Washington, D.C. 20549
_________________
FORM 10-K
_________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
DECEMBER 31, 1998
Commission file number: 000-29778
---------------------
MERRY LAND PROPERTIES, INC.
P.O. Box 1417
Augusta, GA 30903
706-722-6756
State of Incorporation: Georgia I.R.S. Employer Identification Number:
58-2412761
Securities registered pursuant to Section 12(b)
of the Act: Name of Each Exchange
Title of Class on Which Registered
-------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 stated value
(Title of Class)
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 twelve months, and (2) has been subject to such
filing requirements for the past ninety 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.
The aggregate market value of the voting and nonvoting common equity held by
non affiliates of the registrant on March 8, 1999: Common Stock, $1 stated
value-$9,905,441 (all shares other than those owned or controlled by officers,
directors, and 5% shareholders).
The number of shares of common stock outstanding as of March 8, 1999 was
2,595,300.
Documents incorporated by reference: The 1999 definitive proxy statement mailed
to shareholders for the annual meeting scheduled for April 15, 1999, is
incorporated by reference into Part III of this form 10-K.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1 Business 3
Item 2 Properties 5
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a Vote of Security Holders 7
PART II
Item 5 Market for the Registrant's Common Stock
and Related Shareholders' Matters 8
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8 Financial Statements and Supplementary Data 18
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 30
PART III
Item 10 Directors and Executive Officers of the Registrant 30
Item 11 Executive Compensation 30
Item 12 Security Ownership of Certain Beneficial Owners
and Management 30
Item 13 Certain Relationships and Related Transactions 30
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 31
<PAGE>
PART I
Item 1--Business
THE COMPANY
Merry Land Properties, Inc. is a full service real estate company and
at December 31, 1998 had a total market capitalization of $52.7 million.
The Company is headquartered in Augusta, Georgia and maintains offices in
Atlanta and Savannah. Merry Land Properties owns five apartment communities
located in Savannah, Georgia, and Charleston, South Carolina, over 4,000
acres of clay land which produces significant royalties, and a number of
commercial properties, and other tracts of land suitable for sale or
development. The Company also provides third party property management and
development consulting services for others. (See Note 12 to the Financial
Statements in Item 8 for financial information about segments.)
OBJECTIVE
Merry Land's objective is to build shareholder value through active
involvement in the apartment business and other commercial real estate
activities-through the investment, development, rehabilitation and
management of properties for ourselves and for others. The Company expects
to operate primarily in the coastal areas of the Southeastern United States
where it and its predecessor, Merry Land & Investment Company, Inc., have
been active for over eighteen years. The Company believes these areas will
experience economic growth well above national and regional averages as the
baby boom generation approaches retirement age and tends to move in large
numbers, either seasonally or permanently, to resort areas. This in turn
will lead to higher job growth and stronger housing demand, creating
exceptional opportunities for well conceived and well managed real estate
projects.
ORGANIZATION
Merry Land Properties maintains a centralized and functionally organized
management structure, conducting all its corporate level activities (including
accounting, finance, general property management and acquisitions and
development) from its offices in Augusta. The Company also has satellite
offices in Savannah and Atlanta from which it provides property management and
development consulting services to third parties.
Most of the Company's employees are veterans of old Merry Land. The
Chief Executive Officer, Chief Operating Officer, and Chief Financial
Officer all held the same positions at the old company. They and other key
employees bring to the new Merry Land many years of experience in the
apartment business, giving the Company a high level of competence in the
fields of residential development, marketing, management, maintenance and
in other real estate related areas.
Each apartment community functions as an individual business unit
according to well developed policies and procedures. Each community is
operated by an on site Property Manager and staff who are extensively
trained by the Company in sales, management, accounting, maintenance and
other disciplines.
At December 31, 1998, the Company had a total of 140 employees. Of this
number, 125 work at its apartment communities, and 15 are employed at the
corporate offices. A significant portion of the compensation of on site
personnel is tied to achievement of community cash flow targets. All employees
have the opportunity to become shareholders through the Company's Employee
Stock Ownership Plan. Corporate level employees participate in the Company's
restricted stock grant plan, thus further aligning their interests with those
of the Company's shareholders. The Company is a Georgia corporation formed in
1998. It has its principal office at 624 Ellis Street, Augusta, Georgia 30901
and its telephone number is (706) 722-6756.
HISTORY
On October 15, 1998, the shares of Merry Land Properties, Inc., a
newly created subsidiary of Merry Land & Investment Company, Inc. were spun
out as a dividend to that firm's shareholders in conjunction with old Merry
Land's merger into Equity Residential Properties Trust. (See Management's
Discussion and Analysis of Financial Condition and Results of Operations).
The original Merry Land was one of the nation's leading apartment
companies. It owned and operated 135 communities with 35,000 apartment
units which it had acquired or developed throughout the Southeast and
Texas. Its common shares, with a market value in excess of a billion
dollars, were listed on the New York Stock Exchange. Its training,
maintenance, accounting and other operating systems were among the most
progressive in the industry.
FORWARD LOOKING STATEMENTS
This filing includes statements that are "forward looking statements"
regarding expectations with respect to market conditions, development
projects, acquisitions, occupancy rates, capital requirements, sources of
funds, expense levels, operating performance and other matters. These
assumptions and statements are subject to various factors, unknown risks
and uncertainties, including general economic conditions, local market
factors, delays and cost overruns in construction, completion and rent up
of development communities, performance of consultants or other third
parties, environmental concerns, and interest rates, any of which may cause
actual results to differ from the Company's current expectations.
ACCOUNTING PREDECESSOR
Merry Land has operated only since October 15, 1998. Accordingly, only
the Consolidated Balance Sheet for December 31, 1998 is an actual financial
statement prepared for a real company. All other statements are those of an
"accounting predecessor" which have been constructed in accordance with the
rules of the Securities and Exchange Commission as described in the Notes
to the Financial Statements.
<PAGE>
PART I
Item 2--Properties
APARTMENTS
COMMUNITIES. The Company owns five apartment communities containing
1,004 units in Savannah, Georgia and Charleston, South Carolina. They are
"garden apartments", in wood frame two and three-story buildings without
elevators, with individually metered electric and gas service and
individual heating and cooling systems. The Company's apartments are 32%
one bedroom units, 54% two bedroom units and 14% three bedroom units. The
units average 944 square feet in area, fifteen years of age, and are well
equipped with modern appliances and other conveniences. The communities are
generally heavily landscaped and offer extensive amenities. Most include
swimming pools, tennis courts, club rooms, exercise facilities and hot
tubs. Some of the Company's communities also offer racquetball courts,
saunas, alarm systems and other features.
RESIDENTS. Residents at the Company's apartments typically earn middle
and upper middle levels of incomes. They include young professionals, white
collar workers, medical personnel, teachers, members of the military, single
parents, single adults and young families. These residents are generally
"renters by choice" - who have the means to own homes but choose to live in
apartment communities because of their current employment, family or other
personal circumstances. The Company believes that demand for its apartments is
primarily dependent on the general economic strength of each market's economy
and its level of job creation and household formation, and to a lesser extent
to prevailing interest rate levels for home mortgage loans. There is a steady
turnover of leases at the Company's communities, allowing rents to be adjusted
upward as demand allows. Leases are generally for terms of from six to twelve
months. About two-thirds of the Company's units turn over each year, a rate the
Company believes is typical for higher end apartment communities.
MARKETS. Merry Land's apartment communities are located in the
Southern coastal cities of Savannah, Georgia and Charleston, South
Carolina. The Company believes that these cities will experience economic
growth well above national and regional averages as the baby boom
generation approaches retirement age and tends to move in large numbers,
either seasonally or permanently, to resort areas. Physical occupancy at
the Company's communities has been high over the last five years, averaging
95% or more in each of those years. This strong demand has produced a 3.6%
average annual increase in rental rates at the Company's apartment
communities during this period.
The following table describes the Company's apartment communities at
December 31, 1998.
<TABLE>
<CAPTION>
Average Average Average Rent (2)
Date Cost(1) Cost Per Unit Size Per Unit Per Sq. Ft. Average
Name Location Built Units (In Thousands) Unit(1) (Sq.Ft.) 1998 1998 Occupancy
- ---- -------- ----- ----- -------------- -------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Greentree Savannah 1983 194 $7,476 $38,534 852 $600 $0.70 94%
Marsh Cove Savannah 1983 188 8,201 43,623 1,053 677 0.64 98
West Wind Savannah 1985 192 7,349 38,277 1,124 708 0.63 98
--- ------ ------- ----- ---- ----- --
574 23,026 40,155 1,009 661 0.66 97
Quarterdeck Charleston 1986 230 9,709 42,093 810 634 0.78 100
Waters Edge Charleston 1985 200 8,030 39,693 911 574 0.63 97
--- ------ ------- ----- ---- ----- ---
430 17,739 41,254 857 606 0.71 99
TOTALS 1,004 $40,765 $40,603 944 $638 $0.67 97%
</TABLE>
(1) Represents the total acquisition cost of the property plus the capitalized
cost of the improvements made subsequent to acquisition.
(2) Represents the weighted average of rent charged for occupied units and rent
asked for unoccupied units at December 31, 1998.
(3) Represents average physical occupancy at each month end for 1998.
APARTMENT DEVELOPMENT SITES
The Company owns four land parcels containing a total of 84 acres with
a book value of $3.4 million and zoning to allow the development of
approximately 750 apartment units. The Company intends to commence
construction in 1999 of a 230 unit luxury apartment community on one land
parcel that is adjacent to the Quarterdeck apartment community, which is
owned by the Company. This property is located only minutes from
Charleston's historic downtown. Another parcel is also adjacent to an
existing apartment community owned by the Company, Waters Edge, and lies
along the Ashley River in the Summerville area of Charleston. The Company
is exploring the possibility of subdividing this tract and offering it for
sale as single family lots.
COMMERCIAL PROPERTIES
The Company owns six commercial properties in the Augusta area,
primarily small office buildings, including the Company's headquarters
building. Three buildings are located in the depressed downtown Augusta
rental market and are in varying stages of physical obsolescence. In
conjunction with the formulation of a new business plan for the Company and
the likely disposal of these assets, the Company wrote down the carrying
cost of several of these properties to their estimated value as determined
in the Company's formation and startup in late 1998. This produced a pretax
charge of $1.7 million. These properties, aggregating approximately
170,000 square feet, have a net book value of $2.3 million.
The Company owns six commercial land sites in Augusta, Jacksonville,
Miami, Savannah and Nashville containing 46 acres with a book value of $2.6
million. The Company intends to either sell or develop these properties.
LAND
The Company owns approximately 4,800 acres of unimproved land with a
book value of $1.3 million. Since 1981, brick manufacturer Boral Bricks,
Inc. has had a long term clay mining lease on 2,522 acres of the Company's
land. In 1997, Boral Bricks leased an additional 195 acres for clay
mining. The Company also leases 100 acres to another company for the
mining of sand and gravel, leases other tracts for agriculture and grows
timber on much of the remaining land. The Company expects that some of its
land eventually may be developed or sold for development by others.
<PAGE>
PART I
Item 3--Legal Proceedings
None
Item 4--Submission of Matters to a Vote of Security Holders
None
<PAGE>
PART II
Item 5--Market for the Registrant's Common Stock and Related Shareholders'
Matters
COMMON STOCK
The Company's shares began trading on the NASDAQ SmallCap Market
System under the symbol "MRYP" on October 16, 1998. For the partial fourth
quarter ended December 31, 1998, the high and low sales prices of the
Company's common shares were $6.00 and $3.44, respectively. On December 31,
1998, the closing sale price for the Common Stock was $3.63 and on March 8,
1999, the closing sale price was $6.50 per share.
At December 31, 1998, there were approximately 2,716 shareholders of
record. In addition, the Company estimates that an additional 11,200
shareholders hold their shares in "street name".
The Company did not pay any dividends to common shareholders in 1998.
At the present time, the Company's intention is to retain earnings to fund
future growth. The Preferred Stock, Senior Debt and Subordinated Debt
agreements contain provisions which could limit the payment of dividends by
the Company; however, these provisions do not currently limit the Company's
ability to pay dividends.
RECENT SALES OF UNREGISTERED SECURITIES. On October 15, 1998, in a
private transaction, the Company issued to Merry Land & Investment Company,
Inc. (the Company's parent corporation at the time) 2,151,315 shares of
common stock, 5,000 shares of Series A Redeemable Cumulative Preferred
Stock ($1,000 liquidation preference per share), $18,317,429 of senior
debt, and $20,000,000 of subordinated debt. The securities were issued in
exchange for five apartment communities, four apartment development sites,
five commercial properties, six commercial sites, 4,816 acres of
undeveloped land, and other assets, all received from Merry Land &
Investment Company, Inc. The securities were issued in a transaction exempt
from registration under Section 4(2) of the Securities Act of 1933.
Following the issuance of securities on October 15, 1998, the common stock
of Merry Land Properties was spun off to the common shareholders of Merry
Land & Investment Company, Inc.
<PAGE>
PART II
Item 6--Selected Financial Data
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company
and should be read in conjunction with the financial statements and notes
thereto incorporated by reference herein. The following amounts are in
thousands, except for information with respect to per share amounts and
apartment units.
