt or other securities.
(vii) The Transfer of limited partnership interests by the
limited partners of Borrower Parties, including, without limitation, the
conversion or exchange of limited partnership interests in Borrower
Parties to shares of common stock or other beneficial or ownership
interests or other forms of securities in the REIT; provided, however,
that no Change in Control occurs as the result of such Transfer.
(viii) The issuance by Borrower Parties of additional
limited partnership units or convertible debt, equity and other similar
securities, and the subsequent Transfer of such units or other
securities; provided, however, that no Change in Control occurs as the
result of such Transfer, either upon such Transfer or upon the
subsequent conversion to equity of such convertible debt or other
securities.
(ix) A merger with or acquisition of another entity by
Borrower Parties, provided that (A) Borrower Parties are the surviving
entity after such merger or acquisition, (B) no Change in Control
occurs, and (C) such merger or acquisition does not result in an Event
of Default, as such terms are defined in this Agreement.
(x) A Transfer in connection with any substitution or
release pursuant to the terms and conditions of Article VII of this
Agreement.
-70-
<PAGE>
(c) CONSENT TO PROHIBITED TRANSFERS. Lender may, in its sole and
absolute discretion, consent to a Transfer that would otherwise violate this
Section 13.21 if, prior to the Transfer, Borrower Parties have satisfied each of
the following requirements:
(i) the submission to Lender of all information required
by Lender to make the determination required by this Section 13.21(c);
(ii) the absence of any Event of Default;
(iii) the transferee meets all of the eligibility, credit,
management and other standards (including any standards with respect to
previous relationships between Lender and the transferee and the
organization of the transferee) customarily applied by Lender at the
time of the proposed Transfer to the approval of Borrower Parties in
connection with the origination or purchase of similar mortgages, deeds
of trust or deeds to secure debt on multifamily properties;
(iv) in the case of a Transfer of direct or indirect
ownership interests in Borrower Parties, if transferor or any other
person has obligations under any Loan Documents, the execution by the
transferee of one or more individuals or entities acceptable to Lender
of an assumption agreement that is acceptable to Lender and that, among
other things, requires the transferee to perform all obligations of
transferor or such person set forth in such Loan Document, and may
require that the transferee comply with any provisions of this
Instrument or any other Loan Document which previously may have been
waived by Lender;
(v) Lender's receipt of all of the following:
(A) a transfer fee equal to 1 percent of the
Commitment immediately prior to the transfer.
(B) In addition, Borrower Parties shall be required
to reimburse Lender for all of Lender's reasonable out-of-pocket
costs (including reasonable attorneys' fees) incurred in
reviewing the Transfer request.
SECTION 13.22 CHANGE IN SENIOR MANAGEMENT.
(a) The Borrower Parties shall give the Lender notice of any
change in the identity of Senior Management.
(b) Within 30 Business Days after receipt of the Borrower
Parties' notice, the Lender shall have the right to terminate this Agreement and
the Credit Facility by giving a notice of such termination to the Borrower
Parties. In such event, this Agreement and the Credit Facility shall terminate
with the same effect as if the Lender had approved a Credit Facility Termination
Request (including the Borrower Parties' obligation, pursuant to Section
10.03(a), to pay in full all of the Notes Outstanding on the Closing Date,
including any other charges under the Notes), except that, for these purposes,
the Closing Date shall be the 180th day after the date on which the Borrower
Parties first receive the Lender's termination notice.
-71-
<PAGE>
(c) If the Lender exercises its termination right pursuant to
subsection (b), the Borrower Parties shall have a period of 120 days, commencing
with the date on which the Borrower Parties receives the Lender's termination
notice, to request that the Lender rescind its termination notice. The Borrower
Parties may include in their request any undertakings which they are willing to
make in order to obtain such a rescission. The Lender shall give the Borrower
Parties notice of its acceptance or rejection of the Borrower Parties' request
within 30 Business Days after the Borrower Parties make the request. If the
Lender accepts the request, the Lender shall give the Borrower Parties a notice
that the termination notice shall be deemed rescinded and of no further force or
effect, and this Agreement and the Credit Facility shall continue in accordance
with, and subject to the terms, conditions and limitations contained in, this
Agreement.
SECTION 13.23 DATE-DOWN ENDORSEMENTS. At any time and from time to time, a
Lender may obtain an endorsement to each Title Insurance Policy containing a
Revolving Credit Endorsement, amending the effective date of the Title Insurance
Policy to the date of the title search performed in connection with the
endorsement. The Borrower Parties shall pay for the cost and expenses incurred
by the Lender to the Title Company in obtaining such endorsement, provided that,
for each Title Insurance Policy, it shall not be liable to pay for more than one
such endorsement in any consecutive 12 month period.
SECTION 13.24 GEOGRAPHICAL DIVERSIFICATION. The Borrower shall maintain
Mortgaged Properties in the Collateral Pool so that the Collateral Pool consists
of at least seven (7) Mortgaged Properties located in at least five (5) states,
and provided, however, that, upon the occurrence of any increase in the
Commitment pursuant to Article VIII, the Borrower shall at all times thereafter
cause the Collateral Pool to satisfy such other Geographical Diversification
Requirements as the Lender may determine and notify Borrower of at the time of
the increase.
SECTION 13.25 OWNERSHIP OF MORTGAGED PROPERTIES. A Borrower Party shall be the
sole owner of each of the Mortgaged Properties free and clear of any Liens other
than Permitted Liens.
ARTICLE XIV
NEGATIVE COVENANTS OF THE BORROWER PARTIES
Each Borrower Party, with respect to itself, agrees and covenants with the
Lender that, at all times during the Term of this Agreement:
SECTION 14.01 OTHER ACTIVITIES. No Borrower Party shall:
(a) engage in any business or activity other than in connection
with (i) the Ownership, development, construction, management and operation of
Multifamily Residential Properties or other types of real property in which it
has expertise and (ii) activities related to the activities permitted in (i)
above;
(b) amend its Organizational Documents in any material respect
without the prior written consent of the Lender;
(c) dissolve or liquidate in whole or in part;
-72-
<PAGE>
(d) except as otherwise provided in this Agreement, without the
prior written consent of Lender, merge or consolidate with any Person; or
(e) use, or permit to be used, any Mortgaged Property for any
uses or purposes other than as a Multifamily Residential Property.
SECTION 14.02 VALUE OF SECURITY. The Borrower Party shall not take any action
which could reasonably be expected to have any Material Adverse Effect.
SECTION 14.03 ZONING. The Borrower Party shall not initiate or consent to any
zoning reclassification of any Mortgaged Property or seek any variance under any
zoning ordinance or use or permit the use of any Mortgaged Property in any
manner that could result in the use becoming a nonconforming use under any
zoning ordinance or any other applicable land use law, rule or regulation.
SECTION 14.04 LIENS. The Borrower Party shall not create, incur, assume or
suffer to exist any Lien on any Mortgaged Property or any part of any Mortgaged
Property, except the Permitted Liens.
SECTION 14.05 SALE. Except in connection with a release of Collateral in
accordance with Article VII, the Borrower Party shall not Transfer any Mortgaged
Property or any part of any Mortgaged Property without the prior written consent
of the Lender (which consent may be granted or withheld in the Lender's
discretion), or any interest in any Mortgaged Property, other than to enter into
Leases for units in a Mortgaged Property to any tenant in the ordinary course of
business. For so long as the Mortgaged Property commonly known as Paddock Park
Ocala II and located in Ocala, Florida is part of the Collateral Pool, the
Borrower Party shall not sell or otherwise transfer any Ownership Interest in
the entity owing all or any part of the property commonly known as Paddock Park
Ocala I and located in Ocala, Florida (except for any Transfer permitted under
this Agreement) and any uncured default on any indebtedness secured by such
Multifamily Residential Property shall be a default under this Agreement. For so
long as the Mortgaged Property commonly known as Paddock Club Tallahassee I and
located in Tallahassee, Florida, is part of the Collateral Pool, the Borrower
Party shall not sell or otherwise transfer any Ownership Interest in the entity
owing all or any part of the property commonly known as Paddock Club Tallahassee
II and located in Tallahassee, Florida (except for any Transfer permitted under
this Agreement) and any uncured default on any indebtedness secured by such
Multifamily Residential Property shall be a default under this Agreement.
SECTION 14.06 INDEBTEDNESS. The Borrower Party shall not incur or be obligated
at any time with respect to any Indebtedness (other than Advances) in connection
with any of the Mortgaged Properties.
SECTION 14.07 PRINCIPAL PLACE OF BUSINESS. The Borrower Party shall not change
its principal place of business or the location of its books and records, each
as set forth in Section 12.01(a), without first giving 30 days' prior written
notice to the Lender.
SECTION 14.08 FREQUENCY OF REQUESTS. The Borrower shall have the right, subject
to the terms, conditions and limitations of this Agreement, to make a Future
Advance Request for a Variable Facility Advance on any day until the expiration
of the Variable Facility Availability
-73-
<PAGE>
Period and to make a Future Advance Request for a Fixed Facility Advance on any
day until the expiration of the Fixed Facility Availability Period.
SECTION 14.09 CHANGE IN PROPERTY MANAGEMENT. The Borrower Parties shall not
change the management agent for any Mortgaged Property except to a management
agent which the Lender determines is qualified in accordance with the criteria
set forth in Section 701 of the DUS Guide.
SECTION 14.10 CONDOMINIUMS. The Borrower Parties shall not submit any Mortgaged
Property to a condominium regime during the Term of this Agreement.
SECTION 14.11 RESTRICTIONS ON PARTNERSHIP DISTRIBUTIONS. The Borrower Party
shall not make any distributions of any nature or kind whatsoever to the owners
of its Ownership Interests as such if, at the time of such distribution, a
Potential Event of Default or an Event of Default has occurred and remains
uncured.
SECTION 14.12 LINES OF BUSINESS. The Borrower Party shall not be substantially
involved in any businesses other than the acquisition, ownership, development,
construction, leasing, financing or management, directly or through Affiliates,
of Multifamily Residential Properties, and the conduct of these businesses shall
not violate the Organizational Documents pursuant to which it is formed.
SECTION 14.13 LIMITATION ON UNIMPROVED REAL PROPERTY AND NEW CONSTRUCTION. The
Borrower Party shall not permit:
(a) the value of its real property which is not improved (except
real property on which phases of a Mortgaged Property are contemplated to be
constructed) by one or more buildings leased, or held out for lease, to third
parties ("Unimproved Real Property") to exceed 10% of the value of all of its
"Real Estate Assets" (as that term is defined in Section 856(c)(6)(B) of the
Internal Revenue Code and the regulations thereunder); and
(b) the sum of (i) the value of its Unimproved Real Property and
(ii) the value of its Real Estate Assets which are under construction or subject
to substantial rehabilitation to exceed 20% of the value of all of its Real
Estate Assets.
All of the foregoing values shall be reasonably determined by the Lender.
SECTION 14.14 DIVIDEND PAYOUT. The Borrower Party shall not 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 the REIT (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring or
sales of property, plus depreciation and goodwill amortization, before
extraordinary or unusual items, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect Funds from Operations on the same
basis. Upon written pre-approval of the Lender, exceptions may be made where the
Board of Directors of the REIT determines, in good faith, that a special
-74-
<PAGE>
dividend must be paid to avoid taxes due to excess gains from the sale of
Multifamily Residential Properties.
ARTICLE XV
FINANCIAL COVENANTS OF THE BORROWER PARTIES
Each Borrower Party agrees and covenants with the Lender that, at all times
during the Term of this Agreement:
SECTION 15.01 FINANCIAL DEFINITIONS. For all purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"CONSOLIDATED EBITDA" means, for any period, and without double counting
any item, the EBITDA for the Borrower Parties and their respective Subsidiaries
for such period on a consolidated basis.
"CONSOLIDATED EBITDA TO FIXED CHARGES RATIO" means, for any period of
determination, the ratio (expressed as a percentage) of--
(a) the excess of--
(i) the Consolidated EBITDA for the period, less
(ii) the Imputed Capital Expenditures for the period;
TO
(b) the Consolidated Fixed Charges for the period.
"CONSOLIDATED EBITDA TO INTEREST RATIO" means, for any period of
determination, the ratio (expressed as a percentage) of--
(a) the excess of--
(i) the Consolidated EBITDA for the period, less
(ii) the Imputed Capital Expenditures for the period;
TO
(b) the Consolidated Interest Expense for the period.
"CONSOLIDATED FIXED CHARGES" means, for any period of determination, the
sum of--
(a) the Consolidated Interest Expense for the period;
(b) the Consolidated Scheduled Amortization for the period; and
(c) Preferred Distributions for the period.
-75-
<PAGE>
"CONSOLIDATED INTEREST EXPENSE" means, for any period of
determination, and without double counting any item, the sum of the Interest
Expense for the Borrower Parties and their respective Subsidiaries for such
period on a consolidated basis.
"CONSOLIDATED SCHEDULED AMORTIZATION" means, for any period of
determination, and without double counting any item, the sum of the Scheduled
Amortization (but excluding balloon payments) for the Borrower Parties and their
respective Subsidiaries for such period on a consolidated basis.
"CONSOLIDATED TOTAL ASSETS" means, for any Person, all assets of
such Person and its Subsidiaries determined on a consolidated basis in
accordance with GAAP; provided that all assets composed of real property shall
be valued on an undepreciated cost basis and the portion of any joint venture
assets owned by such Person shall be included in Consolidated Total Assets. The
assets of a Person and its Subsidiaries shall be adjusted to reflect such
Person's allocable share of such assets, for the relevant period or as of the
date of determination, taking into account (a) the relative proportion of each
such item derived from assets directly owned by such Person and from assets
owned by its Subsidiaries, and (b) such Person's respective ownership interest
in its Subsidiaries.
"CONSOLIDATED TOTAL INDEBTEDNESS" means, as of any date, and
without double counting any item, the Total Indebtedness for each Borrower Party
and their respective Subsidiaries as of such date (including the Total
Indebtedness of the Borrower Parties as of such date and the portion of any
indebtedness of any joint venture in which any Borrower Party or any Subsidiary
thereof is a venturer attributable to such Borrower Party or its Subsidiary).
"EBITDA" means, for any period, the sum determined in accordance
with GAAP, of the following, for any Person on a consolidated basis--
(a) the net income (or net loss) of such Person during such
Period, but excluding gains and losses on the sale of fixed assets;
(b) all amounts treated as expenses for depreciation, Interest
Expense and the amortization of intangibles of any kind to the extent included
in the determination of such net income (or loss); and
(c) all accrued taxes on or measured by income to the extent
included in the determination of such net income (or loss);
PROVIDED, HOWEVER, that net income (or loss) shall be computed
for these purposes without giving effect to extraordinary losses or
extraordinary gains.
"IMPUTED CAPITAL EXPENDITURES" means, for any four (4)
consecutive quarters, an amount equal to the average number of apartment units
owned by the Borrower Parties or their Subsidiaries during such period
multiplied by Three Hundred Dollars ($300.00) per apartment unit, and for any
period of less than four (4) consecutive quarters, an appropriate proration of
such figure.
"INTEREST EXPENSE" means, for any period, the sum of--
-76-
<PAGE>
(a) gross interest expense for the period (including all
commissions, discounts, fees and other charges in connection with standby
letters of credit and similar instruments) for the Borrower Parties and their
respective Subsidiaries; and
(b) the portion of the up-front costs and expenses for Rate
Contracts entered into by the Borrower Parties and their respective Subsidiaries
(to the extent not included in gross interest expense) fairly allocated to such
Rate Contracts as expenses for such period, as determined in accordance with
GAAP;
(c) provided, that, all interest expense accrued by the Borrower
Parties and their respective Subsidiaries during such period, even if not
payable on or before the Credit Facility Termination Date, shall be included
within "Interest Expense." Notwithstanding the foregoing, interest accrued under
any Intra-Company Debt shall not be included within "Interest Expense" for any
purposes hereof.
"INTRA-COMPANY DEBT" means Indebtedness (whether book-entry or
evidenced by a term, demand or other note or other instrument) owed by the
Borrower Parties or any of their respective Subsidiaries to any Subsidiary, and
incurred or assumed for the purpose of capitalizing a Subsidiary of the Borrower
Parties.
"MANAGEMENT ENTITY" means the REIT.
"NET WORTH" means, as of any specified date, for any Person, the
excess of the Person's assets over the Person's liabilities, determined in
accordance with GAAP, on a consolidated basis, provided that all real property
shall be valued on an undepreciated basis.
"PLEDGED CASH" shall mean the amount held on deposit in the
Pledgee Account.
"PREFERRED DISTRIBUTIONS" means, for any period, the amount of
any and all distributions due and payable to the holders of any form of
preferred stock (whether perpetual, convertible or otherwise) or other ownership
or beneficial interest in the REIT or any of its Subsidiaries that entitles the
holders thereof to preferential payment or distribution priority with respect to
dividends, assets or other payments over the holders of any other stock or other
ownership or beneficial interest in such Person.
"RATE CONTRACTS" means interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance, currency
spot and forward contracts and other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange rates.
"RESTRICTED CASH" means the sum of Pledged Cash plus any cash
pledged by the Borrower Parties or any of their Subsidiaries to other lenders,
as indicated in the line item for "restricted cash" in the Borrower Parties'
balance sheet from time to time.
"SCHEDULED AMORTIZATION" means, with respect to any Person, the
sum, as of any date of determination, of the current portion (i.e., such portion
as is scheduled to be paid by the obligor thereof within 12 months from the date
of determination) of all regularly scheduled
-77-
<PAGE>
amortization payments due on such Person's long-term fully amortizing mortgage
Indebtedness (exclusive of balloon payments).
"STOCK" means all shares, options, warrants, interests,
participations or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, perpetual preferred stock or any other "equity security"
(as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, and regulations promulgated thereunder).
"TOTAL INDEBTEDNESS" means, as of any date of determination, and
in respect of any Person, all outstanding Indebtedness, and shall include,
without limitation: (i) such Person's share of the Indebtedness of any
partnership or joint venture in which such Person directly or indirectly holds
any interest; and (ii) any recourse or contingent obligations, directly or
indirectly, of such Person with respect to any Indebtedness of such partnership
or joint venture in excess of its proportionate share. Notwithstanding the
foregoing, (x) Intra-Company Debt, and (y) accounts payable to trade creditors
for goods and services and current operating liabilities (not the result of the
borrowing of money) incurred in the ordinary course of business in accordance
with customary terms and paid within the specified time, shall be excluded from
the calculation of "Total Indebtedness" but shall not otherwise be excluded as
Indebtedness for any other purpose hereof.
"UNCONSOLIDATED PARTNERSHIP" means any partnership or joint
venture (a) in which any Borrower Party or any Subsidiary of any Borrower Party
holds an interest which is not consolidated in the financial statements of the
REIT or (b) which is not a Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of the Borrower
Parties one hundred percent (100%) of the Stock or other equity or other
beneficial interests (in the case of Persons other than corporations) is owned
directly or indirectly by the Borrower Parties; provided, however, that where
such term is qualified with respect to a specific Person (e.g., "Wholly-Owned
Subsidiary of the REIT") such terms means a Subsidiary one hundred percent
(100%) of the Stock or other equity or other beneficial interests (in the case
of Persons other than corporations) is owned directly or indirectly by the
specified Person.
SECTION 15.02 COMPLIANCE WITH DEBT SERVICE COVERAGE RATIOS. The Borrower Parties
shall at all times maintain the Aggregate Debt Service Coverage Ratio for the
Trailing 12 Month Period so that it is not less than 1.40:1.0.