<TABLE>
<CAPTION>
Years Ended December 31*
--------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Income from operations:
Rental income $ 8,121 $ 7,774 $ 7,523 $ 7,260 $ 6,981
Royalty income 1,693 1,401 369 436 817
Management fees 149 - - - -
Development fees 515 - - - -
Rental expense, property taxes and ins. 3,449 3,022 2,912 2,849 2,765
Depreciation of real estate owned 1,291 1,284 1,213 1,191 1,103
--------- --------- --------- --------- ---------
5,738 4,869 3,767 3,656 3,930
Other income:
Interest income 137 84 70 72 89
--------- --------- --------- --------- ---------
137 84 70 72 89
Expenses:
Interest expense 694 - - - -
Depreciation-other 265 224 145 84 -
General & administrative 655 120 108 90 60
--------- --------- --------- --------- ---------
1,614 344 253 174 60
Income from continuing operations 4,261 4,609 3,584 3,554 3,959
Non recurring cost-impairment charge 1,666 - - - -
--------- --------- --------- --------- ---------
Income before taxes 2,595 4,609 3,584 3,554 3,959
Income tax benefit 462 - - - -
--------- --------- --------- --------- ---------
Net income $ 3,057 $ 4,609 $ 3,584 $ 3,554 $ 3,959
========= ========= ========= ========= =========
Weighted average common shares 2,113 1,923 1,796 1,668 1,322
Weighted average diluted common shares 2,129 1,946 1,834 1,704 1,349
Earnings per common share-basic $ 1.45 $ 2.40 $ 2.00 $ 2.13 $ 2.99
Earnings per common share-diluted $ 1.44 $ 2.37 $ 1.95 $ 2.09 $ 2.93
Common dividends paid $ - $ - $ - $ - $ -
BALANCE SHEET DATA
Real estate and other fixed assets $ 40,982 $ 42,596 $ 41,558 $ 42,508 $ 41,956
Cash and short term investments 3,995 - - - -
Other assets 9,766 1,412 726 751 783
--------- --------- --------- ---------- --------
Total assets $ 54,743 $ 44,008 $ 42,284 $ 43,259 $ 42,739
========= ========= ========= ========== ========
Debt $ 38,317 $ - $ - $ - $ -
Other liabilities 2,209 629 337 394 420
Preferred stock 5,000 - - - -
Investment by Merry Land &
Investment Company, Inc. - 43,379 41,947 42,865 42,739
Common stock and retained earnings 9,217 - - - -
--------- --------- --------- ---------- --------
Total liabilities and stockholders' equity $ 54,743 $ 44,008 $ 42,284 $ 43,259 $ 42,739
========= ========= ========= ========== ========
OTHER DATA
Apartment units owned 1,004 1,004 1,004 1,004 1,004
Apartment units managed 2,712 - - - -
</TABLE>
* 1994 operating data, 1995 and 1994 balance sheet data and all other data
unaudited.
<PAGE>
PART II
Item 7--Management's Discussion and Analysis of Financial Condition and
Results of Operations
Merry Land Properties, Inc, was formed on September 3, 1998, as a
corporate subsidiary of Merry Land & Investment Company, Inc. in connection
with a transaction in which Merry Land & Investment Company was merged into
Equity Residential Properties Trust on October 19, 1998. On October 15,
1998, prior to the merger, Merry Land & Investment Company contributed five
apartment communities, four apartment development sites, five commercial
properties, six commercial sites, 4,816 acres of undeveloped land, and
other assets to Merry Land Properties in exchange for 2,131,315 shares of
common stock, $5,000,000 of preferred stock, $18,317,429 of senior debt and
$20,000,000 of subordinated debt. On October 15, 1998, the common stock of
Merry Land Properties was spun off to the common shareholders of Merry Land
& Investment Company on the basis of one share of Merry Land Properties
stock for every twenty shares of Merry Land & Investment Company. When the
merger transaction was completed Merry Land Properties began operating as
an independent public company and the senior debt, subordinated debt and
preferred stock were acquired by Equity Residential. Also in conjunction
with the merger Equity Residential made an additional capital contribution
of $2,400,000 to Merry Land Properties.
Merry Land has operated only since October 15, 1998. Accordingly,
only the Consolidated Balance Sheet for December 31, 1998 is an actual
financial statement prepared for a real company. All other statements are
those of an "accounting predecessor" which have been constructed in
accordance with the rules of the Securities and Exchange Commission as
described in the Notes to the Financial Statements.
RESULTS OF OPERATIONS
The results of operations for 1998 include the results of Merry Land
Properties, as it operated as an independent company for the period from
October 15, 1998 to December 31, 1998, combined with the constructed
results of the accounting predecessor to Merry Land Properties for the
period from January 1, 1998 to October 15, 1998. The operating results for
the years ended December 31, 1997 and 1996 are entirely those of the
accounting predecessor to Merry Land Properties.
RENTAL OPERATIONS-APARTMENTS. The Company owns five apartment
communities described in the following table:
<TABLE>
<CAPTION>
Occupancy (1) Average Rent (2)
---------------------------------- -------------------------------
Community Units 1998 1997 1996 1998 1997 1996
- --------- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Quarterdeck 230 99.8% 99.5% 99.6% $634 $614 $589
Waters Edge 200 96.7 97.3 93.5 574 570 547
--- ---- ---- ---- ---- ---- ----
Total Charleston 430 98.4 98.5 96.8 606 593 569
Greentree 194 93.8 92.0 95.1 600 593 569
Marsh Cove 188 97.8 95.3 95.6 677 658 644
West Wind 192 97.9 98.1 98.3 708 679 660
--- ---- ---- ---- ---- ---- ----
Total Savannah 574 96.5 95.1 96.3 661 643 624
Total 1,004 97.3% 96.6% 96.5% $638 $624 $601
</TABLE>
(1) Represents the average physical occupancy at each month end for the
period held.
(2) Represents weighted average monthly rent charged for
occupied units and rents asked for unoccupied units at
December 31.
The operating performance of the Company's apartment
communities is summarized in the following table (dollars in
thousands, except average monthly rent):
<TABLE>
<CAPTION>
% Change from Twelve Months
CHANGE 1997 TO 1998 1998 1997 1996
------ ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental income 3.9% $283.4 $7,638.7 $7,355.3 $7,145.1
Personnel 2.3 22.7 1,022.4 999.7 862.6
Utilities 1.9 5.3 277.9 272.6 314.4
Operating 39.6 106.6 375.9 269.3 238.3
Maintenance and grounds 33.4 178.4 711.8 533.4 556.7
Taxes and insurance 9.4 63.7 737.7 674.0 685.4
Depreciation and amortization (0.4) (4.6) 1,171.4 1,176.0 1,114.2
----- ----- -------- -------- --------
Subtotal 9.5 372.1 4,297.1 3,925.0 3,771.6
Operating income (2.6)% $(88.7) $3,341.6 $3,373.5
Average occupancy (1) - 0.7% 97.3% 96.6% 96.5%
Average monthly rent (2) 2.2% $ 14 $ 638 $ 624 $ 601
Expense ratio (3) - 2.9% 56.3% 53.4% 52.8%
(1) Represents the average physical occupancy at each month end for the period
held.
(2) Represents weighted average monthly rent charged for occupied units and
rents asked for unoccupied units at December 31.
(3) Represents total operating expenses divided by rental revenues.
For the twelve month period of 1998, rental income rose by $283.4 thousand,
or 3.9%, for the five apartment communities because of 2.2% higher rents and
0.7% higher occupancy over 1997. In the aggregate, the Charleston and Savannah
rental markets were strong in 1998 and 1997 as demand for apartments exceeded
additions to supply. The Company's apartments experienced 97.3% occupancy in
1998, which was 0.7% above 1997. Average rent increased 2.2%, from $624 on
December 31, 1997 to $638 on December 31, 1998. Charleston rents increased to
$606, or 2.2% and Savannah rents increased to $661, or 2.8%, during this
period. The Company believes that physical occupancy should remain satisfactory
despite substantial delivery of new units if general economic activity, job
growth and household formation along the southeastern coast remain strong.
Total expenses were up $372.1 thousand, or 9.5%, in 1998, from the same
period in 1997, due primarily to increases in operating, maintenance and
grounds, taxes and insurance expenses. Operating expenses increased by $106.6
thousand, or 39.6%, while maintenance expenses were up $178.4 thousand, or
33.4%, primarily due to completion of a major maintenance project to repair
deteriorated floor systems at Waters Edge community, which totaled $165.0
thousand. Real estate taxes and insurance were up $63.7 thousand, or 9.4%,
due to an overall increase in millage rates and higher insurance premiums.
In 1997 rental income rose by $210.2 thousand from 1996, or 2.9%,
because of higher rents. Occupancy was essentially flat for the twelve month
period of 1997 versus 1996. Total expenses were up $153.4 thousand, or 4.1%,
in 1997 from the same period in 1996. Personnel expenses were up $137.1
thousand, or 15.9%, due to higher salaries and higher bonuses. Utilities were
down $41.8 thousand, or 13.3%, largely due to the collection of water fees from
the residents. Operating expenses were up $31.0 thousand, or 13.0%, generally
due to increased marketing and advertising expenses.
RENTAL OPERATIONS-COMMERCIAL. The Company owns six commercial properties
in the Augusta area containing a total of 169,915 square feet and including
the office building were the Company's headquarters are located. Three buildings
containing approximately 75,000 square feet are located in the depressed
downtown Augusta rental market and are in varying stages of physical
obsolescence. Consequently, occupancy for all six commercial properties was
52.0% at December 31, 1998. The performance of the six commercial properties is
summarized in the following table (dollars in thousands):
</TABLE>
<TABLE>
<CAPTION>
% Change from Twelve Months
Change 1997 to 1998 1998 1997 1996
------ ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental Income 21.8% $73.7 $411.9 $338.2 $304.1
Utilities 22.4% 17.4 95.1 77.7 76.1
Operating 64.5 2.0 5.1 3.1 5.9
Maintenance and grounds 19.5 13.8 84.7 70.9 60.8
Taxes and insurance 4.2 2.6 63.9 61.3 55.5
Depreciation and amortization (3.0) (9.9) 321.7 331.6 242.5
----- ------ ------ ------ ------
Subtotal 4.8 25.9 570.5 544.6 440.8
Operating income 23.1% $47.8 $(158.6) $(206.4) $(136.7)
</TABLE>
In 1998, rental income rose by $73.7 thousand, or 21.8%, for commercial
properties because of increased occupancy. Total expenses were up $25.9
thousand, or 4.8%, in 1998 from the same period in 1997 primarily due to higher
utilities and maintenance expenses resulting from higher occupancy.
In 1997, rental income increased by $34.1 thousand, or 11.2%, for
commercial properties because of increased occupancy. Total expenses were up
$103.8 thousand, or 23.5%, in 1997 from 1996 generally due to higher occupancy
and higher depreciation expense related to capital improvements made in 1997
and 1996.
LAND. The Company owns approximately 4,800 acres of unimproved land, of
which 3,144 acres are subject to clay and sand mining leases and 180 acres are
zoned for apartment or commercial uses. The operating performance of the land
is summarized in the following table (dollars in thousands):
<TABLE>
<CAPTION>
% Change from Twelve Months
Change 1997 to 1998 1998 1997 1996
------ ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Clay royalties 23.4% $297.0 $1,564.7 $1,267.7 $238.8
Sand royalties (3.7) (5.0) 128.7 133.7 129.8
Rental income (13.4) (10.8) 70.0 80.8 73.8
------ ------- -------- -------- ------
Subtotal 19.0 281.2 1,763.4 1,482.2 442.4
Operating expense 925.0 25.9 28.7 2.8 0.0
Taxes and insurance (20.5) (11.8) 45.9 57.7 56.6
------ ------- -------- -------- ------
Subtotal (23.3) 14.1 74.6 60.5 56.6
Operating income 18.8 $267.1 $1,688.8 $1,421.7 $385.8
</TABLE>
Clay royalties increased $297.0 thousand, or 23.4%, for the twelve month
period in 1998 compared to the same period in 1997 due to collections from a
royalty agreement executed in March 1997. For the twelve months in 1997, clay
royalties increased in comparison with 1996 also due to the March 1997 royalty
agreement. Because royalty payments under th agreement end in April 1999,
royalties in future periods are expected to be significantly lower.
MORTGAGE INTEREST INCOME. Interest income from mortgage notes receivable
totaled $106.3 thousand in the twelve month period of 1998, up from $83.8
thousand in the twelve month period of 1997 and $70.3 thousand in the twelve
month period of 1996. The increases were due to an additional note received for
$675.0 thousand from the sale of an apartment community in Augusta during
November 1997.
OTHER INTEREST INCOME. Other interest income was $30.3 thousand, all
earned on cash balances for the period October 15, 1998 to December 31, 1998.
PROPERTY MANAGEMENT AND DEVELOPMENT FEES. In 1998, management fee income
was $149.0 thousand and development fee income was $515.0 thousand, all of
which related to the period October 15, 1998 to December 31, 3998. These fees
were earned under agreements with Equity Residential whereby the Company
provides either property management or development consulting services for
twelve apartment communities. At December 31, 1998, approximately $2.0 million
remains to be earned under the development agreement. The Company has no
expectations of a continuing relationship with Equity Residential that would
produce further fees. The Company intends to seek other third party property
management and development consulting business, but there can be no assurance
that fees approaching current levels will be achieved.
INTEREST EXPENSE. The assets contributed to the Company by Merry Land &
Investment company were not encumbered by mortgage debt at any time during 1996
or 1997 or prior to the spin off in 1998. Therefore, the financial statements
for the accounting predecessor to Merry Land Properties for periods prior to
the spin off assume that there was no debt or related interest expense. In
October 1998 and in connection with the spin off, the Company received its
assets subject to $18.3 million of senior debt, $20.0 million of subordinated
debt, and $5.0 million of preferred stock. Interest expense related to these
obligations totaled $694.5 thousand for 1998, all accrued after the spin off
and included $81.1 thousand of dividends accrued on the Company's preferred
stock. During this period, the average rate on the senior debt was 7.8% and
the rate on the subordinated debt and preferred stock was 8.0%.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
totaled $516.1 thousand for the period of October 15, 1998 to December 31,
1998. For periods prior to October 15, 1998, management has estimated common
and corporate level expenses which might have been incurred on behalf of the
accounting predecessor to Merry Land Properties by Merry Land & Investment
Company in accordance with the rules and regulations of the Securities and
Exchange Commission applicablefor subsidiaries which have been spun off.
Management has allocated such expenses based on its best estimate under these
guidelines of time and effort that would have been expended for the benefit of
the accounting predecessor.
IMPAIRMENT CHARGE. In conjunction with the formulation of a new business
plan for the Company's commercial properties and the likely disposition of
these properties, the Company wrote down the carrying cost of several of these
assets to their estimated value as determined in the Company's formation and
startup. This produced a pretax charge of $1.7 million.
INCOME BEFORE TAXES. Income before taxes decreased to $2.6 million in
1998 from $4.6 million in 1997 and $3.6 million in 1996. As discussed in Note
1 to the financial statements, general and administrative expenses estimated
in the statements were considerably less prior to the spin off than after the
spin off and there was no interest expense assumed prior to the spin off. This
resulting decrease in income before taxes in 1998 primarily related to the
higher general and administrative expense of $490.8 thousand, higher interest
expense of $694.5 thousand, and the $1.7 million impairment charge. These
increases in expenses were somewhat offset by increases in mineral royalties
and fee incme from third party property management and development consulting.
Income increased by $1.3 million in 1997 largely due to an increase in mineral
royalties.
INCOME TAXES. As a REIT, the accounting predecessor to Merry Land
Properties would not have been subject to income taxes. A net income tax
benefit in 1998 related to the period October 15, 1998 to December 31, 1998
totaled $462.6 thousand, and consisted of $123.8 thousand in current income
tax expense and $586.4 thousand in deferred income tax benefit. The deferred
income tax benefit arose primarily from the impairment charge taken against
several of the Augusta commercial properties.