SECTION 15.03 COMPLIANCE WITH LOAN TO VALUE RATIOS. The Borrower Parties shall
at all times maintain the Aggregate Loan to Value Ratio so that it is not
greater than 65%.
SECTION 15.04 COMPLIANCE WITH CONCENTRATION TEST.
(a) The Borrower Parties shall at all times maintain the
Collateral so that the aggregate Valuations of any group of Mortgaged Properties
located within a one mile radius shall not exceed 25% of the aggregate
Valuations of all Mortgaged Properties.
-78-
<PAGE>
(b) The Borrower Parties shall at all times maintain the
Collateral so that the Valuation of any one Mortgaged Property shall not exceed
20% of the aggregate Valuations of all Mortgaged Properties.
SECTION 15.05 COMPLIANCE WITH REIT'S NET WORTH TEST. The REIT shall at all times
maintain its Net Worth so that it is not less than $550,000,000.
SECTION 15.06 COMPLIANCE WITH REIT'S TOTAL INDEBTEDNESS TO CONSOLIDATED TOTAL
ASSETS RATIO. The REIT shall not permit the ratio of Consolidated Total
Indebtedness to Consolidated Total Assets to exceed 60% at any time.
SECTION 15.07 COMPLIANCE WITH REIT'S CONSOLIDATED EBITDA TO INTEREST RATIO. The
REIT shall not permit the Consolidated EBITDA to Interest Ratio computed for any
fiscal quarter to be less than 200% for any period of four consecutive fiscal
quarters (treated as a single accounting period).
SECTION 15.08 COMPLIANCE WITH REIT'S CONSOLIDATED EBITDA TO FIXED CHARGE RATIO.
The REIT shall not permit the Consolidated EBITDA to Fixed Charges Ratio
computed for any fiscal quarter or year to be less than 150% for any period of
four consecutive fiscal quarters (treated as a single accounting period).
ARTICLE XVI
FEES
SECTION 16.01 STANDBY FEE. The Borrower shall pay the Standby Fee to the Lender
for the period from the date of this Agreement to the end of the Term of this
Agreement. The Standby Fee shall be payable monthly, in arrears, on the first
Business Day following the end of the month, except that the Standby Fee for the
last month during the Term of this Agreement shall be paid on the last day of
the Term of this Agreement.
SECTION 16.02 ORIGINATION FEES.
(a) INITIAL ORIGINATION FEE. The Borrower shall pay to the Lender
an origination fee ("INITIAL ORIGINATION FEE") equal to $736,001.50 (which is
equal to the product obtained by multiplying (i) the Commitment as of the date
of this Agreement ($113,231,000), by (ii) .65%). The Borrower shall pay the
Initial Origination Fee on the date of this Agreement.
(b) EXPANSION ORIGINATION FEE. Upon the closing of a Credit
Facility Expansion Request under Article VIII, the Borrower shall pay to the
Lender an origination fee ("EXPANSION ORIGINATION FEE") equal to the product
obtained by multiplying (i) the increase in the Commitment made on the Closing
Date for the Credit Facility Expansion Request, by (ii) .65%. The Borrower shall
pay the Expansion Origination Fee on or before the Closing Date for the Credit
Facility Expansion Request.
SECTION 16.03 DUE DILIGENCE FEES.
-79-
<PAGE>
(a) INITIAL DUE DILIGENCE FEES. The Borrower shall pay to the
Lender due diligence fees ("INITIAL DUE DILIGENCE FEES") with respect to the
Initial Mortgaged Properties in an amount not to exceed the product obtained by
multiplying:
(A) $16,000, by
(B) the number of Initial Mortgaged Properties;
The Borrower has previously paid to the Lender a portion of the Initial Due
Diligence Fees and shall pay the remainder of the Initial Due Diligence Fees to
the Lender on the Initial Closing Date. Any portion of the Initial Due Diligence
Fee paid to Lender not actually used by Lender to cover reasonable due diligence
expenses shall be promptly refunded to the Borrower.
(b) ADDITIONAL DUE DILIGENCE FEES FOR ADDITIONAL COLLATERAL. The
Borrower shall pay to the Lender additional reasonable due diligence fees (the
"ADDITIONAL COLLATERAL DUE DILIGENCE FEES") with respect to each Additional
Mortgaged Property in an amount not to exceed the sum of $16,000. The Borrower
shall pay Additional Collateral Due Diligence Fees for the Additional Mortgaged
Property to the Lender on the date on which it submits the Collateral Addition
Request for the addition of the Additional Mortgaged Property to the Collateral
Pool.
SECTION 16.04 LEGAL FEES AND EXPENSES.
(a) INITIAL LEGAL FEES. The Borrower shall pay, or reimburse the
Lender for, all out-of-pocket legal fees and expenses incurred by the Lender and
by Fannie Mae in connection with the preparation, review and negotiation of this
Agreement and any other Loan Documents executed on the date of this Agreement.
Lender's legal fees shall not exceed $8,000 per Multifamily Residential Property
comprising the Initial Collateral Pool. On the date of this Agreement, the
Borrower shall pay all such legal fees and expenses not previously paid or for
which funds have not been previously provided.
(b) FEES AND EXPENSES ASSOCIATED WITH REQUESTS. The Borrower
shall pay, or reimburse the Lender for, all reasonable costs and expenses
incurred by the Lender, including the out-of-pocket legal fees and expenses
incurred by the Lender in connection with the preparation, review and
negotiation of all documents, instruments and certificates to be executed and
delivered in connection with each Request, the performance by the Lender of any
of its obligations with respect to the Request, the satisfaction of all
conditions precedent to the Borrower's rights or the Lender's obligations with
respect to the Request, and all transactions related to any of the foregoing,
including the cost of title insurance premiums and applicable recordation and
transfer taxes and charges and all other reasonable costs and expenses in
connection with a Request. The obligations of the Borrower under this subsection
shall be absolute and unconditional, regardless of whether the transaction
requested in the Request actually occurs. The Borrower shall pay such costs and
expenses to the Lender on the Closing Date for the Request, or, as the case may
be, after demand by the Lender when the Lender determines that such Request will
not close.
SECTION 16.05 MBS-RELATED COSTS. The Borrower shall pay to the Lender, within 30
days after demand, all reasonable fees and expenses incurred by the Lender or
Fannie Mae in
-80-
<PAGE>
connection with the issuance of any MBS backed by an Advance, including the fees
charged by Depository Trust Company and State Street Bank or any successor
fiscal agent or custodian.
SECTION 16.06 FAILURE TO CLOSE ANY REQUEST. If the Borrower makes a Request and
fails to close on the Request for any reason other than the default by the
Lender, then the Borrower shall pay to the Lender and Fannie Mae all damages
incurred by the Lender and Fannie Mae in connection with the failure to close.
SECTION 16.07 OTHER FEES. The Borrower shall pay the following additional fees
and payments, if and when required pursuant to the terms of this Agreement:
(a) The Collateral Addition Fee, pursuant to Section 6.03(b), in
connection with the addition of an Additional Mortgaged Property to the
Collateral Pool pursuant to Article VI;
(b) The Release Price, pursuant to Section 7.02(c), in connection
with the release of a Mortgaged Property from the Collateral Pool pursuant to
Article VII;
(c) The Release Fee, pursuant to Section 7.03(c), in connection
with the release of a Mortgaged Property from the Collateral Pool pursuant to
Article VII;
(d) The Variable Facility Termination Fee, pursuant to Section
9.03(b) in connection with a complete or partial termination of the Variable
Facility pursuant to Article IX; and
(e) The Variable Facility Termination Fee, pursuant to Section
10.03(b), in connection with the termination of the Credit Facility pursuant to
Article X.
ARTICLE XVII
EVENTS OF DEFAULT
SECTION 17.01 EVENTS OF DEFAULT. Each of the following events shall constitute
an "Event of Default" under this Agreement, whatever the reason for such event
and whether it shall be voluntary or involuntary, or within or without the
control of a Borrower Party, or be effected by operation of law or pursuant to
any judgment or order of any court or any order, rule or regulation of any
Governmental Authority:
(a) the occurrence of a default under any Loan Document beyond
the cure period, if any, set forth therein; or
(b) the failure by the Borrower Parties to pay when due any
amount payable by the Borrower Parties under any Note, any Mortgage, this
Agreement or any other Loan Document, including any fees, costs or expenses; or
(c) the failure by any Borrower Party to perform or observe any
covenant set forth in Sections 13.01 through 13.25 or Sections 14.01 through
14.14, provided that such period shall be extended for up to 30 additional days
if the Borrower Party, in the discretion of
-81-
<PAGE>
the Lender, is diligently pursuing a cure of such default within 30 days after
receipt of notice from the Lender; or
(d) any warranty, representation or other written statement made
by or on behalf of a Borrower Party contained in this Agreement, any other Loan
Document or in any instrument furnished in compliance with or in reference to
any of the foregoing, is false or misleading in any material respect on any date
when made or deemed made; or
(e) any other Indebtedness in an aggregate amount of $1,000,000
of any Borrower Party or assumed by any Borrower Party (i) is not paid when due
nor within any applicable grace period in any agreement or instrument relating
to such Indebtedness or (ii) becomes due and payable before its normal maturity
by reason of a default or event of default, however described, or any other
event of default shall occur and continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Indebtedness; or
(f) (i) A Borrower Party shall (A) commence a voluntary case
under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up
or composition or adjustment of debts, (C) consent to or fail to contest in a
timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (D) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its debts as they
become due, (F) make a general assignment for the benefit of creditors, (G)
assert that any Borrower Party has no liability or obligations under this
Agreement or any other Loan Document to which it is a party; or (H) take any
action for the purpose of effecting any of the foregoing; or (ii) a case or
other proceeding shall be commenced against a Borrower Party in any court of
competent jurisdiction seeking (A) relief under the Federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding upon or composition
or adjustment of debts, or (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower Party, or of all or a
substantial part of the property, domestic or foreign, of the Borrower Party and
any such case or proceeding shall continue undismissed or unstayed for a period
of 60 consecutive calendar days, or any order granting the relief requested in
any such case or proceeding against the Borrower Party (including an order for
relief under such Federal bankruptcy laws) shall be entered; or
(g) if any provision of this Agreement or any other Loan Document
or the lien and security interest purported to be created hereunder or under any
Loan Document shall at any time for any reason cease to be valid and binding in
accordance with its terms on any Borrower Party, or shall be declared to be null
and void, or the validity or enforceability hereof or thereof or the validity or
priority of the lien and security interest created hereunder or under any other
Loan Document shall be contested by any Borrower Party seeking to establish the
invalidity or unenforceability hereof or thereof, or any Borrower Party shall
deny that it has any further liability or obligation hereunder or thereunder; or
(h) (i) the execution by the Borrower Parties of a chattel
mortgage or other security agreement on any materials, fixtures or articles used
in the construction or operation of the improvements located on any Mortgaged
Property or on articles of personal property located therein, or (ii) if any
such materials, fixtures or articles are purchased pursuant to any conditional
sales contract or other security agreement or otherwise so that the Ownership
thereof will not vest unconditionally in the Borrower Parties free from
encumbrances, or (iii) if the Borrower Parties do not furnish to the Lender upon
request the contracts, bills of sale, statements, receipted vouchers and
agreements, or any of them, under which the Borrower Parties claim title to such
materials, fixtures, or articles; or
-82-
<PAGE>
(i) the failure by any Borrower Party to comply with any
requirement of any Governmental Authority within 30 days after written notice of
such requirement shall have been given to the Borrower Party by such
Governmental Authority; provided that, if action is commenced and diligently
pursued by the Borrower Party within such 30 days, then the Borrower Party shall
have an additional 30 days to comply with such requirement; or
(j) a dissolution or liquidation for any reason (whether
voluntary or involuntary) of any Borrower Party; or
(k) any judgment against any Borrower Party, any attachment or
other levy against any portion of any Borrower Party's assets with respect to a
claim or claims in an amount in excess of $500,000 in the aggregate remains
unpaid, unstayed on appeal undischarged, unbonded, not fully insured or
undismissed for a period of 60 days; or
(l) the failure by the Borrower Parties to cause the Gross
Revenues with respect to any Mortgaged Property to be deposited into the
applicable Pledgee Account in accordance with the requirements of the Cash
Management Agreement; or
(m) the failure of the Borrower Parties to perform or observe any
of the Financial Covenants, which failure shall continue for a period of 30 days
after the date on which the Borrower Party receives a notice from the Lender
specifying the failure; or
(n) the failure of the Borrower Parties to comply with the
requirement to convert a portion of the Variable Commitment to a Fixed Facility
Commitment and to borrow Fixed Facility Advances as required by Section 3.01; or
(o) the failure by any Borrower Party to perform or observe any
term, covenant, condition or agreement hereunder, other than as set forth in
subsections (a) through (m) above, or in any other Loan Document, within 30 days
after receipt of notice from the Lender identifying such failure.
ARTICLE XVIII
REMEDIES
SECTION 18.01 REMEDIES; WAIVERS. Upon the occurrence of an Event of Default, the
Lender may do any one or more of the following (without presentment, protest or
notice of protest, all of which are expressly waived by the Borrower Parties):
-83-
<PAGE>
(a) by written notice to the Borrower Parties, to be effective
upon dispatch, terminate the Commitment and declare the principal of, and
interest on, the Advances and all other sums owing by the Borrower Parties to
the Lender under any of the Loan Documents forthwith due and payable, whereupon
the Commitment will terminate and the principal of, and interest on, the
Advances and all other sums owing by the Borrower Parties to the Lender under
any of the Loan Documents will become forthwith due and payable.
(b) The Lender shall have the right to pursue any other remedies
available to it under any of the Loan Documents.
(c) The Lender shall have the right to pursue all remedies
available to it at law or in equity, including obtaining specific performance
and injunctive relief.
SECTION 18.02 WAIVERS; RESCISSION OF DECLARATION. The Lender shall have the
right, to be exercised in its complete discretion, to waive any breach hereunder
(including the occurrence of an Event of Default), by a writing setting forth
the terms, conditions, and extent of such waiver signed by the Lender and
delivered to the Borrower Parties. Unless such writing expressly provides to the
contrary, any waiver so granted shall extend only to the specific event or
occurrence which gave rise to the waiver and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.
SECTION 18.03 THE LENDER'S RIGHT TO PROTECT COLLATERAL AND PERFORM COVENANTS AND
OTHER OBLIGATIONS. If any Borrower Party fails to perform the covenants and
agreements contained in this Agreement or any of the other Loan Documents, then
the Lender at the Lender's option may make such appearances, disburse such sums
and take such action as the Lender deems necessary, in its sole discretion, to
protect the Lender's interest, including (i) disbursement of reasonable
attorneys' fees, (ii) entry upon the Mortgaged Property to make repairs and
Replacements, (iii) procurement of satisfactory insurance as provided in
paragraph 5 of the Security Instrument encumbering the Mortgaged Property, and
(iv) if the Security Instrument is on a leasehold, exercise of any option to
renew or extend the ground lease on behalf of the Borrower Parties and the
curing of any default of the Borrower Parties in the terms and conditions of the
ground lease. Any amounts disbursed by the Lender pursuant to this Section, with
interest thereon, shall become additional indebtedness of the Borrower Parties
secured by the Loan Documents. Unless the Borrower and the Lender agree to other
terms of payment, such amounts shall be immediately due and payable and shall
bear interest from the date of disbursement at the weighted average, as
determined by Lender, of the interest rates in effect from time to time for each
Advance unless collection from the Borrower of interest at such rate would be
contrary to applicable law, in which event such amounts shall bear interest at
the highest rate which may be collected from the Borrower under applicable law.
Nothing contained in this Section shall require the Lender to incur any expense
or take any action hereunder.
SECTION 18.04 NO REMEDY EXCLUSIVE. Unless otherwise expressly provided, no
remedy herein conferred upon or reserved is intended to be exclusive of any
other available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under the Loan Documents or existing at law or
in equity.
-84-
<PAGE>
SECTION 18.05 NO WAIVER. No delay or omission to exercise any right or power
accruing under any Loan Document upon the happening of any Event of Default or
Potential Event of Default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient.
SECTION 18.06 NO NOTICE. In order to entitle the Lender to exercise any remedy
reserved to the Lender in this Article, it shall not be necessary to give any
notice, other than such notice as may be required under the applicable
provisions of this Agreement or any of the other Loan Documents.
SECTION 18.07 APPLICATION OF PAYMENTS. Except as otherwise expressly provided in
the Loan Documents, and unless applicable law provides otherwise, (i) all
payments received by the Lender from any of the Borrower Parties under the Loan
Documents shall be applied by the Lender against any amounts then due and
payable under the Loan Documents by any of the Borrower Parties, in any order of
priority that the Lender may determine and (ii) the Borrower Parties shall have
no right to determine the order of priority or the allocation of any payment it
makes to the Lender.
ARTICLE XIX
RIGHTS OF FANNIE MAE
SECTION 19.01 SPECIAL POOL PURCHASE CONTRACT. The Borrower Parties acknowledge
that Fannie Mae is entering into an agreement with the Lender ("SPECIAL POOL
PURCHASE CONTRACT"), pursuant to which, INTER alia, (i) the Lender shall agree
to assign all of its rights under this Agreement to Fannie Mae, (ii) Fannie Mae
shall accept the assignment of the rights, (iii) subject to the terms,
limitations and conditions set forth in the Special Pool Purchase Contract,
Fannie Mae shall agree to purchase a 100% participation interest in each Advance
issued under this Agreement by issuing to the Lender a Fannie Mae MBS, in the
amount and for a term equal to the Advance purchased and backed by an interest
in the Fixed Facility Note or the Variable Facility Note, as the case may be,
and the Collateral Pool securing the Notes, (iv) the Lender shall agree to
assign to Fannie Mae all of the Lender's interest in the Notes and Collateral
Pool securing the Notes, and (v) the Lender shall agree to service the loans
evidenced by the Notes.
SECTION 19.02 ASSIGNMENT OF RIGHTS. The Borrower Parties acknowledge and consent
to the assignment to Fannie Mae of all of the rights of the Lender under this
Agreement and all other Loan Documents, including the right and power to make
all decisions on the part of the Lender to be made under this Agreement and the
other Loan Documents, but Fannie Mae, by virtue of this assignment, shall not be
obligated to perform the obligations of the Lender under this Agreement or the
other Loan Documents.
SECTION 19.03 RELEASE OF COLLATERAL. The Borrower Parties hereby acknowledge
that, after the assignment of Loan Documents contemplated in Section 19.02, the
Lender shall not have the right or power to effect a release of any Collateral
pursuant to Articles VII or X. The Borrower Parties acknowledge that the
Security Instruments provide for the release of the Collateral under Articles
VII and X. Accordingly, the Borrower Parties shall not look to the Lender for
performance of any obligations set forth in Articles VII and X, but shall look
solely to the party
-85-
<PAGE>
secured by the Collateral to be released for such performance. The Lender
represents and warrants to the Borrower Parties that the party secured by the
Collateral shall be subject to the release provisions contained in Articles VII
and X by virtue of the release provisions in each Security Instrument.