FUNDS FROM OPERATIONS. For the period that the Company operated as an
independent public entity from October 15, 1998 to December 31, 1998 funds
from operations were $680.1 thousand. The following is a reconciliation of
net income to funds from operations. (data in thousands):
October 15, 1998
to
December 31, 1998
-----------------
Net loss available for common $ (648.6)
Add depreciation of real estate owned 248.6
Add impairment charge 1,666.5
Less deferred tax benefit 586.4
----------------
Funds from operations available to common shares $ 680.1
================
Weighted average common shares outstanding--
Basic 2,181.1
Diluted 2,191.6
The Company believes that funds from operations are an important measure
of its operating performance. Funds from operations do not represent cash
flows from operations as defined by generally accepted accounting principles,
GAAP, and should not be considered as an alternative to net income, or as an
indicator of the Company's operating peformance, or as a measure of the
Company's liquidity. The Company defines funds from operations as net income
computed in accordance with GAAP, excluding non-recurring costs and net
realized gains, plus depreciation of real property.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL STRUCTURE. At December 31, 1998, total debt equaled 73% of both
total capitalization at cost and total capitalization with equity valued at
market. At that date, the Company's financial structure was as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Equity
% of Market % of
Book Total Value Total
---- ----- ------ -----
<S> <C> <C> <C> <C>
Senior debt $18,317.4 35% $18,317.4 35%
Subordinated debt 20,000.0 38 20,000.0 38
--------- -- --------- --
Total debt 38,317.4 73 $38,317.4 73
Preferred stock 5,000.0 10 5,000.0 9
Common stock 9,216.7 17 9,416.4 18
--------- -- --------- --
Total capitalization $52,534.1 100% $52,733.8 100%
========= ==== ========= ====
</TABLE>
The senior debt, subordinated debt, and preferred stock were issued in
connection with the merger and spin off. Before the spin off non of Merry
Land & Investment Company's debt or preferred stock were attributed to the
predecessor.
Borrowings of up to $25.0 million are available under the senior debt
agreement. The senior debt bears interest, payable quarterly, at the Company's
option either LIBOR plus 250 basis points or at prime plus 200 basis points,
and matures in October 2013. The dividend rate on the preferred stock is also
8.0% until October 2003, payable quarterly, and its mandatory redemption date
is October 2013. Beginning in October 2003, the interest rate on the
subordinated debt and the dividend rate on the preferred stock increase each
year until 2013.
LIQUIDITY. The Company expects to meet its short-term liquidity
requirements with its working capital, cash provided by operating activities,
construction loans, mortgage debt and a line of credit which it intends to
establish with a commercial bank. The Company's primary short-term liquidity
needs are operating expenses, capital improvements, the proposed development
of the Merritt James Island community, and the maturity of the senior debt.
The Company expects to meet its long-term liquidity requirements from a
variety of sources, including operating cash flow, additional borrowings, and
the issuance and sale of debt and equity securities in public and private
markets. The Company's long-term liquidity needs include the maturity of the
subordinated debt, redemption of the preferred stock, and financing
acquisitions and development.
CASH FLOWS. Before the merger and spin off in October 1998, under the
accounting rules for preparing financial statements of a company to be spun
off, all cash flow was assumed to be generated from operating activities and
distributed to the accounting predecessor of Merry Land Properties. Cash and
cash equivalents totaled $4.0 million on December 31, 1998 and were generated
from the merger and spin off, and from operating activities after the spin
off.
YEAR 2000 DISCLOSURE. The Company has evaluated the impact of the "Year
2000" issue on its business, results of operations, and financial condition
and has determined that the cost of any software and hardware upgrades is not
expected to be material. The cost to analyze and prepare for the Year 2000
issue has not been material and the Company does not anticipate the need for
a contingency plan. While there can be no assurances, the Company does not
currently expect the Year 2000 issue will have a material impact on the
Company's business, operations, or financial condition.
INFLATION. Substantially all of the Company's leases are for terms of
one year or less, which should enable the Company to replace existing leases
with new leases at higher rent rates in times of rising prices. The Company
believes that this would offset the effect of cost increases stemming from
inflation.
FORWARD LOOKING STATEMENTS. This filing includes statements that are
"forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 regarding expectations with respect to market conditions, development
projects, acquisitions, occupancy rates, capital requirements, sources of
funds, expense levels, operating performance, and other matters. These
assumptions and statements are subject to various factors, unknown risks and
uncertainties, including general economic conditions, local market factors,
delays and cost overruns in construction, completion and rent up of development
communities, performance of consultants or other third parties, environmental
concerns, and interest rates, any of which may cause actual results to differ
from the Company's current expectations.
<PAGE>
Item 7A--Quantitative and Qualitative Disclosures about Market Risk.
The Company has variable rate debt and thus is exposed to the impact of
interest rate change. The variable rate debt matures in 1999 and bears
interest, payable quarterly, at LIBOR plus 250 basis points or prime plus 200
basis points. Additional borrowings of $6.7 million are available with $18.3
million currently outstanding. The Company intends to eliminate this exposure
to interest rate change by replacing this variable debt with fixed rate debt.
The Company does not enter contracts for trading purposes and does not
use leveraged instruments. None of the Company's notes receivable have variable
interest rates. The following table summarizes the Company's market risk
associated with notes payable and notes receivable as of December 31, 1998.
The table represents principal payments and the related weighted average
interest rates by expected year of maturity. The variable rate represents the
floating interest rate calculated at December 31, 1998.
<TABLE>
<CAPTION>
Expected Fiscal Year of Maturity
---------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total Fair Market
---- ---- ---- ---- ---- ---------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Debt:
Fixed Rate $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $20,000.0 $20,000.0 $20,000.0
Avg. Interest Rate - - - - - 9.50% 9.50% 9.50%
Variable Rate $18,317.4 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $18,317.4 $18,317.4
Avg. Interest Rate 7.58% - - - - - 7.58%
Notes Receivable:
Fixed Rate $ 633.5 $51.1 $54.9 $54.1 $42.2 $ 506.5 $ 1,342.3 $ 1,342.3
Avg. Interest Rate 9.8% 7.3% 7.3% 7.1% 6.1% 6.1% 8.0%
</TABLE>
<PAGE>
Part II
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Accounting
Predecessor
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land held for mining, development and sale $ 7,255,130 $ 6,391,361
Apartments 40,765,214 40,377,348
Commercial rental property 2,622,024 5,220,096
Furniture and equipment 1,836,144 1,684,030
---------------- ---------------
Total cost 52,478,512 53,672,835
Accumulated depreciation and depletion (11,496,904) (11,076,536)
---------------- ---------------
CASH AND CASH EQUIVALENTS 3,995,365 -
OTHER ASSETS
Notes receivable 1,342,246 1,411,727
Other receivable 1,434,512 -
Deferred tax asset 6,909,857 -
Other 79,620 -
--------------- ---------------
TOTAL ASSETS $ 54,743,208 $ 44,008,026
=============== ===============
NOTES PAYABLE
Senior debt $ 18,317,429 $ -
Subordinated debt 20,000,000 -
--------------- ---------------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest 444,553 -
Accrued income taxes 123,846 -
Accrued property taxes 309,936 244,627
Accrued dividends payable 81,111 -
Deferred revenue 771,627 330,696
Other 477,967 53,443
--------------- ---------------
2,209,040 628,766
PREFERRED STOCK 5,000,000 -
STOCKHOLDER'S EQUITY
Investment by Merry Land & Investment Company, Inc. - 43,379,260
Common stock, at $1 stated value, 2,597,633 shares
issued and outstanding 2,597,633 -
Capital surplus 9,121,985 -
Unamortized compensation (1,854,291) -
Cumulative undistributed net earnings (deficit) (648,588) -
--------------- ---------------
9,216,739 43,379,260
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,743,208 $ 44.008,026
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets. Specific reference is made to Note 1 where the basis
of presentation for these statementsis described and the lack of
comparability between periods is discussed.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
INCOME
Rental income $ 8,120,569 $ 7,774,310 $ 7,522,965
Royalty income 1,693,489 1,401,363 368,644
Interest income 136,644 83,816 70,257
Management fees 148,958 - -
Development fees 515,016 - -
----------- ----------- -----------
10,614,676 9,259,489 7,961,866
EXPENSES
Rental expense 3,449,045 3,022,300 2,912,349
Interest expense 694,462 - -
Depreciation 1,556,457 1,507,721 1,356,831
Insurance 42,066 - -
General and administrative expense 611,335 120,480 108,432
Impairment charge 1,666,463 - -
----------- ---------- -----------
8,019,828 4,650,501 4,377,612
INCOME BEFORE TAXES 2,594,848 4,608,988 3,584,254
Income tax benefit 462,597 - -
----------- --------- -----------
NET INCOME $ 3,057,445 $ 4,608,988 $ 3,584,254
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
Basic 2,113,393 1,923,000 1,796,000
Diluted 2,129,479 1,946,000 1,834,000
EARNINGS PER COMMON SHARE
Basic $ 1.45 $ 2.40 $ 2.00
Diluted $ 1.44 $ 2.37 $ 1.95
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Specific reference is made to Note 1 where the basis of presentation for these
statements is described and the lack of comparability between periods is
discussed.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Undistributed Total
Investment Common Stock Capital Unamortized Net Earnings Stockholder's
By Parent Shares Amount Surplus Compensation Deficit Equity
--------- ------ ------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1995 $ 42,864,836 - $ - $ - $ - $ - $ 42,864,836
Net income 3,584,254 - - - - - 3,584,254
Net distributions (4,501,631) - - - - - (4,501,631)
------------ -------- --------- -------- ------------ ------------- ------------
BALANCE DECEMBER 31, 1996 $ 41,947,459 - - - - - 41,947,459
Net income 4,608,987 - - - - - 4,608,987
Net distributions (3,177,186) - - - - - (3,177,186)
------------ -------- --------- -------- ------------ ------------- -------------
BALANCE DECEMBER 31, 1997 $ 43,379,260 - - - - - $ 43,379,260
Net income prior to spin off- 3,706,033 - - - - - 3,706,033
Note 1
Net distrinbutions prior to spin off-
Note 1 (3,911,647) - - - - - (3,911,647)
Initial capitalization resulting from
the spin off-Note 1 (43,173,646) 2,151,315 2,151,315 5,152,926 - - (35,869,405)
Capital contribution in connection
with spin off-Note 1 - - - 2,400,000 - - 2,400,000
Issuance of restricted stock grants - 446,318 446,318 1,569,059 (2,015,377) - -
Amortization of stock grants - - - - 161,086 - 161,086
Net income(loss) subsequent to - - - - - (648,588) (648,588)
spin off ------------- --------- --------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1998 $ - 2,597,633 $2,597,633 $9,121,985 $(1,854,291) $(648,588) $ 9,216,739
============= ========= ========== ========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Specific reference is made to Note 1 where the basis of presentation for these
statements is described and the lack of comparability between periods is
discussed.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,057,445 $ 4,608,987 $ 3,584,254
Adjustments to reconcilde net income to
Net cash provided by operating activities:
Depreciation expense 1,556,457 1,507,721 1,356,831
Impairment charge 1,666,463 - -
Deferred tax benefit (586,443) - -
Increase in property taxes payable 65,309 1,385 12,653
Increase in income taxes payable 123,846 - -
Increase in deferred credits 440,931 330,696 -
Increase in accrued interest 444,553 - -
Other 268,930 (40,000) (70,010)
------------ ------------ ------------
Net cash provided by operating activities 7,037,491 6,408,789 4,883,728
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 69,481 (685,416) 25,050
Investment in real estate assets (1,599,960) (2,546,187) (407,147)
------------ ------------ ------------
Net cash used in investing activities (1,530,479) (3,231,603) (382,097)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from Merry Land & Investment Co., Inc. 1,554,584 2,546,187 407,147
Other capital contributions 2,400,000 - -
Distributions to Merry Land & Investment Co., Inc. (5,466,231) (5,723,373) (4,908,778)
------------ ------------ ------------
Net cash used in financing activities (1,511,647) (3,177,186) (4,501,631)
NET INCREASE (DECREASE) IN CASH $ 3,995,365 - -
CASH AT BEGINNING OF PERIOD - - -
------------ ------------ ------------
CASH AT END OF PERIOD $ 3,995,365 $ - $ -
============ ============ ============
Interest paid $ 168,798 $ - $ -
Income taxes paid $ - $ - $ -
Non cash transactions:
Deferred tax asset from initial contribution $ 6,323,414 $ - $ -
Issuance of debt in initial capitalization $ 38,317,429 $ - $ -
Issuance of preferred stock in initial
capitalization $ 5,000,000 $ - $ -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Specific reference is made in Note 1 where the basis of presentation for these
statements is described and the lack of comparability between periods is
discussed.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. ORGANIZATION
Merry Land Properties, Inc. was formed on September 3, 1998, as a
corporate subsidiary of Merry Land & Investment Company, Inc. in connection
with a transaction in which Merry Land & Investment Company was merged into
Equity Residential Properties Trust on October 19, 1998. On October 15, 1998,
prior to the merger, Merry Land & Investment Company contributed five
apartment communities, four apartment development sites, five commercial
properties, six commercial sites, 4,816 acres of undeveloped land, and other
assets to Merry Land Properties in exchange for 2,151,315 shares of common
stock, $5,000,000 of preferred stock, $18,317,429 of senior debt and
$20,000,000 of subordinated debt. On October 15, 1998, the common stock of
Merry Land Properties was spun off to the common shareholders of Merry Land
& Investment Company on the basis of one share of Merry Land Properties stock
for every twenty shares of Merry Land & Investment Company. When the merger
transaction was completed Merry Land Properties began operating as an
independent public company and the senior debt, subordinated debt and
preferred stock were acquired by Equity Residential. Also, in conjunction
with the merger, Equity Residential made an additional capital contribution
of $2,400,00 to Merry Land Properties.
2. BASIS OF PRESENTATION
The financial statements for periods prior to the spin off include only
those assets and liabilities contributed by Merry Land & Investment Company
as described above. These financial statements have been prepared using
Merry Land & Investment Company's historical basis of the assets and
liabilities and the historical results of operations and have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission applicable for subsidiaries which have been spun off. These rules
stipulated that statements shall be prepared as if the entity had existed
prior to the existence of the new company. Such statements are not those of a
real entity, but describe a hypothetical "accounting predecessor" to Merry Land
Properties.
Management has estimated common and corporate level expenses which would
have been incurred on behalf of the accounting predecessor by Merry Land &
Investment Company and has allocated such expenses based on its best estimate
of the time and effort that would have been expended. Property management
costs have been estimated and allocated on a per unit basis. The assets
contributed to Merry Land Properties by Merry Land & Investment Company were
not encumbered by mortgage debt at any time prior to the spin off and the
financial statements for the accounting predecessor for periods prior to the
spin off do not include any debt or related interest expense.
Merry Land & Investment Company was qualified to be taxed as a real
estate investment trust and was not subject to federal income taxation on
distributed income. Accordingly, no provision for income tax is included in
the accompanying financial statements for periods prior to the spin off.
Amounts shown for periods and dates prior to the spin off assume lower
levels of general and administrative expenses than have actually been
incurred after the spin off and exclude any debt, interest expense or income
taxes. Accordingly, comparison of periods subsequent to the spin off with
periods prior to the spin off may be difficult and misleading.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary corporations. Any significant intercompany
transactions and accounts have been eliminated in consolidation.
RECOGNITION OF INCOME
The Company leases its apartment properties generally for terms of one
year or less. Rental income is recognized when earned. Commercial properties
are leased under operating leases. Rental income is recognized on a straight-
line basis over the terms of the respective leases. The Company recognizes
mineral royalty income both as clay and sand is mined and also on a straight-
line basis over the life of the related agreements depending on the terms of
the underlying leases. Property management and development consulting fee
income are recognized when earned.
REAL ESTATE ASSETS AND DEPRECIATION
Real estate assets are carried at depreciated cost except when it is
determined that the asset's carrying value may not be recoverable. Depreciation
of buildings and equipment is computed on the straight-line method for
financial reporting purposes using the following estimated useful lives:
Apartments...........................................40-50 years
Land improvements.......................................15 years
Commercial rental buildings..........................40-50 years
Furniture, fixtures, equipment and carpet............ 5-15 years
Operating equipment....................................3-5 years
Straight-line and accelerated methods are used for income tax reporting
purposes. Expenditures that extend the lives of assets are capitalized; other
repairs and maintenance are expensed.
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of", requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In October, 1998
in conjunction with formulation of a new business plan for the Company's
commercial properties the Company recorded an impairment charge of
approximately $1.7 million related to the likely disposal of several commercial
properties in Augusta, Georgia. This charge reduces the Company's carrying
value in the properties to the estimated fair value, less selling costs.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, all investments purchased
with an original maturity of three months or less are considered to be cash
equivalents.
INCOME TAXES
In conjunction with the spin off the Company, a taxable "C" corporation,
began accounting for income taxes under SFAS 109 "Accounting for Income
Taxes". Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and
liabilities and are measured using the tax rates and regulations that may be
in effect when the differences are expected to reverse.
EARNINGS PER SHARE AND SHARE INFORMATION
Basic earnings per common share is computed on the basis of the weighted
average number of shares outstanding during each period excluding the unvested
shares issued to employees under the Company's Management Incentive Plan.
Diluted earnings per share is computed giving effect to dilutive stock
equivalents resulting from outstanding options and restricted stock using the
treasury stock method.
For periods prior to the spin off, earnings per share have been computed
giving effect to the distribution ratio of one share of Merry Land Properties
for every twenty common shares of Merry Land & Investment Company. Accordingly,
weighted average common shares outstanding for the accounting predecessor
have been assumed to be 1/20 of the shares outstanding of Merry Land &
Investment Company for the periods prior to the spin off. For the periods
prior to the spin off, dilutive earnings per share are calculated giving
effect to dilutive options of Merry Land & Investment company using the same
ratio.
A reconciliation of the average outstanding shares used in the two
calculations is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding - basic 2,113,393 1,923,000 1,796,000
Dilutive potential common shares 16,086 23,000 38,000
--------- --------- ---------
Weighted average shares outstanding - diluted 2,129,479 1,946,000 1,834,000
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect both the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
4. NOTES RECEIVABLE
At December 31, 1998 and 1997, notes receivable consisted of the
following:
<TABLE>
<CAPTION>
Original Note Balances
Note Rate Due Amount 1998 1997
- ---- ---- --- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Augusta Partners 10.00% 10/99 $ 695,000 $ 573,566 $ 588,573
Brothersville 6.00% 11/12 675,000 636,512 672,791
Brothersville 10.00% 9/02 327,600 74,717 90,363
New Zion 7.00% 11/12 60,000 57,451 60,000
---------- ---------- ----------
$1,757,600 $1,342,246 $1,411,727
</TABLE>
5. DEBT
At December 31, 1998, debt consisted of the following:
<TABLE>
<CAPTION>
Debt Maturity Date Interest Rate Balance
- ---- ------------- ------------- -------
<S> <C> <C> <C>
Senior debt (a) October 19, 1999 (a) $18,317,429
Subordinated debt (b) October 19, 2013 (b) 20,000,000
-----------
Total $38,317,429
</TABLE>
(a) Senior debt. Borrowing of up to $25,000,000 are available under the
senior debt agreement, therefore, an additional $6,682,571 is available for
future draws. The Senior debt bears interest, payable quarterly, at the
Company's option either LIBOR plus 250 basis points or prime plus 200 basis
points. At December 31, 1998, the interest rate was 7.6%
(b) Subordinated debt. The Subordinated debt has a fifteen-year term,
maturing on October 19, 2013. Interest is payable quarterly and accrues at
the following rates:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Until October, 19, 2003 8.00% Oct. 20, 2008-Oct. 19, 2009 9.75%
Oct. 20, 2003-Oct. 19, 2004 8.25% Oct. 20, 2009-Oct. 19, 2010 10.50%
Oct. 20, 2004-Oct. 19, 2005 8.50% Oct. 20, 2010-Oct. 19, 2011 11.50%
Oct. 20, 2005-Oct. 19, 2006 8.75% Oct. 20, 2011-Oct. 19, 2012 12.75%
Oct. 20, 2006-Oct. 19, 2007 9.00% Oct. 20, 2012-Oct. 19, 2013 14.25%
Oct. 20, 2007-Oct. 19, 2008 9.25%
</TABLE>
The senior debt and subordinated debt agreements contain covenants
restricting the amount of debt which can be incurred by the Company.
6. MANAGEMENT INCENTIVE PLAN
In October, 1998, the shareholders of Merry Land Properties approved the
1998 Management Incentive Plan. In October 1998, fifteen employees, including
the Company's three executive officers, received restricted stock grants for
a total of 446,318 shares of the Company's common stock. The common stock
received under the restricted stock grants vest in fifteen equal annual
installments beginning on the date granted and are forfeitable in the event
the employee terminates service prior to vesting. At December 31, 1998, there
were an additional 53,682 common shares available for grant.
7. EMPLOYEE STOCK OWNERSHIP PLAN
In October, 1998, Merry Land Properties adopted and assumed Merry Land &
Investment Company's Employee Stock Ownership Plan. All costs and expenses
resulting from the assumption of sponsorship of the ESOP by the Company and
certain allocations to accounts of the ESOP participants will be shared by
the Company and Equity Residential Properties Trust based on the ratio of
employees' allocations on October 19, 1998.
Under the plan the Company makes annual contributions to a trust for
the benefit of eligible employees in the form of either cash or common
shares of the Company. The amount of the annual contribution is made at the
discretion of the Board of Directors.
8. PREFERRED STOCK
On October 15, 1998, the Company issued $5,000,000 of Preferred Stock
(5,000 shares with a liquidation preference of $1,000 per share). The
preferred stock agreement contains covenants restricting the amount of debt
which can be incurred by the company. The Preferred Stock must be redeemed
no later than October 19, 2013 and has a dividend rate as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Until Oct. 19, 2003 8.00% Oct. 20, 2008-Oct. 19, 2009 9.75%
Oct. 20, 2003-Oct. 19, 2004 8.25% Oct. 20, 2009-Oct. 19, 2010 10.75%
Oct. 20, 2004-Oct. 19, 2005 8.50% Oct. 20, 2010-Oct. 19, 2011 11.50%
Oct. 20, 2005-Oct. 19, 2006 8.75% Oct. 20, 2011-Oct. 19, 2012 12.75%
Oct. 20, 2006-Oct. 19, 2007 9.00% Oct. 20, 2012-Oct. 19, 2013 14.25%
Oct. 20, 2007-Oct. 19, 2008 9.25%
</TABLE>
For the period from October 15, 1998 to December 31, 1998, the Company
accrued preferred stock dividends of $81,111, which were paid in January
1999.
9. COMMON DIVIDENDS
The Company did not pay any dividends to common shareholders in 1998.
10. INCOME TAXES
As discussed in Note 1, the Company is a taxable "C" corporation. It is
assumed that the accounting predecessor distributed sufficient taxable income
to shareholders in the form of dividends to qualify as a REIT, and so no
income taxes were provided for in periods prior to the spin off.
The components of the income tax provision (benefit) are as follows:
Jan. 1, 1998
to
Dec. 31, 1998
-------------
Current federal tax $ 104,271
Current state tax 19,575
Deferred federal tax (493,749)
Deferred state tax (92,694)
-------------
The reconciliation of income tax computed at the U.S. federal statutory
rate to income tax expense for the full year of 1998 is as follows:
<TABLE>
<CAPTION>
% of pretax
$ Amount income
-------- -----------
<S> <C> <C>
Income tax expense at statutory rate $ 882,248 34.0%
Increases (reductions) in taxes resulting from:
Benefit from non taxable income under REIT status (1,261,051) (48.6)%
State and local income taxes, net of federal income
tax benefit (48,258) (1.9)%
Royalty income not taxable (64,964) (2.5)%
Dividends not deductible 27,578 1.1%
Other 1,850 0.1%
---------- ------
$ (462,597) (17.8%)
</TABLE>
Significant components of the Company's net deferred income taxes are as
follows:
Deferred tax asset: December 31, 1998
- ------------------- -----------------
Excess of tax basis of assets over
Book basis of assets $ 6,956,003
Other (46,146)
-----------------
Total deferred tax asset $ 6,909,857
SFAS 109 requires a valuation allowance be provided to reduce the amount
of the deferred tax assets if, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Management has
determined that no valuation allowance at December 31, 1998 is required.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
Management estimates that the carrying value of cash and cash equivalents,
notes receivable and notes payable approximate their fair values when compared
to instruments of similar type, maturity and terms.
12. SEGMENT INFORMATION
The Company has four reportable segments: Apartment Communities,
Commercial Properties, Land and Third Party Services. The accounting policies
of the segments are the same as those described in the summary of significant
accounting policies.
<TABLE>
<CAPTION>
Third Party
December 31, 1998 Apartments Commercial Land Services Corporate Consolidated
- ----------------- ---------- ---------- ---- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 7,638,710 $ 411,885 $ 69,973 $ - $ - $ 8,120,568
Real estate expense 3,125,712 248,774 74,559 - - 3,449,045
Depreciation and amortization 1,171,433 321,659 - - 63,365 1,556,457
Impairment charge - 1,666,463 - - - 1,666,463
------------ ----------- ---------- ----------- ---------- ------------
Income from real estate 3,341,565 (1,825,011) (4,586) - (63,365) 1,448,603
Other income - - 1,693,489 663,974 136,644 2,494,107
Segment income 3,341,565 (1,825,011) 1,688,903 663,974 73,279 3,942,710
------------ ----------- ---------- ----------- ----------- ------------
Interest expense - - - - (694,462) (694,462)
Insurance expense - - - - (42,066) (42,066)
General and administrative - - - (194,619) (416,715) (611,334)
Income before taxes 3,341,565 (1,825,011) 1,688,903 469,355 (1,079,964) 2,594,848
============ =========== ========= =========== ========== ============
Income tax benefit - - - - (462,597) (462,597)
Net income $ 3,341,565 $(1,825,011) $1,688,903 $ 469,355 $ (617,367) $ 3,057,445
============ =========== ========== =========== ========== ============
Capital investments $ 387,865 $ 205,175 $ 834,244 $ - $ 172,676 $ 1,599,960
============ =========== ========== =========== ========== ============
Total real estate assets $ 30,664,309 $ 2,319,489 $7,225,605 $ - $ 772,205 $ 40,981,608
============ =========== ========== =========== ========== ============
December 31, 1997
Real estate rental revenue $ 7,355,313 338,209 80,788 - - 7,774,310
Real estate expense 2,749,001 212,883 60,416 - - 3,022,300
Depreciation and amortization 1,176,016 331,705 - - - 1,507,721
Income from real estate 3,430,296 (206,379) 20,372 - - 3,244,289
Other income - - 1,401,363 - 83,816 1,485,179
Segment income 3,430,296 (206,379) 1,421,735 - 83,816 4,729,468
------------ ----------- ---------- ----------- ---------- ------------
General and administrative - - - - (120,480) (120,480)
Net income $ 3,430,296 $ (206,379) $1,421,735 $ - $ (36,664) $ 4,608,988
============ =========== ========== =========== ========== ============
Capital investments $ 750,683 $ 175,417 $1,085,211 $ - $ 534,876 $ 2,546,187
============ =========== ========== =========== ==========
Total real estate assets $ 31,447,876 $ 3,884,674 $6,391,361 $ - $ 872,388 $ 42,596,299
============ =========== ========== =========== ========== ============
December 31, 1996
Real estate rental revenue $ 7,145,051 $ 304,109 $ 73,805 - - 7,522,965
Real estate expense 2,657,449 198,225 56,675 - - 2,912,349
Depreciation and amortization 1,114,207 242,624 - - - 1,356,831
------------ ----------- ---------- ----------- ---------- ------------
Income from real estate 3,373,395 (136,740) 17,130 - - 3,253,785
Other income - - 368,644 - 70,257 438,901
Segment income 3,373,395 (136,740) 385,774 - 70,257 3,692,686
------------ ----------- ---------- ----------- ---------- ------------
General and administrative - - - - (108,432) (108,432)
Net income $ 3,373,395 $ (136,740) $ 385,774 $ - $ (38,175) $ 3,584,254
============ =========== ========== =========== ========== ============
Capital investments $ 408,565 $ 461,808 $ (674,409) $ - $ 211,183 $ 407,147
============ =========== ========== =========== ========== ============
Total real estate assets $ 31,873,208 $ 3,816,834 $5,306,150 $ - $ 561,641 $ 41,557,833
============ =========== ========== =========== ==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merry Land Properties, Inc.:
We have audited the accompanying consolidated balance sheets of Merry
Land Properties, Inc. and subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
presently fairly, in all material respects, the financial position of Merry
Land Properties, Inc. and subsidiaries as of December 31, 1998 and 1997 and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
January 27, 1999
<PAGE>
Part II
Item 9 --Changes in and Disagreements with Accountants and Financal
Disclosure
None
Part III
Item 10--Directors and Executive Officers of the Registrant
Incorporated by reference to the Company's definitive proxy
statement filed with the Securities and Exchange Commission.