SECTION 19.04 REPLACEMENT OF LENDER. At the request of Fannie Mae, the Borrower
Parties and the Lender shall agree to the assumption by another lender
designated by Fannie Mae (which lender shall meet Fannie Mae's then current
standards for lenders for credit facilities of the type and size of the credit
facility evidenced by this Agreement), of all of the obligations of the Lender
under this Agreement and the other Loan Documents, and/or any related servicing
obligations, and, at Fannie Mae's option, the concurrent release of the Lender
from its obligations under this Agreement and the other Loan Documents, and/or
any related servicing obligations, and shall execute all releases, modifications
and other documents which Fannie Mae determines are necessary or desirable to
effect such assumption.
SECTION 19.05 FANNIE MAE AND LENDER FEES AND EXPENSES. The Borrower Parties
agree that any provision providing for the payment of fees, costs or expenses
incurred or charged by the Lender pursuant to this Agreement shall be deemed to
provide for the Borrower's payment of all reasonable fees, costs and expenses
incurred or charged by the Lender or Fannie Mae in connection with the matter
for which fees, costs or expenses are payable.
SECTION 19.06 THIRD-PARTY BENEFICIARY. The Borrower Parties hereby acknowledge
and agree that Fannie Mae is a third party beneficiary of all of the
representations, warranties and covenants made by any Borrower Parties to, and
all rights under this Agreement conferred upon, the Lender, and, by virtue of
its status as third-party beneficiary and/or assignee of the Lender's rights
under this Agreement, Fannie Mae shall have the right to enforce all of the
provisions of this Agreement against the Borrower Parties.
ARTICLE XX
INSURANCE, REAL ESTATE TAXES
AND REPLACEMENT RESERVES
SECTION 20.01 INSURANCE AND REAL ESTATE TAXES. The Borrower Parties shall
(unless waived by Lender) establish funds for taxes, insurance premiums and
certain other charges for each Mortgaged Property in accordance with Section
7(a) of the Security Instrument for each Mortgaged Property.
SECTION 20.02 REPLACEMENT RESERVES. The Borrower Parties shall execute a
Replacement Reserve Agreement for the Mortgaged Property which they own and
shall (unless waived by the Lender) make all deposits for replacement reserves
in accordance with the terms of the Replacement Reserve Agreement.
ARTICLE XXI
INTENTIONALLY OMITTED
ARTICLE XXII
LIMITS ON PERSONAL LIABILITY
-86-
<PAGE>
SECTION 22.01 PERSONAL LIABILITY TO THE BORROWER PARTIES.
(a) FULL RECOURSE. Except as provided in Section 22.01(b), the
Borrower Parties are and shall remain jointly and severally personally liable to
the Lender for the payment and performance of all Obligations throughout the
term of this Agreement.
(b) TERMINATION OF PERSONAL LIABILITY. The provisions of Section
22.01(a) shall be null and void upon the written notice of Borrower to Lender of
its election to render such provisions null and void if (i) the Aggregate Loan
to Value Ratio is 60% or less, (ii) the Aggregate Debt Service Ratio for the
Trailing 12 Month Period is 145% or more, (iii) there has been a complete
termination of the Variable Facility, and (iv) the Mortgaged Properties are
owned in fee simple by a Borrower Party that is a Single Purpose Entity. Upon
the termination of the effectiveness of Section 22.01(a) the following
additional provisions of this agreement shall be null and void and no longer
applicable:
(1) The second, third and fourth sentences of Section 8.01; and
(2) Sections 15.02 and 15.03 to the extent that a Default would result
from the failure of the Borrower to be in compliance with such Sections;
(c) Exceptions to Limits on Personal Liability. Upon termination
of personal liability of the Borrower Parties pursuant to paragraph (b) of this
Section 22.01, the Borrower Parties shall remain personally liable to the Lender
on a joint and several basis for the repayment of a portion of the Advances and
other amounts due under the Loan Documents equal to any loss or damage suffered
by the Lender as a result of (1) failure of the Borrower Parties to pay to the
Lender upon demand after an Event of Default all Rents to which the Lender is
entitled under Section 3(a) of the Security Instrument encumbering the Mortgaged
Property and the amount of all security deposits collected by the Borrower
Parties from tenants then in residence; (2) failure of the Borrower Parties to
apply all insurance proceeds and condemnation proceeds as required by the
Security Instrument encumbering the Mortgaged Property; (3) failure of the
Borrower Parties to comply with Section 13.04 relating to the delivery of books
and records, statements, schedules and reports; (4) fraud or written material
misrepresentation by any Borrower Party or any officer, director, partner,
member or employee of any Borrower Party in connection with the application for
or creation of the Obligations or any request for any action or consent by the
Lender; (5) failure to apply Rents, first, to the payment of reasonable
operating expenses and then to amounts ("Debt Service Amounts") payable under
the Loan Documents (except that the Borrower Party will not be personally liable
(i) to the extent that the Borrower Party lacks the legal right to direct the
disbursement of such sums because of a bankruptcy, receivership or similar
judicial proceeding, or (ii) with respect to Rents of a Mortgaged Property that
are distributed in any Calendar Quarter if the Borrower Party has paid all
operating expenses and Debt Service Amounts for that Calendar Quarter); (6) the
Borrower Parties' failure to deposit all Gross Revenues into a Property Account
(as defined in the Cash Management Agreement) in accordance with the Cash
Management Agreement; or (7) failure of the Borrower to pay any and all
documentary stamp taxes, intangible taxes and other taxes, impositions, fees and
charges due on or with respect to the Note, the Indebtedness, this Instrument
and/or any of the other Loan Documents.
-87-
<PAGE>
(d) FULL RECOURSE AFTER TERMINATION OF PERSONAL LIABILITY. Upon
termination of personal liability of the Borrower Parties pursuant to paragraph
(b) of this Section 22.01, the Borrower Parties shall become personally liable
to the Lender for the payment and performance of all Obligations upon the
occurrence of any of the following Events of Default: (1) the Borrower Parties'
acquisition of any property or operation of any business not permitted by
Section 33 of the Security Instrument; or (2) a Transfer that is an Event of
Default under Section 21 of the Security Instrument.
(e) PERMITTED TRANSFER NOT RELEASE. No Transfer by the REIT of
its Ownership Interests in the Borrower Parties shall release the Borrower
Parties from liability under this Article, this Agreement or any other Loan
Document, unless the Lender shall have approved the Transfer and shall have
expressly released the Borrower Parties in connection with the Transfer.
(f) MISCELLANEOUS. To the extent that a Borrower Party has
personal liability under this Section, the Lender may exercise its rights
against the Borrower Party personally without regard to whether the Lender has
exercised any rights against the Mortgaged Property or any other security, or
pursued any rights against any guarantor, or pursued any other rights available
to the Lender under the Loan Documents or applicable law. For purposes of this
Article, the term "Mortgaged Property" shall not include any funds that (1) have
been applied by any Borrower Party as required or permitted by the Loan
Documents prior to the occurrence of an Event of Default, or (2) are owned by a
Borrower Party and which the Borrower Party was unable to apply as required or
permitted by the Loan Documents because of a bankruptcy, receivership, or
similar judicial proceeding.
ARTICLE XXIII
MISCELLANEOUS PROVISIONS
SECTION 23.01 COUNTERPARTS. To facilitate execution, this Agreement may be
executed in any number of counterparts. It shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart, but it shall be
sufficient that the signature of, or on behalf of, each party, appear on one or
more counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
SECTION 23.02 AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may be
amended, changed, modified, altered or terminated only by written instrument or
written instruments signed by all of the parties hereto.
SECTION 23.03 PAYMENT OF COSTS, FEES AND EXPENSES. The Borrower shall pay, on
demand, all reasonable fees, costs, charges or expenses (including the fees and
expenses of attorneys, accountants and other experts) incurred by the Lender in
connection with:
(a) Any amendment, consent or waiver to this Agreement or any of
the Loan Documents (whether or not any such amendments, consents or waivers are
entered into).
-88-
<PAGE>
(b) Defending or participating in any litigation arising from
actions by third parties and brought against or involving the Lender with
respect to (i) any Mortgaged Property, (ii) any event, act, condition or
circumstance in connection with any Mortgaged Property or (iii) the relationship
between the Lender and the Borrower Parties or the REIT in connection with this
Agreement or any of the transactions contemplated by this Agreement.
(c) The administration or enforcement of, or preservation of
rights or remedies under, this Agreement or any other Loan Documents or in
connection with the foreclosure upon, sale of or other disposition of any
Collateral granted pursuant to the Loan Documents.
(d) The REIT's Registration Statement, or similar disclosure
documents, including fees payable to any rating agencies, including the
reasonable fees and expenses of the Lender's attorneys and accountants.
The Borrower shall also pay, on demand, any transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution, delivery, filing, recordation, performance or enforcement of any of
the Loan Documents or the Advances. However, the Borrower will not be obligated
to pay any franchise, excise, estate, inheritance, income, excess profits or
similar tax on the Lender. Any attorneys' fees and expenses payable by the
Borrower pursuant to this Section shall be recoverable separately from and in
addition to any other amount included in such judgment, and such obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment. Any amounts payable by the
Borrower pursuant to this Section, with interest thereon if not paid when due,
shall become additional indebtedness of the Borrower secured by the Loan
Documents. Such amounts shall bear interest from the date such amounts are due
until paid in full at the weighted average, as determined by Lender, of the
interest rates in effect from time to time for each Advance unless collection
from the Borrower of interest at such rate would be contrary to applicable law,
in which event such amounts shall bear interest at the highest rate which may be
collected from the Borrower under applicable law. The provisions of this Section
are cumulative with, and do not exclude the application and benefit to the
Lender of, any provision of any other Loan Document relating to any of the
matters covered by this Section.
SECTION 23.04 PAYMENT PROCEDURE. All payments to be made to the Lender pursuant
to this Agreement or any of the Loan Documents shall be made in lawful currency
of the United States of America and in immediately available funds by wire
transfer to an account designated by the Lender before 1:00 p.m. (Washington,
D.C. time) on the date when due.