Item 11--Executive Compensation
Incorporated by reference to the Company's definitive proxy
statement 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 filed with the Securities and Exchange Commission.
Item 13--Certain Relationships and Related Transactions
Incorporated by reference to the Company's definitive proxy
statement filed with the Securities and Exchange Commission.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS. The following financial statements are filed as
part of this report:
Report of Independent Public Accountants
Balance Sheets
Statements of Income
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules
are required to be filed by Item 8 and Item 14(d) of Form 10-K:
Report of Independent Public Accountants on Schedules
Real Estate and Accumulated Depreciation
3. EXHIBITS.
(3.i) - Articles of Incorporation, as amended by Articles of Amendment to
Articles of Incorporation re Series A Redeemable Cumulative Preferred
Stock
(3.ii) - Bylaws, as amended on January 28, 1999.
(4) Instruments Defining Rights of Security Holders, Including
Indentures:
(4.1) - The Company's $20,000,000 Senior Subordinated Term Loan Agreement
with Merry Land & Investment Company, Inc., dated October 15, 1998.
(10) MATERIAL CONTRACTS.
(10.1) The Company's Development Agreement with ERP Operating Limited
Partnership dated October 19, 1998.
(10.2) The Company's $25,000,000 Senior Term Loan Agreeemnt with Merry
Land & Investment Company, Inc., dated October 15, 1998.
(10.3) The Company's Employee Stock Ownership Plan.
(10.4) The Company's 1998 Management Incentive Plan (incorporated herein
by reference to Appendix F to Exhibit 10.1 of the Company's
Registration Statement on Form 10 filed September 4, 1998)
(10.5) Asset Exchange Agreement with Merry Land & Investment Company, Inc.
dated October 15, 1998.
(10.6) The Company's Preferred Stock Purchase Agreement with Merry Land &
Investment Company, Inc. dated October 15, 1998.
(21) -- Subsidiaries of Merry Land Properties, Inc.
(27) -- Financial Data Schedule.
(b) -- Reports on Form 8-K. The registrant filed no reports on Form 8-K
during the last quarter of 1998.
<PAGE>
To Merry Land Properties, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in this Form 10-K, and have issued
our report thereon dated January 27, 1999. Our audit was made for the purpose
of forming an opinion on those statements taken as a whole. The schedule
listed in Item 14 is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
- ------------------------------
Arthur Andersen LLP
Atlanta, Georgia
January 27, 1999
<PAGE>
PART IV
Item 14 --Schedule XI--Real Estate and Accumulated Depreciation for the Year
Ending December 31, 1998:
<TABLE>
<CAPTION>
Cost Capitalized Gross Amount at Which
Initial Cost to Company Subsequent to Acquisition Carried at Dec. 31, 1998 Accumulated Date of Deprec
Buildings & Carrying Buildings & Total Depreciation Construc- Date iable
Residential Land Improvements Improvements Cost Land Improvements (a) (a) tion Acq. Life
- ----------- ---- ------------ ------------ -------- ---- ------------ ------ ------------ --------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
- -----------
Greentree $325,000 $ 6,001,731 $ 1,148,959 $ 325,806 $ 7,149,884 $ 7,475,690 $ 2,293,979 1983 1986 5-50 yr.
Marsh Cove 329,786 6,649,280 1,222,098 345,467 7,855,697 8,201,164 2,423,086 1986 1989 5-50 yr.
Quarterdeck 580,000 8,216,250 912,636 600,402 9,108,484 9,708,886 2,178,557 1986 1989 5-50 yr.
Waters Edge 448,000 6,490,069 1,092,185 450,864 7,579,390 8,030,254 2,017,841 1985 1988 5-50 yr.
West Wind 960,000 5,597,500 791,720 960,000 6,389,220 7,349,220 1,187,441 1985 1993 5-50 yr.
Landing -------- ----------- ----------- --------- ----------- ----------- -----------
Total 2,642,786 32,954,830 5,167,598 - 2,682,539 38,082,675 40,765,214 10,100,904
Apartments
Commercial 356,000 1,612,486 653,538 - 370,920 2,251,104 2,622,024 302,535 var. var. 5-50 yr.
- ----------
Land 5,716,070 - 1,539,060 - 7,255,130 - 7,255,130 29,526 various -
- ---- ---------- ----------- ----------- ---- ---------- ----------- ----------- -----------
Total $8,714,856 $34,567,316 $ 7,360,196 $ - $10,308,589 $40,333,779 $50,642,368 $10,432,965
========== =========== =========== ==== =========== =========== =========== ===========
Notes:
</TABLE>
(a) Reconciliations of total real estate carrying value and accumulated
depreciation for the years ending December 31, 1998, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
Real Estate Cost Accumulated Depreciation
------------------------------------------- -------------------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of period $50,603,514 $49,677,413 $48,248,064 $10,264,894 $ 8,981,301 $ 7,721,600
Additions - acquisitions
and improvements 2,842,102 926,101 1,429,349 1,304,855 1,283,593 1,259,701
Deductions -
impairment charge 2,803,247 - - 1,136,784 - -
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $50,642,369 $50,603,514 $49,677,413 $10,432,965 $10,264,894 $ 8,981,301
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned,
MERRY LAND PROPERTIES, INC.
(Registrant)
/s/ W. TENNENT HOUSTON
- ---------------------------
W. Tennent Houston
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ DAVID W. COBB Director March 31, 1999
- -----------------
David W. Cobb
/s/ DORRIE E. GREEN Vice President, Chief March 31, 1999
- ------------------- Financial Officer,
Dorrie E. Green Secretary and Treasurer
/s/ W. TENNENT HOUSTON Chairman of the Board and March 31, 1999
- ---------------------- Chief Executive Officer
W. Tennent Houston
/s/ BOONE A. KNOX Director March 31, 1999
- ------------------
Boone A. Knox
/s/ STEWART R. SPEED Director March 31, 1999
- --------------------
Stewart R. Speed
/s/ MICHAEL N. THOMPSON President, Chief Operating March 31, 1999
- ----------------------- Officer and Director
Michael N. Thompson
ARTICLES OF INCORPORATION
OF
MERRY LAND PROPERTIES, INC.
ARTICLE I.
The name of the Corporation is MERRY LAND PROPERTIES, INC.
ARTICLE II.
The initial registered office of the Corporation shall be at: 624
Ellis Street, Augusta, Richmond County, Georgia 30901. The initial
registered agent of the Corporation at such address shall be: W. Hale
Barrett.
ARTICLE III.
The name and address of the incorporator is: Mark S. Burgreen, 801
Broad Street, Suite 700, Augusta, Georgia 30901.
ARTICLE IV.
The mailing address of the initial principal office of the Corporation
is 624 Ellis Street, Augusta, Georgia 30901.
ARTICLE V.
The authorized capital stock of said corporation shall consist of:
(a) 2,000,000 shares of preferred stock, without par value. The
Board of Directors shall have the power to issue the preferred
stock in one or more series, to designate the number of shares in
each series, and to determine the preferences, limitations and
relative rights of the preferred shares and of one or more series
of preferred shares, all before the issuance of any shares of
that series; and
(b) 5,000,000 shares of common stock, without par value.
ARTICLE VI.
No director shall have any personal liability to the Corporation or to
its shareholders for monetary damages for breach of duty of care or other
duty as a director, by reason of any act or omission, except that this
provision shall not eliminate or limit the liability of a director for (a)
any appropriation, in violation of his duties, of any business opportunity
of the Corporation; (b) acts or omissions which involve intentional
misconduct or a knowing violation of law; (c) liabilities of a director of
the type set forth in Section 14-2-832 of the Georgia Business Corporation
Code; or (d) any transaction from which the director derived an improper
personal benefit.
The Corporation shall indemnify its directors and officers, whether
serving the Corporation or at its request any other entity, to the full
extent required or permitted by the Georgia Business Corporation Code now
in force, including the advance of expenses to the full extent permitted by
law. The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. No
amendment of the Articles of Incorporation or Bylaws of the Corporation or
repeal of any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. For purposes of this Article
VI, reference to "the Corporation" shall be defined in Section 14-2-850
O.C.G.A. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VI shall, unless otherwise provided when a
director's or officer's term is terminated, continue as to a person who has
ceased to be a director or officer, and shall insure to the benefit of the
heirs, executors and administrator of such a person.
ARTICLE VII.
Notwithstanding any provision of law to the contrary, the affirmative
vote of at least a majority of all of the votes entitled to be cast on the
matter, and at least two-thirds of the shares voting shall be required,
after due authorization, approval or advice of such action by the Board of
Directors, as required by law, to approve and authorize the following acts
of the Corporation:
(a) consolidation of the Corporation with one or more corporations to
form a new consolidated corporation;
(b) merger of the Corporation into another corporation or the merger
of one or more other corporations into the Corporation;
(c) sale, lease, exchange or other transfer of all, or substantially
all, of the property and assets of the Corporation, including its goodwill
and franchises;
(d) the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation; or
(e) any other transaction that Section 14-2-1110 of the Georgia
Business Corporation Code defines as a "Business Combination."
ARTICLE VIII.
In discharging the duties of their respective positions and in
determining the duties of their respective positions and in determining
what is believed to be in the best interests of the Corporation, the board
of directors, committees of the board of directors, and individual
directors, in addition to considering the effects of any action of the
Corporation or its shareholders, may consider the interests of the
employees, customers, suppliers, and creditors of the Corporation and its
subsidiaries, the communities in which offices or other establishments of
the Corporation and its subsidiaries are located, and all other factors
such directors consider pertinent; provided, however, that any such
provision shall be deemed solely to grant discretionary authority to the
directors and shall not be deemed to provide to any constituency any right
to be considered.
ARTICLE IX.
Any action required by law or by the articles of incorporation or
bylaws of the Corporation to be taken at a meeting of the shareholders of
the Corporation and any action which may be taken at a meeting of the
shareholders may be taken without a meeting if a written consent, setting
forth the action so taken, shall be signed by persons entitled to vote at a
meeting those shares having sufficient voting power to cast not less than
the minimum number (or numbers, in the case of voting by groups) of votes
that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote were present and voted, provided that
action by less than unanimous written consent may not be taken with respect
to any election of directors as to which shareholders would be entitled to
cumulative voting. No such written consent shall be effective unless the
consenting shareholder has been furnished the same material that would have
been required to be sent to shareholders in a notice of a meeting at which
the proposed action would have been submitted to the shareholders, or
unless the consent includes an express waiver of the right to receive the
material. Notice of such action without a meeting by less than unanimous
written consent shall be given within ten (10) days of the taking of such
action to those shareholders of record on the date when the written consent
is first executed and whose shares were not represented on the written
consent.
ARTICLE X.
The Board of Directors of the Corporation shall have authority to
acquire by purchase from time to time any shares of its issued and
outstanding capital stock.
The Board of Directors of the Corporation shall have, with respect to
any such shares reacquired by the Corporation, the authority in its
discretion:
(i) to reissue and sell all or any part of such shares,
(ii) to cancel and retire all or any part of such shares,
(iii) to retain as treasury stock all or any part of such shares, or
(iv) to create security interests in such shares that are retained as
treasury shares.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ Mark S. Burgreen
MARK S. BURGREEN, Incorporator
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
MERRY LAND PROPERTIES, INC.
RE: SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK
1. The name of the corporation is Merry Land Properties, Inc.
2. This Amendment was adopted by the Board of Directors. Pursuant to the
provisions of Section 14-2-602 Official Code of Georgia Annotated, no
shareholder action was required.
3. This Amendment was adopted on October 13, 1998.
4. The text of this Amendment is as follows:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article Five of the Articles of
Incorporation, as amended (the "Articles"), the Board of Directors on
October 13, 1998, duly divided and classified 5,000 shares of the Preferred
Stock of the Corporation, without par value, into a class designated Series
A Redeemable Cumulative Preferred Stock (the "Preferred Stock"), and
provided for the issuance of such Preferred Stock.
SECOND: The terms of the Preferred Stock established by the Board of
Directors, in addition to those set forth in Article FIVE of the Articles
of the Corporation are as follows:
ARTICLE V-A
1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred Stock
shall be designated as Series A Redeemable Cumulative Preferred Stock (the
"Preferred Stock") and 5,000 shall be the number of shares of Preferred
Stock constituting such series. The relative rights, preferences, powers,
qualifications, limitations and restrictions granted to or implied upon the
Preferred Stock or the holders thereof are as follows:
2. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
paragraph 2 shall have, for all purpose hereof, the meanings herein
specified (with terms defined in the singular having comparable
meanings when used in the plural).
"BUSINESS DAY" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law,
regulation or executive order to close.
"CHANGE OF CONTROL" shall mean one or more of the following
events:
(a) less than a majority of the members of the Corporation's
Board of Directors shall be persons who either (i) were serving as
directors on the Closing Date or (ii) were nominated as directors and
approved by the vote of the majority of the directors who are
directors referred to in clause (i) above or this clause (ii); or
(b) the stockholders of the Corporation shall approve any plan or
proposal for the liquidation or dissolution of the Corporation; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the capital stock of the
Corporation as of the Closing Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Corporation representing more than thirty percent
(30%) of the combined voting power of the outstanding voting
securities for the election of directors or shall have the right to
elect a majority of the Board of Directors of the Corporation
"CLOSING DATE" shall mean October 15, 1998.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock, no par value per
share, of the Corporation.
"DIVIDEND PERIOD" shall have the meaning set forth in
subparagraph (c) of paragraph 3.
"DIVIDEND RATE" shall mean during each year following the Closing
Date the rate set forth in the following schedule opposite such year;
provided that upon the occurrence and during the continuance of an
Event of Default, the rates set forth in the following schedule shall
be increased by $50.00:
<TABLE>
<CAPTION>
YEAR RATE
<S> <C>
First, Second, Third, Fourth and Fifth $80.00
Sixth $82.50
Seventh $85.00
Eighth $87.50
Ninth $90.00
Tenth $92.50
Eleventh $97.50
Twelfth $105.00
Thirteenth $115.00
Fourteenth $127.50
Fifteenth and thereafter $142.50
</TABLE>
"EVENT OF DEFAULT" shall mean (i) the occurrence of an "Event of
Default" under the Preferred Stock Agreement, dated as of October 15,
1998, between Merry Land & Investment Company, Inc. and the
Corporation; or (ii) the failure to comply with any term, condition or
obligation or failure to provide any right under the terms hereof.