SECTION 23.05 PAYMENTS ON BUSINESS DAYS. In any case in which the date of
payment to the Lender or the expiration of any time period hereunder occurs on a
day which is not a Business Day, then such payment or expiration of such time
period need not occur on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the day of maturity or
expiration of such period, except that interest shall continue to accrue for the
period after such date to the next Business Day.
SECTION 23.06 CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR
-89-
<PAGE>
ANY OF THE OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND
PROVISIONS, AND RIGHTS AND OBLIGATIONS OF EACH BORROWER PARTY UNDER THE NOTES,
AND EACH BORROWER PARTY UNDER THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY,
INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS
OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE
OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY
TO (1) THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS,
AND ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES,
WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE
MORTGAGED PROPERTY IS LOCATED, (2) THE PERFECTION, THE EFFECT OF PERFECTION AND
NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONAL PROPERTY (OTHER
THAN DEPOSIT ACCOUNTS), WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE DISTRICT OF
COLUMBIA UNIFORM COMMERCIAL CODE AND (3) THE PERFECTION, THE EFFECT OF
PERFECTION AND NON-PERFECTION AND FORECLOSURE OF DEPOSIT ACCOUNTS, WHICH MATTERS
SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE DEPOSIT ACCOUNT
IS LOCATED. THE BORROWER PARTIES AGREE THAT ANY CONTROVERSY ARISING UNDER OR IN
RELATION TO THE NOTES, THE SECURITY DOCUMENTS OR ANY OTHER LOAN DOCUMENT SHALL
BE, EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN DISTRICT OF COLUMBIA. THE
LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH JURISDICTION IN DISTRICT OF
COLUMBIA SHALL, EXCEPT AS OTHERWISE PROVIDED HEREIN, HAVE JURISDICTION OVER ALL
CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO THE LOAN DOCUMENTS,
INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION, JURISDICTION, BREACH,
ENFORCEMENT OR COMPLIANCE WITH THE NOTES, THE SECURITY DOCUMENTS OR ANY OTHER
ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS. EACH BORROWER PARTY IRREVOCABLY CONSENTS TO SERVICE, JURISDICTION,
AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE NOTES, THE SECURITY
DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY OTHER VENUE TO
WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR
OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT THE LENDER FROM
BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST THE
BORROWER PARTIES, AND AGAINST THE COLLATERAL IN ANY OTHER JURISDICTION.
INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER
JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED
HEREIN THAT THE LAWS OF DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND
OBLIGATIONS OF THE BORROWER PARTIES AND THE LENDER AS PROVIDED HEREIN OR THE
SUBMISSION HEREIN BY THE BORROWER PARTIES TO PERSONAL JURISDICTION WITHIN
DISTRICT OF COLUMBIA EACH BORROWER PARTY (I) COVENANTS AND AGREES NOT TO
-90-
<PAGE>
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER ANY OF THE LOAN
DOCUMENTS TRIABLE BY A JURY AND (II) WAIVES ANY RIGHT TO TRIAL BY JURY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER IS INTENDED
TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER, EACH BORROWER PARTY HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING, BUT NOT LIMITED
TO, LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO EACH BORROWER
PARTY THAT LENDER WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION. THE
FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY THE
BORROWER PARTIES UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY
THE BORROWER PARTIES' FREE WILL.
SECTION 23.07 SEVERABILITY. In the event any provision of this Agreement or in
any other Loan Document shall be held invalid, illegal or unenforceable in any
jurisdiction, such provision will be severable from the remainder hereof as to
such jurisdiction and the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired in any jurisdiction.
SECTION 23.08 NOTICES.
(a) MANNER OF GIVING NOTICE. Each notice, direction, certificate
or other communication hereunder (in this Section referred to collectively as
"notices" and singly as a "notice") which any party is required or permitted to
give to the other party pursuant to this Agreement shall be in writing and shall
be deemed to have been duly and sufficiently given if:
(1) personally delivered with proof of delivery thereof
(any notice so delivered shall be deemed to have been received at the
time so delivered);
(2) sent by Federal Express (or other similar overnight
courier) designating morning delivery (any notice so delivered shall be
deemed to have been received on the Business Day it is delivered by the
courier);
(3) sent by telecopier or facsimile machine which
automatically generates a transmission report that states the date and
time of the transmission, the length of the document transmitted, and
the telephone number of the recipient's telecopier or facsimile machine
(to be confirmed with a copy thereof sent in accordance with paragraphs
(1) or (2) above within two Business Days) (any notice so delivered
shall be deemed to have been received (i) on the date of transmission,
if so transmitted before 5:00 p.m. (local time of the recipient) on a
Business Day, or (ii) on the next Business Day, if so transmitted on or
after 5:00 p.m. (local time of the recipient) on a Business Day or if
transmitted on a day other than a Business Day);
addressed to the parties as follows:
As to any Borrower Party:
-91-
<PAGE>
c/o Mid-America Apartment Communities, Inc.
6584 Polar Avenue
Suite 340
Memphis, Tennessee 38138
Attention: Simon R.C. Wadsworth
Chief Financial Officer
Telecopy No.: (901) 682-6667
with a copy to:
Apperson, Crump & Maxwell, PLL
1755 Kirby Parkway
Suite 100
Memphis, Tennessee 38120
Attention: Philip G. Kaminsky, Esq.
Telecopy No.: (902) 757-1296
As to the Lender:
WMF Washington Mortgage Corp.
1593 Spring Hill Road
Vienna, Virginia 22182
Attention: Ms. Leslie Dixon-Cook
Telecopy No.: (703) 610-1422
with a copy to:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
Attention: Gary S. Smuckler, Esq.
Telecopy No.: (202) 467-7176
As to Fannie Mae:
Fannie Mae
3939 Wisconsin Avenue, N.W.
Washington, D.C. 20016-2899
Attention: Vice President for
Multifamily Asset Management
Telecopy No.: (202) 752-5016
with a copy to:
Arter & Hadden LLP
1801 K Street, N.W.
Suite 400K
Washington, D.C. 200006
-92-
<PAGE>
Attention: Lawrence H. Gesner, Esq.
Telecopy No.: (202) 857-0172
(b) CHANGE OF NOTICE ADDRESS. Any party may, by notice given
pursuant to this Section, change the person or persons and/or address or
addresses, or designate an additional person or persons or an additional address
or addresses, for its notices, but notice of a change of address shall only be
effective upon receipt. Each party agrees that it shall not refuse or reject
delivery of any notice given hereunder, that it shall acknowledge, in writing,
receipt of the same upon request by the other party and that any notice rejected
or refused by it shall be deemed for all purposes of this Agreement to have been
received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service, the courier
service or facsimile.
SECTION 23.09 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
(a) FURTHER ASSURANCES. To the extent permitted by law, the
parties hereto agree that they shall, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as the Lender or the Borrower
Parties may request and as may be required in the opinion of the Lender or its
counsel to effectuate the intention of or facilitate the performance of this
Agreement or any Loan Document.
(b) FURTHER DOCUMENTATION. Without limiting the generality of
subsection (a), in the event any further documentation or information is
required by the Lender to correct patent mistakes in the Loan Documents,
materials relating to the Title Insurance Policies or the funding of the
Advances, the Borrower Parties shall provide, or cause to be provided to the
Lender, at their cost and expense, such documentation or information. The
Borrower Parties shall execute and deliver to the Lender such documentation,
including any amendments, corrections, deletions or additions to the Notes, the
Security Instruments or the other Loan Documents as is reasonably required by
the Lender.
(c) COMPLIANCE WITH INVESTOR REQUIREMENTS. Without limiting the
generality of subsection (a), the Borrower Parties shall do anything necessary
to comply with the reasonable requirements of the Lender in order to enable the
Lender to sell the MBS backed by an Advance.
SECTION 23.10 TERM OF THIS AGREEMENT. This Agreement shall continue in effect
until the Credit Facility Termination Date.
SECTION 23.11 ASSIGNMENTS; THIRD-PARTY RIGHTS. No Borrower Party shall assign
this Agreement, or delegate any of its obligations hereunder, without the prior
written consent of the Lender. The Lender may assign its rights and obligations
under this Agreement separately or together, without the Borrower Parties'
consent, only to Fannie Mae, but may not delegate its obligations under this
Agreement unless required to do so pursuant to Section 19.04.
SECTION 23.12 HEADINGS. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
-93-
<PAGE>
SECTION 23.13 GENERAL INTERPRETIVE PRINCIPLES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
(i) the terms defined in Article I, Section 15.01, Section 16.01 and elsewhere
in this Agreement have the meanings assigned to them in this Agreement and
include the plural as well as the singular, and the use of any gender herein
shall be deemed to include the other genders; (ii) accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP; (iii) references herein to "Articles," "Sections," "subsections,"
"paragraphs" and other subdivisions without reference to a document are to
designated Articles, Sections, subsections, paragraphs and other subdivisions of
this Agreement; (iv) a reference to a subsection without further reference to a
Section is a reference to such subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions; (v) a reference to an Exhibit or a Schedule without a
further reference to the document to which the Exhibit or Schedule is attached
is a reference to an Exhibit or Schedule to this Agreement; (vi) the words
"herein," "hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular provision; and (vii) the word
"including" means "including, but not limited to."
SECTION 23.14 INTERPRETATION. The parties hereto acknowledge that each party and
their respective counsel have participated in the drafting and revision of this
Agreement and the Loan Documents. Accordingly, the parties agree that any rule
of construction which disfavors the drafting party shall not apply in the
interpretation of this Agreement and the Loan Documents or any amendment or
supplement or exhibit hereto or thereto.
SECTION 23.15 STANDARDS FOR DECISIONS, ETC. Unless otherwise provided herein, if
the Lender's approval is required for any matter hereunder, such approval may be
granted or withheld in the Lender's sole and absolute discretion. Unless
otherwise provided herein, if the Lender's designation, determination,
selection, estimate, action or decision is required, permitted or contemplated
hereunder, such designation, determination, selection, estimate, action or
decision shall be made in the Lender's sole and absolute discretion.
SECTION 23.16 DECISIONS IN WRITING. Any approval, designation, determination,
selection, action or decision of the Lender or the Borrower Parties must be in
writing to be effective.
SECTION 23.17 JOINT AND SEVERAL LIABILITY. Each Borrower Party shall be jointly
and severally liable for the payment and performance of each obligation of any
Borrower Party arising under any of the Loan Documents.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
-94-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BORROWER PARTIES
MID-AMERICA APARTMENT COMMUNITIES,
INC., a Tennessee corporation
By: __________________________________
Simon R.C. Wadsworth
Executive Vice President
MID-AMERICA APARTMENTS, L.P.,
a Tennessee limited partnership
By: Mid-America Apartment Communities, Inc.,
a Tennessee corporation, its general partner
By: _____________________________
Simon R.C. Wadsworth
Executive Vice President
PADDOCK CLUB BRANDON, A LIMITED
PARTNERSHIP, a Georgia limited partnership
By: Mid-America Apartment Communities,
Inc., a Tennessee corporation, its general
partner
By: _____________________________
Simon R.C. Wadsworth
Executive Vice President
-95-
<PAGE>
PADDOCK CLUB COLUMBIA, A LIMITED
PARTNERSHIP, a Georgia limited partnership
By: Mid-America Apartment Communities,
Inc., a Tennessee corporation, its general
partner
By: ______________________________
Simon R.C. Wadsworth
Executive Vice President
PADDOCK PARK OCALA II, A LIMITED
PARTNERSHIP, a Georgia limited partnership
By: Mid-America Apartment Communities, Inc.,
a Tennessee corporation, its general partner
By: ______________________________
Simon R.C. Wadsworth
Executive Vice President
PADDOCK CLUB TALLAHASSEE, A LIMITED
PARTNERSHIP, a Georgia limited partnership
By: Mid-America Apartment Communities,
Inc., a Tennessee corporation, its general
partner
By: ______________________________
Simon R.C. Wadsworth
Executive Vice President
-96-
<PAGE>
LENDER
WMF WASHINGTON MORTGAGE CORP., a Delaware
corporation, formerly known as Washington
Mortgage Financial Group, Ltd.
By: ___________________________________________
Name: _________________________________________
Title: ________________________________________
-97-
<PAGE>
MASTER CREDIT FACILITY AGREEMENT
among
(i) MID-AMERICA APARTMENT COMMUNITIES, INC.,
a Tennessee corporation,
(ii) MID- AMERICA APARTMENTS, LP,
a Tennessee limited partnership,
(iii) PADDOCK CLUB BRANDON, A LIMITED PARTNERSHIP,
a Georgia limited partnership,
(iv) PADDOCK CLUB COLUMBIA, A LIMITED PARTNERSHIP,
a Georgia limited partnership,
(v) PADDOCK PARK OCALA II, A LIMITED PARTNERSHIP,
a Georgia limited partnership, and
(vi) PADDOCK CLUB TALLAHASSEE, A LIMITED PARTNERSHIP,
a Georgia limited partnership,
and
WMF WASHINGTON MORTGAGE CORP.,
a Delaware corporation,
formerly known as Washington Mortgage Financial Group, Ltd.
dated as of
November 10, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS ................................................................... 1
ARTICLE I .................................................................. 2
ARTICLE II ................................................................. 21
SECTION 2.01 VARIABLE FACILITY COMMITMENT .............................. 21
SECTION 2.02 REQUESTS FOR VARIABLE ADVANCES ............................ 21
SECTION 2.03 MATURITY DATE OF VARIABLE ADVANCES ........................ 22
SECTION 2.04 INTEREST ON VARIABLE FACILITY ADVANCES .................... 22
SECTION 2.05 COUPON RATES FOR VARIABLE ADVANCES ........................ 23
SECTION 2.06 VARIABLE FACILITY NOTE .................................... 23
SECTION 2.07 EXTENSION OF VARIABLE FACILITY TERMINATION DATE ........... 23
ARTICLE III ................................................................ 24
SECTION 3.01 FIXED FACILITY COMMITMENT ................................. 24
SECTION 3.02 REQUESTS FOR FIXED FACILITY ADVANCES ...................... 24
SECTION 3.03 MATURITY DATE OF FIXED FACILITY ADVANCES;
AMORTIZATION PERIOD ....................................... 24
SECTION 3.04 INTEREST ON FIXED FACILITY ADVANCES ....................... 25
SECTION 3.05 COUPON RATES FOR FIXED FACILITY ADVANCES .................. 25
SECTION 3.06 FIXED FACILITY NOTE ....................................... 25
SECTION 3.07 CONVERSION OF COMMITMENT FROM VARIABLE FACILITY
COMMITMENT TO FIXED FACILITY COMMITMENT ................... 25
SECTION 3.08 LIMITATIONS ON RIGHT TO CONVERT ........................... 26
SECTION 3.09 CONDITIONS PRECEDENT TO CONVERSION ........................ 26
SECTION 3.10 DEFEASANCE ................................................ 27
ARTICLE IV ................................................................. 34
SECTION 4.01 RATE SETTING FOR AN ADVANCE ............................... 34
SECTION 4.02 ADVANCE CONFIRMATION INSTRUMENT FOR VARIABLE ADVANCES ..... 35
SECTION 4.03 BREAKAGE AND OTHER COSTS .................................. 36
ARTICLE V .................................................................. 36
SECTION 5.01 INITIAL ADVANCE ........................................... 36
SECTION 5.02 FUTURE ADVANCES ........................................... 37
SECTION 5.03 CONDITIONS PRECEDENT TO FUTURE ADVANCES ................... 37
SECTION 5.04 DETERMINATION OF ALLOCABLE FACILITY AMOUNT AND VALUATIONS . 38
ARTICLE VI ................................................................. 38
SECTION 6.01 RIGHT TO ADD COLLATERAL ................................... 38
SECTION 6.02 PROCEDURE FOR ADDING COLLATERAL ........................... 38
SECTION 6.03 CONDITIONS PRECEDENT TO ADDITION OF AN ADDITIONAL
MORTGAGED PROPERTY TO THE COLLATERAL POOL ................. 40
ARTICLE VII ................................................................ 41
SECTION 7.01 RIGHT TO OBTAIN RELEASES OF COLLATERAL .................... 41
SECTION 7.02 PROCEDURE FOR OBTAINING RELEASES OF COLLATERAL ............ 41
SECTION 7.03 CONDITIONS PRECEDENT TO RELEASE OF COLLATERAL RELEASE
PROPERTY FROM THE COLLATERAL .............................. 42
SECTION 7.04 SUBSTITUTIONS ............................................. 43
ARTICLE VIII ............................................................... 47
SECTION 8.01 RIGHT TO INCREASE COMMITMENT .............................. 47
i
<PAGE>
SECTION 8.02 PROCEDURE FOR OBTAINING INCREASES IN COMMITMENT ........... 48
SECTION 8.03 CONDITIONS PRECEDENT TO INCREASE IN COMMITMENT ............ 49
ARTICLE IX ................................................................. 49
SECTION 9.01 RIGHT TO COMPLETE OR PARTIAL TERMINATION OF FACILITIES .... 49
SECTION 9.02 PROCEDURE FOR COMPLETE OR PARTIAL TERMINATION OF
FACILITIES ................................................ 49
SECTION 9.03 CONDITIONS PRECEDENT TO COMPLETE OR PARTIAL TERMINATION
OF FACILITIES ............................................. 50
ARTICLE X .................................................................. 51
SECTION 10.01 RIGHT TO TERMINATE CREDIT FACILITY ....................... 51
SECTION 10.02 PROCEDURE FOR TERMINATING CREDIT FACILITY ................ 51
SECTION 10.03 CONDITIONS PRECEDENT TO TERMINATION OF CREDIT FACILITY ... 51
ARTICLE XI ................................................................. 52
SECTION 11.01 CONDITIONS APPLICABLE TO ALL REQUESTS .................... 52
SECTION 11.02 DELIVERY OF CLOSING DOCUMENTS RELATING TO INITIAL ADVANCE
REQUEST, COLLATERAL ADDITION REQUEST, CREDIT FACILITY
EXPANSION REQUEST OR FUTURE ADVANCE REQUEST .............. 53
SECTION 11.03 DELIVERY OF PROPERTY-RELATED DOCUMENTS ................... 54
ARTICLE XII ................................................................ 55
SECTION 12.01 REPRESENTATIONS AND WARRANTIES OF THE BORROWER PARTIES ... 55
SECTION 12.02 REPRESENTATIONS AND WARRANTIES OF THE BORROWER PARTIES ... 59
SECTION 12.03 REPRESENTATIONS AND WARRANTIES OF THE LENDER ............. 62
ARTICLE XIII ............................................................... 62
SECTION 13.01 COMPLIANCE WITH AGREEMENTS ............................... 62
SECTION 13.02 MAINTENANCE OF EXISTENCE ................................. 62
SECTION 13.03 MAINTENANCE OF REIT STATUS ............................... 63
SECTION 13.04 FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER
INFORMATION .............................................. 63
SECTION 13.05 CERTIFICATE OF COMPLIANCE ................................ 65
SECTION 13.06 MAINTAIN LICENSES ........................................ 66
SECTION 13.07 ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS .............................................. 66
SECTION 13.08 INFORM THE LENDER OF MATERIAL EVENTS ..................... 66
SECTION 13.09 INTENTIONALLY OMITTED .................................... 68
SECTION 13.10 INSPECTION ............................................... 68
SECTION 13.11 COMPLIANCE WITH APPLICABLE LAWS .......................... 68
SECTION 13.12 WARRANTY OF TITLE ........................................ 68
SECTION 13.13 DEFENSE OF ACTIONS ....................................... 68
SECTION 13.14 ALTERATIONS TO THE MORTGAGED PROPERTIES .................. 69
SECTION 13.15 ERISA .................................................... 69
SECTION 13.16 LOAN DOCUMENT TAXES ...................................... 69