"LIQUIDATION VALUE" shall have the meaning set forth in
subparagraph (d) of paragraph 3 below.
"PERSON" shall mean any natural person, corporation, business
trust, joint venture, association, limited liability company,
partnership, or government, or any agency or political subdivision
thereof.
"PREFERRED STOCK" shall mean the shares of Series A Redeemable
Cumulative Preferred Stock, no par value, of the Corporation.
"QUARTERLY DIVIDEND DATE" shall have the meaning set forth in
subparagraph (c) of paragraph 3 below.
"RECORD DATE" shall have the meaning set forth in subparagraph
(c) of paragraph 3 below.
"REDEMPTION DATE" shall have the meaning set forth in
subparagraph (e) of paragraph 3 below.
"REDEMPTION PRICE" shall have the meaning set forth in
subparagraph (e) of paragraph 3 below.
"RESPONSIBLE OFFICER" of any corporation shall mean any executive
officer of such corporation, and any other officer or similar official
thereof responsible for the administration of the obligations of such
corporation in respect hereof.
3. PREFERRED STOCK
(a) NUMBER. The maximum number of shares of Preferred Stock
shall be five thousand (5,000).
(b) RELATIVE SENIORITY. In respect of rights to receive
dividends and to participate in distributions or payments in the event
of any liquidation, dissolution or winding up of the Corporation, the
Preferred Stock shall rank senior to the Common Stock and any other
class or series of shares of capital stock of the Corporation
(collectively, "Junior Shares"). Notwithstanding the foregoing, the
Corporation may make distributions or pay dividends in shares of
Common Stock or in any other shares of the Corporation ranking junior
to the Preferred Stock as to distribution rights and liquidation
preference at any time.
(c) DIVIDENDS. The holders of the then outstanding Preferred
Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Corporation out of any funds legally available
therefor, dividends at the Dividend Rate per share per year, payable
in cash in equal amounts quarterly on the fifteenth day, or if not a
Business Day, the next succeeding Business Day, of January, April,
July and October in each year, beginning January 15, 1999 (each such
day being hereinafter called a "Quarterly Dividend Date" and each
period ending on a Quarterly Dividend Date being hereinafter called a
"Dividend Period"), to shareholders of record at the close of business
on such date as shall be fixed by the Board of Directors of the
Corporation at the time of declaration of the dividend (the "Record
Date"), which shall be not fewer than 10 nor more than 30 days
preceding the Quarterly Dividend Date. The amount of any dividend
payable for the initial Dividend Period and for any other Dividend
Period shorter than a full Dividend Period shall be prorated and
computed on the basis of a 360-day year of twelve 30-day months.
Dividends paid on the Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a per share basis among all such
shares at the time outstanding.
In the event that sufficient funds for the payment of any such
dividend shall not at any time be otherwise legally available, the
Corporation shall use its reasonable best efforts to cause such
availability to come into existence. Dividends on the Preferred Stock
shall be cumulative daily from the Closing Date (whether or not
declared and whether or not in any Dividend Period or Dividend Periods
there shall be net profits or net assets of the Corporation legally
available for the payment of those dividends). Accumulated and unpaid
dividends on the Preferred Stock shall bear interest at a per annum
rate of equal to the Dividend Rate (expressed as a percent) plus five
percent (5%).
In the event the Corporation fails to pay any dividend on the
Preferred Stock on any Quarterly Dividend Date, the Corporation shall
not pay any dividends on any other class of stock of the Corporation
until such dividend on the Preferred Stock has been paid.
Except as provided herein, the Preferred Stock shall not be
entitled to participate in the earnings or assets of the Corporation.
(d) LIQUIDATION RIGHTS.
(i) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of the
Preferred Stock then outstanding shall be entitled to receive and
to be paid out of the assets of the Corporation available for
distribution to its shareholders, before any payment or
distribution shall be made on any Junior Shares, the amount of
$1,000.00 per share of Preferred Stock ("Liquidation Value"),
plus any accrued and unpaid dividends thereon.
(ii) After the payment to the holders of the Preferred Stock
of the full preferential amounts provided for in this paragraph
3(d), the holders of the Preferred Stock as such shall have no
right or claim to any of the remaining assets of the Corporation.
(e) REDEMPTION.
(i) OPTIONAL REDEMPTION. On any date after the Closing
Date, the Corporation may, at its option, redeem at any time all
of the outstanding Preferred Stock or a part of the outstanding
Preferred Stock at a price per share (the "Redemption Price"),
equal to $1,000.00 per share of Preferred Stock, together with
all accrued and unpaid dividends to and including the date fixed
for redemption (the "Redemption Date"), and any accrued and
unpaid interest on such accrued and unpaid dividends. The
Redemption Price and all accrued and unpaid dividends, and any
accrued and unpaid interest on such accrued and unpaid dividends,
shall be paid in cash.
(ii) PROCEDURES FOR REDEMPTION.
(A) Notice of any redemption will be mailed by the
Corporation, postage prepaid, not less than 30 nor more than 90
days prior to the Redemption Date, addressed to the holders of
record of the Preferred Stock to be redeemed at their addresses
as they appear on the share transfer records of the Corporation.
No failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings for
the redemption of any Preferred Stock except as to the holder to
whom the Corporation has failed to give notice or except as to
the holder to whom notice was defective. In addition to any
information required by law or by the applicable rules of any
exchange upon which Preferred Stock may be listed or admitted to
trading, such notice shall state: (a) the Redemption Date; (b)
the Redemption Price; (c) the number of shares of Preferred Stock
to be redeemed; and (d) the place or places where certificates
for such shares are to be surrendered for payment of the
Redemption Price.
(B) If notice has been mailed in accordance with
subparagraph (3)(e)(ii) above and provided that on or before the
Redemption Date specified in such notice all funds necessary for
such redemption shall have been irrevocably set aside by the
Corporation, separate and apart from its other funds, in trust
for the pro rata benefit of the holders of the Preferred Stock so
called for redemption, so as to be, and to continue to be
available therefor, then, from and after the Redemption Date,
distributions shall no longer accrue on said shares and said
shares shall no longer be deemed to be outstanding and shall not
have the status of Preferred Stock and all rights of the holders
thereof as stockholders of the Corporation (except the right to
receive the Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares
of Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice
shall so state), such shares of Preferred Stock shall be redeemed
by the Corporation at the Redemption Price. In case fewer than
all the Preferred Stock represented by any such certificate are
redeemed, a new certificate or certificates shall be issued
representing the unredeemed Preferred Stock without cost to the
holder thereof.
(C) Any funds deposited with a bank or trust company for the
purpose of redeeming shares of Preferred Stock shall be
irrevocable and the holders shall be entitled to receive the
interest or other earnings, if any, earned on any money so
deposited in trust, provided that any balance of monies so
deposited by the Corporation and unclaimed by the holders of the
Preferred Stock entitled thereto at the expiration of one year
from the applicable Redemption Date shall be repaid, together
with any interest or other earnings earned thereon, to the
Corporation, and after any such repayment, the holders of the
shares entitled to the funds so repaid to the Corporation shall
look only to the Corporation for payment without interest or
other earnings.
(D) No Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.
(E) Unless a sum sufficient for the payment of the then
current dividend due for the then current Dividend Period is set
apart, no shares of Preferred Stock shall be redeemed (unless all
outstanding shares of Preferred Stock are simultaneously
redeemed) or purchased or otherwise acquired directly or
indirectly; PROVIDED, HOWEVER, that the foregoing shall not
prevent the purchase or acquisition of Preferred Stock pursuant
to a purchase or exchange offer made on the same terms to holders
of all outstanding shares of Preferred Stock.
(F) If the Redemption Date is after a Record Date and before
the related Quarterly Dividend Date, the dividend payable on such
Quarterly Dividend Date shall be paid to the holder in whose name
the Preferred Stock to be redeemed are registered at the close of
business on such Record Date notwithstanding the redemption
thereof between such Record Date and the related Quarterly
Dividend Date or the Corporation's default in the payment of the
dividend due.
(G) In case of redemption of less than all of the shares of
Preferred Stock at the time outstanding, the shares of Preferred
Stock to be redeemed shall be selected pro rata from the holders
of record of such shares in proportion to the number of shares of
Preferred Stock held by such holders (with adjustments to avoid
redemption of fractional shares) or by any other equitable method
determined by the Corporation.
(iii) REQUIRED REDEMPTION. Upon the occurrence of an Event
of Default or a Change of Control or on and after the date
fifteen (15) years after the Closing Date, whichever comes first,
the holder of any shares of Preferred Stock may, at its option,
cause the Corporation to redeem at any time all of the Preferred
Stock held by such holder at the Redemption Price, payable in
cash, together with all accrued and unpaid dividends to and
including the Redemption Date, and any accrued and unpaid
interest on such accrued and unpaid dividends.
(iv) PROCEDURES FOR REQUIRED REDEMPTION.
(A) Notice of any required redemption shall be mailed by the
holder of the Preferred Stock requesting redemption, postage
prepaid, not less than 30 nor more than 90 days prior to the
Redemption Date, addressed to the Corporation. In addition to any
information required by law or by the applicable rules of any
exchange upon which Preferred Stock may be listed or admitted to
trading, such notice shall state: (a) the Redemption Date; (b)
the Redemption Price; and (c) the number of shares of Preferred
Stock to be redeemed.
(B) If notice has been mailed in accordance with
subparagraph (3)(e)(iv) above on or before the Redemption Date
specified in such notice all funds necessary for such redemption
shall have been irrevocably set aside by the Corporation,
separate and apart from its other funds in trust for the pro rata
benefit of the holders of the Preferred Stock requesting
redemption, so as to be, and to continue to be available
therefor, then, from and after the Redemption Date, said shares
shall no longer be deemed to be outstanding and shall not have
the status of Preferred Stock and all rights of the holders
thereof as shareholders of the Corporation (except the right to
receive the Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares
of Preferred Stock so redeemed, such shares of Preferred Stock
shall be redeemed by the Corporation at the Redemption Price. In
case fewer than all the Preferred Stock represented by any such
certificate are redeemed, a new certificate or certificates shall
be issued representing the unredeemed Preferred Stock without
cost to the holder thereof.
(C) Any funds deposited with a bank or trust company for the
purpose of redeeming shares of Preferred Stock shall be
irrevocable and the holders shall be entitled to receive the
interest or other earnings, if any, earned on any money so
deposited in trust, provided that any balance of monies so
deposited by the Corporation and unclaimed by the holders of the
Preferred Stock entitled thereto at the expiration of one year
from the applicable Redemption Date shall be repaid, together
with any interest or other earnings earned thereon, to the
Corporation, and after any such repayment, the holders of the
shares entitled to the funds so repaid to the Corporation shall
look only to the Corporation for payment without interest or
other earnings.
(D) No Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price. In
the event that sufficient funds for the payment of any required
redemption are not legally available, the Corporation shall use
its reasonable best efforts to cause such availability to come
into existence.
(E) If the Redemption Date is after a Record Date and before
the related Quarterly Dividend Date, the dividend payable on such
Quarterly Dividend Date shall be paid to the holder in whose name
the Preferred Stock to be redeemed are registered at the close of
business on such Record Date notwithstanding the redemption
thereof between such Record Date and the related Quarterly
Dividend Date or the Corporation's default in the payment of the
dividend due.
(v) The Preferred Stock redeemed or repurchased pursuant to
the provisions of this subparagraph (e) shall thereupon be
retired and may not be reissued as Preferred Stock but shall
thereafter have the status of authorized but unissued shares of
the Corporation.
(f) VOTING RIGHTS
(i) Except for such voting rights as shall be granted to the
holders of shares of the Preferred Stock by this subparagraph (f)
or by law, voting rights shall be vested exclusively in the
Common Stock. Holders of stock of whatever class entitled to
vote shall be entitled to one vote for each share of stock held
by them.
(ii) If, on the date used to determine stockholders of
record for any annual meeting of stockholders of the Corporation
for the election of directors, the dividends on the Preferred
Stock remain unpaid for two or more Dividend Periods, which need
not be consecutive, or a redemption payment in connection with a
required redemption under subparagraph (e)(iii) has not been
paid, the holders of the Preferred Stock at the time outstanding,
voting separately as a class, shall have the right, exercisable
upon the written request of any holder of one or more outstanding
shares of Preferred Stock, by majority vote at such meeting, to
elect the smallest number of directors which shall constitute a
majority of the Board of Directors, but shall not be entitled to
vote in the election of any of the remaining directors of the
Corporation at such annual meeting; and the holders of Common
Stock, voting separately as a class, shall be entitled to elect
the remaining directors of the Corporation, but shall not be
entitled to vote in the election of the directors of the
Corporation to be elected by holders of Preferred Stock as
provided in the foregoing clause. Upon election by holders of
Preferred Stock of the directors they are entitled to elect as
hereinabove provided, the terms of office of all persons who were
theretofore directors of the Corporation shall forthwith
terminate whether or not the holders of Common Stock shall then
have elected the remaining directors of the Corporation.
(iii) Whenever the dividends on the Preferred Stock remain
unpaid for two or more Dividend Periods, which need not be
consecutive, or a redemption payment in connection with a
required redemption under subparagraph (e)(iii) has not been
paid, the Corporation, upon the written request of any holder of
one or more outstanding shares of the Preferred Stock, shall call
a special meeting of the holders of the Preferred Stock, such
special meeting to be held within ten (10) days after the date on
which such request is received by the Corporation, for the
purpose of enabling such holders to elect the number of directors
specified in subparagraph f(ii) hereof; PROVIDED, HOWEVER, that
such special meeting need not be called if an annual meeting of
stockholders of the Corporation for the election of directors
shall be scheduled to be held within such ten (10) days and
written notice of such annual meeting shall have been given to
the holders of the Preferred Stock at least ten (10) days prior
to the date of such annual meeting; and PROVIDED FURTHER that in
lieu of any such special meeting, the election of the directors
to be elected thereat may be effected by the written consent of
the holders of a majority of the outstanding shares of the
Preferred Stock that would be entitled to vote at such special
meeting.
(iv) Any director elected by the holders of shares of the
Preferred Stock shall continue to serve as such director for the
full term for which he shall have been elected, notwithstanding
that prior to the end of such term a dividend or required
redemption payment shall cease to be in arrears.