SECTION 13.17 FURTHER ASSURANCES ....................................... 70
SECTION 13.18 MONITORING COMPLIANCE .................................... 70
SECTION 13.19 LEASES ................................................... 70
SECTION 13.20 INTENTIONALLY OMITTED .................................... 70
SECTION 13.21 TRANSFER OF OWNERSHIP INTERESTS OF THE BORROWER PARTIES ... 70
SECTION 13.22 CHANGE IN SENIOR MANAGEMENT .............................. 72
SECTION 13.23 DATE-DOWN ENDORSEMENTS ................................... 73
SECTION 13.24 GEOGRAPHICAL DIVERSIFICATION ............................. 73
SECTION 13.25 OWNERSHIP OF MORTGAGED PROPERTIES ........................ 73
ARTICLE XIV ................................................................ 73
SECTION 14.01 OTHER ACTIVITIES ......................................... 73
SECTION 14.02 VALUE OF SECURITY ........................................ 74
ii
<PAGE>
SECTION 14.03 ZONING ................................................... 74
SECTION 14.04 LIENS .................................................... 74
SECTION 14.05 SALE ..................................................... 74
SECTION 14.06 INDEBTEDNESS .............................................. 74
SECTION 14.07 PRINCIPAL PLACE OF BUSINESS .............................. 75
SECTION 14.08 FREQUENCY OF REQUESTS .................................... 75
SECTION 14.09 CHANGE IN PROPERTY MANAGEMENT ............................ 75
SECTION 14.10 CONDOMINIUMS ............................................. 75
SECTION 14.11 RESTRICTIONS ON PARTNERSHIP DISTRIBUTIONS ................ 75
SECTION 14.12 LINES OF BUSINESS ........................................ 75
SECTION 14.13 LIMITATION ON UNIMPROVED REAL PROPERTY AND NEW
CONSTRUCTION ............................................. 75
SECTION 14.14 DIVIDEND PAYOUT .......................................... 76
ARTICLE XV ................................................................. 76
SECTION 15.01 FINANCIAL DEFINITIONS .................................... 76
SECTION 15.02 COMPLIANCE WITH DEBT SERVICE COVERAGE RATIOS ............. 80
SECTION 15.03 COMPLIANCE WITH LOAN TO VALUE RATIOS ..................... 80
SECTION 15.04 COMPLIANCE WITH CONCENTRATION TEST ....................... 80
SECTION 15.05 COMPLIANCE WITH REIT'S NET WORTH TEST .................... 80
SECTION 15.06 COMPLIANCE WITH REIT'S TOTAL INDEBTEDNESS TO
CONSOLIDATED TOTAL ASSETS RATIO .......................... 80
SECTION 15.07 COMPLIANCE WITH REIT'S CONSOLIDATED EBITDA TO
INTEREST RATIO ........................................... 80
SECTION 15.08 COMPLIANCE WITH REIT'S CONSOLIDATED EBITDA TO FIXED
CHARGE RATIO ............................................. 80
ARTICLE XVI ................................................................ 80
SECTION 16.01 STANDBY FEE .............................................. 80
SECTION 16.02 ORIGINATION FEES ......................................... 81
SECTION 16.03 DUE DILIGENCE FEES ....................................... 81
SECTION 16.04 LEGAL FEES AND EXPENSES .................................. 81
SECTION 16.05 MBS-RELATED COSTS ........................................ 82
SECTION 16.06 FAILURE TO CLOSE ANY REQUEST ............................. 82
SECTION 16.07 OTHER FEES ............................................... 82
ARTICLE XVII ............................................................... 83
SECTION 17.01 EVENTS OF DEFAULT ........................................ 83
ARTICLE XVIII .............................................................. 85
SECTION 18.01 REMEDIES; WAIVERS ........................................ 85
SECTION 18.02 WAIVERS; RESCISSION OF DECLARATION ....................... 85
SECTION 18.03 THE LENDER'S RIGHT TO PROTECT COLLATERAL AND PERFORM
COVENANTS AND OTHER OBLIGATIONS .......................... 86
SECTION 18.04 NO REMEDY EXCLUSIVE ...................................... 86
SECTION 18.05 NO WAIVER ................................................ 86
SECTION 18.06 NO NOTICE ................................................ 86
SECTION 18.07 APPLICATION OF PAYMENTS .................................. 86
ARTICLE XIX ................................................................ 87
SECTION 19.01 SPECIAL POOL PURCHASE CONTRACT ........................... 87
SECTION 19.02 ASSIGNMENT OF RIGHTS ..................................... 87
SECTION 19.03 RELEASE OF COLLATERAL .................................... 87
SECTION 19.04 REPLACEMENT OF LENDER .................................... 87
SECTION 19.05 FANNIE MAE AND LENDER FEES AND EXPENSES .................. 88
SECTION 19.06 THIRD-PARTY BENEFICIARY .................................. 88
iii
<PAGE>
ARTICLE XX ................................................................. 88
SECTION 20.01 INSURANCE AND REAL ESTATE TAXES .......................... 88
SECTION 20.02 REPLACEMENT RESERVES ..................................... 88
ARTICLE XXI ................................................................ 88
ARTICLE XXII ............................................................... 88
SECTION 22.01 PERSONAL LIABILITY TO THE BORROWER PARTIES ............... 88
ARTICLE XXIII .............................................................. 90
SECTION 23.01 COUNTERPARTS ............................................. 90
SECTION 23.02 AMENDMENTS, CHANGES AND MODIFICATIONS .................... 90
SECTION 23.03 PAYMENT OF COSTS, FEES AND EXPENSES ...................... 90
SECTION 23.04 PAYMENT PROCEDURE ........................................ 91
SECTION 23.05 PAYMENTS ON BUSINESS DAYS ................................ 91
SECTION 23.06 CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL ............................................ 91
SECTION 23.07 SEVERABILITY ............................................. 93
SECTION 23.08 NOTICES .................................................. 93
SECTION 23.09 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS ............ 95
SECTION 23.10 TERM OF THIS AGREEMENT ................................... 95
SECTION 23.11 ASSIGNMENTS; THIRD-PARTY RIGHTS .......................... 95
SECTION 23.12 HEADINGS ................................................. 95
SECTION 23.13 GENERAL INTERPRETIVE PRINCIPLES .......................... 95
SECTION 23.14 INTERPRETATION ........................................... 96
SECTION 23.15 STANDARDS FOR DECISIONS, ETC ............................. 96
SECTION 23.16 DECISIONS IN WRITING ..................................... 96
SECTION 23.17 JOINT AND SEVERAL LIABILITY .............................. 96
iv
<PAGE>
EXHIBIT A - Schedule of Initial Mortgaged Properties and Initial Valuations
EXHIBIT B - Fixed Facility Note
EXHIBIT C - Cash Management Security, Pledge and Assignment Agreement
EXHIBIT D - Compliance Certificate
EXHIBIT E - Sample Facility Debt Service
EXHIBIT F - Organizational Certificate
EXHIBIT G - Intentionally Omitted
EXHIBIT H - Revolving Credit Endorsement
EXHIBIT I - Variable Facility Note
EXHIBIT J - Tie-In Endorsement
EXHIBIT K - Conversion Request
EXHIBIT L - Conversion Amendment
EXHIBIT M - Rate Setting Form
EXHIBIT N - Rate Confirmation Form
EXHIBIT O - Advance Confirmation Instrument
EXHIBIT P - Future Advance Request
EXHIBIT Q - Collateral Addition Request
EXHIBIT R - Collateral Addition Description Package
EXHIBIT S - Collateral Addition Supporting Documents
EXHIBIT T - Collateral Release Request
EXHIBIT U - Confirmation of Obligations
EXHIBIT V - Credit Facility Expansion Request
EXHIBIT W - Variable Facility Termination Request
EXHIBIT X - Variable Facility Termination Document
EXHIBIT Y - Credit Facility Termination Request
EXHIBIT Z - Collateral Substitution Request
EXHIBIT AA - Schedule of Approved Property Management Agreements
EXHIBIT BB - Independent Unit Encumbrances
EXHIBIT CC - List of Properties Requiring 85% Occupancy
EXHIBIT DD - Collateral Substitution Description Package
EXHIBIT EE - Collateral Substitution Supporting Documents
EXHIBIT FF - Guaranty
v
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.
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.
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
INDEPENDENT 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 25, 2000, relating to the consolidated balance
sheets of Mid-America Apartment Communities, Inc. as of December 31, 1999 and
1998, 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, 1999, and the related schedule, which report appears in the
December 31, 1999 Annual Report on Form 10-K of Mid-America Apartment
Communities, Inc.
KPMG LLP
Memphis, Tennessee
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1999 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 26,629
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,394,662
<DEPRECIATION> (146,611)
<TOTAL-ASSETS> 1,298,823
<CURRENT-LIABILITIES> 0
<BONDS> 744,238
0
69
<COMMON> 190
<OTHER-SE> 463,625
<TOTAL-LIABILITY-AND-EQUITY> 1,298,823
<SALES> 222,098
<TOTAL-REVENUES> 226,322
<CGS> 84,885
<TOTAL-COSTS> 84,885
<OTHER-EXPENSES> 67,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,302
<INCOME-PRETAX> 33,639
<INCOME-TAX> 0
<INCOME-CONTINUING> 33,639
<DISCONTINUED> 0
<EXTRAORDINARY> (67)
<CHANGES> 0
<NET-INCOME> 33,572
<EPS-BASIC> 0.93
<EPS-DILUTED> 0.93
</TABLE>