(v) If, prior to the end of the term of any director elected
as aforesaid by the holders of shares of the Preferred Stock, a
vacancy in the office of such director shall occur by reason of
death, resignation, removal or disability, or for any other
cause, such vacancy shall be filled for the unexpired term by
vote or written consent of the holders of a majority of the
shares of the Preferred Stock at the time outstanding, voting
separately as a class.
(vi) Any director elected by holders of the Preferred Stock
may be removed by, and shall not be removed except by, the vote
or written consent of the holders of a majority of the
outstanding shares of the Preferred Stock at the time
outstanding, voting separately as a class.
(vii) So long as any shares of the Preferred Stock shall
remain outstanding, the Corporation will not, without the
affirmative vote at a meeting or the written consent with or
without a meeting of the holders of at least 66 2/3% of the
outstanding shares of Preferred Stock, (1) create any class or
classes of stock ranking prior to or on a parity with the
Preferred Stock either as to dividends or upon liquidation,
(2) amend, alter or repeal any of the provisions of its Articles
of Incorporation or the Corporation's By-Laws in a manner which
adversely affects the holders of the Preferred Stock,
(3) consolidate or merge with or into any other corporation
(other than a merger of a subsidiary of the Corporation into the
Corporation whereby the Corporation is the surviving
corporation), or (4) liquidate, wind up or dissolve itself, or
convey, sell, assign, transfer or otherwise dispose of, all or
substantially all of its assets.
(viii) Notwithstanding anything to the contrary contained in
this subparagraph (f), no holder of Preferred Stock shall have
any voting rights to the extent such rights would (i) cause such
holder of Preferred Stock or any entity that owns, directly or
indirectly, any interest in such holder of Preferred Stock to be
in violation of Section 856(c)(4) of the Code, or (ii) otherwise
cause such holder of Preferred Stock or any entity that owns,
directly or indirectly, any interest in such holder of Preferred
Stock to fail to qualify as a real estate investment trust under
Section 856(a) of the Code.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to Articles of Incorporation to be made under the seal of the
Corporation and signed in its name and attested by its duly authorized
officers this 13th day of October, 1998.
MERRY LAND PROPERTIES, INC.
/s/ Dorrie E. Green
By: _________________________________
Dorrie E. Green
As its Chief Financial Officer, Vice
President,
Secretary and Treasurer
/s/ John W. Gibson
Attest: ________________________________
Assistant Secretary
(Corporate Seal)
BYLAWS OF
MERRY LAND PROPERTIES, INC.
(AS AMENDED ON JANUARY 28, 1999)
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. ANNUAL MEETINGS. The annual meeting of the stockholders
shall be held on the third Thursday in the month of April of each year, or
if such day shall be a legal holiday, then on the next succeeding day not a
legal holiday, at 10:00 a.m., for the election of directors and the
transaction of such other business as may come before the meeting. If the
annual meeting shall not be held on the day designated herein or on any
subsequent date to which the annual meeting may be adjourned, the Board of
Directors shall cause the annual meeting to be held at a special meeting of
the stockholders, as soon thereafter as conveniently may be.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose may be held whenever called by the President, the Chairman of
the Board of Directors, any two directors, stockholders holding an
aggregate of 25% of the voting stock of the Corporation, or a majority of
the Board of Directors.
Section 3. PLACE OF MEETING. All meetings of the stockholders of the
Corporation for the election of directors, or for any other purpose, shall
be held at the place designated in the call and notice of the meeting,
whether within or without the State of Georgia.
Section 4. NOTICE OF MEETINGS. Notice of each meeting of the
stockholders, whether annual or special, shall, at least ten, but not more
than fifty days before the day set for the meeting, be given to each
stockholder of record entitled to vote, by delivering a written notice
thereof to him, personally or by mailing such notice, postage prepaid,
addressed to him at his address registered on the stock transfer books of
the Corporation. Such notice shall state the time and place of the meeting
and, in the case of special meetings, in general terms the purposes
thereof. If mailed, such notice shall be deemed delivered when deposited
in the United States mail, addressed to the stockholder at his address of
record, with postage thereon prepaid.
Section 5. QUORUM. Except as otherwise required by statute, at any
meeting of the stockholders, the holders of a majority of the stock of the
Corporation having voting rights shall be present in person or represented
by proxy and shall constitute a quorum. In the absence of a quorum, the
holders of a majority of the stock represented may adjourn the meeting from
time to time, but not for a period of more than thirty days at any one
time, until a quorum shall attend. At any such adjourned meeting at which
a quorum shall be represented, any business may be transacted which might
have been transacted at the meeting originally called. No notice of an
adjourned meeting need be given.
Section 6. VOTING. Except as otherwise provided by law, the Articles
of Incorporation, or these by-laws, every stockholder shall be entitled to
one vote for each share standing in his name on the records of the
Corporation. Except as provided herein or in the Articles of Incorporation
or otherwise provided, all corporate action shall be determined by a vote
of a majority of the votes cast at a meeting of the stockholders entitled
to vote thereon.
Section 7. PROXY. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary
of the Corporation. No proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
Section 8. ORGANIZATION. The Chairman of the Board of Directors, if
elected and present, or, if not, the President, or in his absence, the Vice
President, or in the absence of all of these, a Chairman selected by the
stockholders, shall preside. The Secretary shall act as Secretary at all
meetings when present, and in the absence of the Secretary, the presiding
officer shall appoint a Secretary.
ARTICLE II
DIRECTORS
Section 1. NUMBER. The business and affairs of the Corporation shall
be managed and controlled by a Board of Directors consisting of at least
five (5) but not more than nine (9) members, as the Board of Directors may
from time to time determine. Notwithstanding the foregoing, the
stockholders, by an affirmative vote of at least a majority of all of the
votes entitled to be cast on the matter, and at least two-thirds of the
shares voting, may from time to time authorize the appointment of more than
nine (9) directors. In no event shall there be less than five (5)
directors.
Notwithstanding anything to the contrary contained herein,
the initial Board of Directors shall be limited to the initial three
Directors appointed by the Incorporator. The initial Board of Directors
shall elect at least two (2) additional directors in accordance with the
procedures set forth below for filling vacancies.
Section 2. CLASSIFICATION. The directors shall be divided into three
classes as nearly equal in number as possible, with respect to the first
time for which they shall severally hold office. Directors of the First
Class chosen shall hold office until the first annual meeting of the
shareholders following their election; directors of the Second Class first
chosen shall hold office until the second annual meeting following their
election; and directors of the Third Class first chosen shall hold office
until the third annual meeting following their election. At each annual
meeting of shareholders held thereafter, directors shall be chosen for a
term of three (3) years to succeed those whose terms expire.
Section 3. VACANCIES. Any vacancy in the Board of Directors
resulting from the death, resignation or retirement of a director, or any
other cause other than removal by the shareholders or increase in the
number of directors, shall be filled by a majority vote of the remaining
directors, though less than a quorum, for a term corresponding to the
unexpired term of his predecessor in office.
Newly created directorships resulting from any increase in the
authorized number of directors shall be filled by a majority vote of the
remaining directors, though less than a quorum, and the directors so chosen
shall hold office for a term expiring at the next annual meeting of
shareholders at which a successor shall be elected and shall qualify.
Section 4. REMOVAL. At any meeting of the shareholders called for
the purpose, the entire board of directors or any individual director may
be removed from office, with or without cause, by the affirmative vote of
at least a majority of all of the votes entitled to be cast on the matter,
and at least two-thirds of the shares voting.
Section 5. AMENDMENT. Notwithstanding anything contained in these
Bylaws to the contrary, the affirmative vote of at least a majority of all
of the votes entitled to be cast for the election of directors, and at
least two-thirds of the shares voting shall be required to amend or repeal,
or to adopt any provision inconsistent with, this Article.
Section 6. PLACE OF MEETING. The directors may hold their meetings at
such places, either within or without the State of Georgia as the Board may
from time to time determine.
Section 7. ANNUAL MEETINGS. The Board of Directors shall meet as soon
as practicable after the annual election of directors at the place of the
annual meeting of the stockholders of the Corporation for the purpose of
organization and the transaction of other business. No notice of such
meeting shall be required. Such meeting may, however, be held at some
other time and place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board.
Section 8. REGULAR AND SPECIAL MEETINGS. The Board of Directors may
hold regular meetings between the annual stockholders' meetings at such
times as they may determine, and may hold special meetings whenever called
by the Chairman of the Board, the President, any Vice President in the
absence of the President, the Secretary, or any two members of the Board.
Notice of regular and special meetings shall be given at least two days in
advance of the meeting. Notice of any special or regular meeting of the
Board shall be given in person or by mail, telephone, or telegraph, and the
purpose need not be stated. Except as otherwise required by statute or by
the notice of the meeting, any and all business may be transacted at any
regular or special meeting of the Board.
Section 9. QUORUM. A majority of the directors shall constitute a
quorum; and it shall be necessary for at least a majority of those
directors present at any meeting to agree upon any resolution or action of
the Board for it to be valid and effective.
Section 10. COMPENSATION OF DIRECTORS. The board of may fix the
compensation of the directors and the Board may allow a fixed sum and
expenses of attendance, if any; but nothing herein contained shall preclude
any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 11. CHAIRMAN. At all meetings of the Board of Directors, the
Chairman of the Board, the President, or a Vice President shall preside, in
the order stated.
Section 12. ELECTION OF OFFICERS. The Board of Directors shall elect
all officers and fix their compensation and may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
Section 13. COMMITTEES. The Board of Directors may, from time to
time, appoint committees, including an Executive Committee, for any
purpose, and by majority vote of the entire Board, may delegate to any such
committee, or to any officer or officers, such powers as the Board may deem
expedient.
Each committee shall consist of at least two directors, except that a
committee authorized to agree upon and execute an underwriting or other
agreement in connection with a public offering of securities shall consist
of one or more directors.
The Executive Committee shall have all of the authority of the Board
of Directors, except the authority to:
(1) approve or propose to shareholders action which the Georgia
Business Corporation Code requires to be approved by
shareholders;
(2) fill vacancies on the Board of Directors or on any of its
committees;
(3) amend articles of incorporation pursuant to Georgia Code
Section 14-2-1002;
(4) adopt, amend, or repeal bylaws; or
(5) approve a plan of merger not requiring shareholder approval.
All committees having more than one member shall act by a majority of
its members.
Section 14. INFORMAL ACTION. Any action required to be taken by the
Board of Directors or a Committee of the Board at a meeting may be taken
without a meeting if written consent, setting forth the action taken, shall
be signed by all the directors or committee members and filed with the
minutes of the proceedings of the Board or committee. Such consent shall
have the same effect as though the action had been taken at a regular
meeting.
ARTICLE III
OFFICERS
Section 1. EXECUTIVE OFFICERS. The executive officers of the
Corporation shall be a President (who shall be a director), one or more
Vice Presidents, a Secretary and a Treasurer, who shall be elected by the
Board of Directors. The Board of Directors may, if it is deemed desirable,
elect a Chairman of the Board of Directors, one or more assistants to the
President, one or more assistant Secretaries and one or more assistant
Treasurers. Any two of said offices may be held by a single person,
provided that the office of President and the office of Secretary shall be
held by separate persons.
Section 2. SUBORDINATE OFFICERS. The Board of Directors or the
President may appoint other officers or agents as shall be deemed necessary
for efficiently carrying on the business of the Corporation, especially
including general and local managers and cashiers, and all other officers
so appointed shall hold their offices for such term and shall exercise such
powers and perform such duties and receive such compensation as shall be
determined from time to time by the Board of Directors, or, in the absence
of such action by the Board, as shall be determined by the President.
Section 3. TENURE OF OFFICERS. The officers of the Corporation shall
hold office until their successors are chosen and qualify in their stead.
Any officer elected by the directors may be removed, either with or without
cause, at any time by a majority vote of the directors; and any officer
appointed by the President may be removed, either with or without cause, at
any time by the President. If the office of any official of the
Corporation becomes vacant for any reason, the vacancy shall be filled by
affirmative action of like character to that which would have been required
to remove such official.
Section 4. CHAIRMAN OF THE BOARD. Should the Board of Directors elect
a Chairman, he shall preside at all meetings of the Board and at all
meetings of the stockholders. He shall, where authorized by the Board of
Directors, be the chief executive officer of the Corporation and have all
powers pertaining to the office of chief executive.
Section 5. PRESIDENT. Unless a Chairman is appointed, the President
shall be the chief executive officer of the Corporation. The President
shall have active and general management of the affairs and business of the
Corporation, except to the extent that such duties are assigned to the
Chairman. In the absence of a Chairman, the President shall preside at all
meetings of stockholders and directors, and shall see that all resolutions
and orders of the stockholders and directors are carried into effect. He
shall do and perform all such duties as may from time to time be assigned
to him by the stockholders, directors or Chairman (if the Chairman has been
given the authority of the chief executive officer). In the absence of a
Chairman, the President shall preside at each annual meeting, and, when
called for by vote of the stockholders, at any special meeting of the
stockholders, and shall provide a full and clear statement of the business
and condition of the Corporation, including a report of operating results
for the preceding period and such recommendations as he may think proper
for best promoting the interests of the Corporation. The President shall
be ex-officio a member of all standing committees; he, together with the
Secretary, shall sign all certificates of capital stock and shall perform
such other duties as are incidental to his office; he shall direct the
activities and business of the Corporation and shall have all of the
authority and general powers of supervision and management usually vested
in the office of the president of a corporation and also those usually
exercised by a general manager in charge of plan and operations.
Section 6. VICE PRESIDENT. A Vice President shall do and perform the
usual duties incident to such office and shall do and perform the duties of
the President in the absence or disability of the President. Should there
be several Vice Presidents, in the absence of designation by the President
or by the Board of Directors, they shall act in the place of the President
in the order in which they were elected at the last election as recorded in
the minutes. A Vice President shall also perform such additional duties,
if any, as may be required of him by the Board of Directors or the
President.
Section 7. SECRETARY. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all
votes and the minutes of the stockholders upon a book to be kept for that
purpose; and shall perform like services for any committees, if any, to
which may be delegated special duties to be performed on behalf of the
Corporation; he shall send copies of such minutes to absent directors and
committeemen. He shall give, or cause to be given, notice of all meetings
of the stockholders and the Board of Directors, and shall perform such
other duties as may be prescribed by the Board of Directors or the
President, under whose supervision he shall be. He shall keep in safe
custody the seal of the Corporation, and when authorized by the President
or by the Board, shall affix the same to any instruments requiring it.
When so affixed, it shall be attested by his signature or by the signature
of the Treasurer. He shall have custody of the stock books of the
Corporation, and be authorized to sign, and affix the seal to, certificates
of the capital stock of the Corporation when executed by the President. In
the absence of the Secretary, an assistant Secretary, or Secretary pro
tempore, may perform all of his duties.
Section 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all monies and other valuable effects in the name and to the credit
of the Corporation in such depositories or savings and loan associations as
may be designated by the Board of Directors. In the absence of the
Treasurer, the assistant Treasurer may perform all of his duties.
The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, with the approval of the President,
taking proper vouchers for all such disbursements, and shall render to the
President and directors at the regular meetings of the Board, or whenever
they may require it, an account of all his transactions as Treasurer and of
the financial condition of the Corporation.
Section 9. COMPENSATION. The compensation of all officers of the
Corporation shall be fixed, from time to time, by the Board of Directors.
ARTICLE IV
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. The certificates of stock of the
Corporation shall be numbered and shall be entered on the books of the
Corporation as they are issued. They shall exhibit the holders' name and
number of shares and shall be signed by the President or Vice President and
the Secretary or Assistant Secretary, and shall be under the seal of the
Corporation. The signatures of such officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee
of the Corporation.
Section 2. TRANSFER AGENTS. The Board of Directors may, in its
discretion, appoint responsible banks or trust companies in such city or
cities as the board may deem advisable, from time to time, to act as
transfer agents or registrar of the stock of the Corporation; and, upon
such appointments being made, no stock certificate thereafter executed in
behalf of the Corporation shall be valid until countersigned by one of such
transfer agents.
Section 3. TRANSFER OF STOCK. Shares of stock may be transferred by
delivery of the certificates therefor, accompanied either by an assignment
in writing on the back of the certificates or by written power of attorney
to sell, assign and transfer the same, signed by the record holders
thereof; but no transfer shall affect the right of the Corporation to pay
any dividend upon the stock to the holder of record thereof, or to treat
the holder of record as the holder in fact thereof for all purposes, and no
transfer shall be valid, except between the parties thereto, until such
transfer shall have been made upon the books of the Corporation.
Section 4. CLOSING OF TRANSFER BOOKS. The Board of Directors may
close the transfer books in their discretion, for a period of not exceeding
twenty days preceding the day appointed for the payment of dividends.
Section 5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to treat the holder of record of any shares of stock as the holder in fact
thereof, and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, save as may
be expressly provided by the laws of the State of Georgia.
ARTICLE V
NOTICE AND WAIVER OF NOTICE
Section 1. Any notice required to be given under these bylaws to any
stockholder or director may be waived. Attendance at a meeting either in
person or by proxy shall constitute waiver of notice of that meeting.
ARTICLE VI
BANK ACCOUNTS, CHECKS, SECURITIES
AND SEALING DOCUMENTS
Section 1. COMPANY FUNDS. Bank accounts for the deposit of funds of
the Corporation may be opened in such banks as may be selected and
designated from time to time by the Board of Directors. Funds of the
Corporation may also be invested in such savings and loan associations as
may be designated from time to time by the Board of Directors.
Section 2. CHECKS. Said banks and savings and loan associations are
authorized to make payments from the funds of the Corporation on deposit or
invested with them, such payments to be made upon presentation of checks or
withdrawal orders signed by such official or officials as may be designated
from time to time by the Board of Directors. The use of facsimile
signatures of such officials may be authorized by the Board of Directors.
Section 3. BONDS. The officers and employees shall furnish such
bonds, if any, for the faithful performance of their duties as may be
required by the Board of Directors.
Section 4. SEALED INSTRUMENTS. The President, a Vice President, the
Secretary or Assistant Secretary, and Treasurer, when two of them shall act
jointly, are empowered to use the corporate seal of the Corporation
whenever required on contracts and other instruments.
ARTICLE VII
AMENDMENT OF BYLAWS
Section 1. These bylaws may be altered, amended or repealed by the
affirmative vote of at least two-thirds of all of the directors then
holding office at any regular or at any special meeting of the Board, if
notice of the proposed alteration, amendment or repeal be contained in the
notice of the meeting. However, any bylaws adopted by the Board of
Directors may be altered, amended or repealed, and new bylaws may be
adopted by the stockholders. The stockholders may prescribe that any bylaw
or bylaws adopted by them shall not be altered, amended or repealed by the
Board of Directors.
ARTICLE VIII
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
All requirements of Part 3, Article 11, Chapter 2, Title 14 of the
Official Code of Georgia Annotated ("O.C.G.A.") shall apply to this
Corporation.
U.S. $20,000,000
SENIOR SUBORDINATED TERM LOAN AGREEMENT
DATED AS OF OCTOBER 15, 1998
BETWEEN
MERRY LAND PROPERTIES, INC.
as Borrower,
and
MERRY LAND & INVESTMENT COMPANY, INC.
as Lender
<PAGE>
TABLE OF CONTENTS
I DEFINITIONS...................................................1
Section 1.1 Definitions......................................1
Section 1.2 Accounting Terms and Determinations.............19
II AMOUNT AND TERMS OF LOAN.....................................19
Section 2.1 Loan............................................19
Section 2.2 Interest on the Loan............................20
Section 2.3 Application of Payments.........................21
Section 2.4 Mandatory Prepayments...........................21
Section 2.5 Optional Prepayments............................21
Section 2.6 General Provisions as to Payments...............22
Section 2.7 Computation of Interest.........................22
III CONDITIONS...................................................22
Section 3.1 Closing.........................................22
IV REPRESENTATIONS AND WARRANTIES...............................24
Section 4.1 Existence and Power.............................24
Section 4.2 Power and Authority.............................24
Section 4.3 No Violation....................................24
Section 4.4 Financial Information...........................25
Section 4.5 Litigation......................................25
Section 4.6 Compliance with ERISA...........................25
Section 4.7 Environmental Matters...........................26
Section 4.8 Taxes...........................................26
Section 4.9 Full Disclosure.................................26
Section 4.10 Solvency.......................................26
Section 4.11 Governmental Approvals.........................26
Section 4.12 Investment Company Act; Public Utility
Holding Company Act...........................27
Section 4.13 Principal Offices..............................27
Section 4.14 Patents, Trademarks, etc.......................27
Section 4.15 Ownership of Property..........................27
Section 4.16 No Default.....................................27
Section 4.17 Licenses, etc..................................27
Section 4.18 Compliance With Law............................27
Section 4.19 No Burdensome Restrictions.....................27
Section 4.20 Brokers' Fees..................................28
Section 4.21 Labor Matters..................................28
Section 4.22 Insurance......................................28
Section 4.23 Organizational Documents.......................28
Section 4.24 Qualifying Unencumbered Properties.............28
Section 4.25 Investment Affiliates..........................28
V AFFIRMATIVE AND NEGATIVE COVENANTS...........................29
Section 5.1 Information.....................................29
Section 5.2 Payment of Obligations..........................32
Section 5.3 Maintenance of Property; Insurance; Leases......32
Section 5.4 Conduct of Business and Maintenance of
Existence.......................................32
Section 5.5 Compliance with Laws............................32
Section 5.6 Inspection of Property, Books and Records.......32
Section 5.7 Existence.......................................33
Section 5.8 Financial Covenants.............................33
Section 5.9 Restriction on Fundamental Changes..............33
Section 5.10 Changes in Business............................34
Section 5.11 Loans..........................................34
Section 5.12 Investment Affiliates..........................34
Section 5.13 Transactions with Affiliates...................34
Section 5.14 Guaranteed Indebtedness........................35
Section 5.15 Payments to an Affiliate.......................35
Section 5.16 Materials of Environmental Concern.............35
VI DEFAULTS.....................................................35
Section 6.1 Events of Default...............................35
Section 6.2 Rights and Remedies.............................37
VII SUBORDINATION................................................38
Section 7.1 Agreement to Subordinate........................38
Section 7.2 Liquidation, Dissolution, Bankruptcy............38
Section 7.3 Default on Senior Indebtedness and
Prepayment and Acceleration...................39
Section 7.4 When Distribution Must Be Paid Over.............39
Section 7.5 Actions With Respect to Senior Indebtedness.....39
Section 7.6 Subrogation.....................................40
Section 7.7 Relative Rights.................................40
Section 7.8 Subordination May Not Be Impaired by Borrower...40
Section 7.9 Lender Entitled to Rely.........................40
Section 7.10 Notice to, and Acknowledgment by, Lender.......40
VIII TAXES.......................................................41
IX MISCELLANEOUS................................................42
Section 9.1 Notices.........................................42
Section 9.2 No Waivers......................................42
Section 9.3 Expenses; Indemnification.......................42
Section 9.4 Set-Off.........................................43
Section 9.5 Amendments and Waivers..........................44
Section 9.6 Successors and Assigns..........................44
Section 9.7 Governing Law; Submission to Jurisdiction.......44
Section 9.8 Counterparts; Integration; Effectiveness........44
Section 9.9 WAIVER OF JURY TRIAL............................45
Section 9.10 Survival.......................................45
Section 9.11 Limitation of Liability........................45
Section 9.12 Recourse Obligation............................45
Section 9.13 Confidentiality................................45
<PAGE>
SENIOR SUBORDINATED TERM LOAN AGREEMENT
THIS SENIOR SUBORDINATED TERM LOAN AGREEMENT (this "Agreement"), dated
as of October 15, 1998, among MERRY LAND PROPERTIES, INC. a Georgia
corporation ("Borrower"), and MERRY LAND & INVESTMENT COMPANY, INC., a
Georgia corporation ("Lender").
R E C I T A L
Borrower desires that Lender extend $20,000,000 in subordinated
financing to Borrower, and Lender is willing to extend $20,000,000 in
subordinated financing to Borrower subject to the terms and conditions set
forth herein.
ACCORDINGLY, in consideration of premises and the mutual agreements
contained herein, and subject to the terms and conditions hereof, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 0.0 DEFINITIONS. The following terms, as used herein, have
the following meanings:
"ACCOMMODATION OBLIGATIONS" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of
which that Person is liable for any Indebtedness or other obligation
or liability of another Person, including without limitation and
without duplication (i) any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising
through any agreement to purchase, repurchase or otherwise acquire
such Indebtedness, obligation or liability or any security therefor,
or to provide funds for the payment or discharge thereof (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make payment other than for value received
and (ii) any obligation of such Person arising through such Person's
status as a general partner of a general or limited partnership with
respect to any Indebtedness, obligation or liability of such general
or limited partnership.
"ADJUSTED ASSET VALUE" means, with respect to any Person or
Property (exclusive of Participating Assets), (i) for any Property
(other than Unimproved Assets or Participating Assets) for which an
acquisition or disposition has not occurred in the Fiscal Quarter most
recently ended by the Borrower and its Consolidated Subsidiaries, the
product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to any such Property owned by the
Borrower or any such Consolidated Subsidiary minus (aa) with respect
to any apartment units contained in such Property, an amount equal to
the product of the average number of apartment units in such Property
during such period and the Capital Apartment Reserve for such period,
and minus (bb) with respect to any commercial property other than
apartments units contained in such Property, an amount equal to the
product of the average number of square feet of leased space in such
commercial property other than apartments units contained in such
Property and the Capital Commercial Reserve for such period, and the
denominator of which is the FMV Cap Rate, plus (ii) for any Property
(other than Unimproved Assets or Participating Assets) which has been
acquired by the Borrower and its Consolidated Subsidiaries in the
Fiscal Quarter most recently ended, the Net Price of the Property paid
by Borrower or the Consolidated Subsidiary, plus (iii) for any
Unimproved Assets owned by the Borrower or its Consolidated
Subsidiaries on the Effective Date, the lesser of (yy) the appraised
value on the Effective Date of such Unimproved Assets owned by the
Borrower or any Consolidated Subsidiary, or (zz) the amount set forth
on Schedule 1.1A attached hereto with respect to such Unimproved
Assets, provided, however, that if Borrower has commenced the
construction of improvements on any such Unimproved Asset and a loan
facility for such construction is in place, the value thereof shall be
equal to the amount reflected on Borrower's balance sheet for
"construction in progress" with respect to such Unimproved Asset, plus
(iv) for any Unimproved Assets acquired by the Borrower and its
Consolidated Subsidiaries after the Effective Date, the Net Price of
the Unimproved Assets paid by Borrower or the Consolidated Subsidiary,
provided, however, that if Borrower has commenced the construction of
improvements on any such Unimproved Asset and a loan facility for such
construction is in place, the value thereof shall be equal to the
amount reflected on Borrower's balance sheet for "construction in
progress" with respect to such Unimproved Asset.
"AFFILIATE" shall mean with respect to any Person (i) each Person
that, directly or indirectly, owns or controls, whether beneficially,
or as a trustee, guardian or other fiduciary, 5% or more of the Stock
having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or
(iii) each of such Person's officers, directors, joint venturers and
partners. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Senior Subordinated Term Loan
Agreement as the same may from time to time hereafter be modified,
supplemented or amended.
"APPLICABLE INTEREST RATE" means (i) with respect to any Fixed
Rate Indebtedness, the fixed interest rate applicable to such Fixed
Rate Indebtedness at the time in question, and (ii) with respect to
any Floating Rate Indebtedness, either (x) the rate at which the
interest rate applicable to such Floating Rate Indebtedness is
actually capped (or fixed pursuant to an interest rate hedging
device), at the time of calculation, if Borrower has entered into an
interest rate cap agreement or other interest rate hedging device with
respect thereto or (y) if Borrower has not entered into an interest
rate cap agreement or other interest rate hedging device with respect
to such Floating Rate Indebtedness, the greater of (A) the rate at
which the interest rate applicable to such Floating Rate Indebtedness
could be fixed for the remaining term of such Floating Rate
Indebtedness, at the time of calculation, by Borrower's entering into
any unsecured interest rate hedging device either not requiring an
upfront payment or if requiring an upfront payment, such upfront
payment shall be amortized over the term of such device and included
in the calculation of the interest rate (or, if such rate is incapable
of being fixed by entering into an unsecured interest rate hedging
device at the time of calculation, a fixed rate equivalent reasonably
determined by Lender) or (B) the floating rate applicable to such
Floating Rate Indebtedness at the time in question.
"APPROVED BANK" shall mean banks which have (i)(a) a minimum net
worth of $500,000,000 and/or (b) total assets of $10,000,000,000, and
(ii) a minimum long term debt rating of (a) BBB+ or higher by S&P, and
(b) Baa1 or higher by Moody's.
"ASSET EXCHANGE AGREEMENT" shall mean the Asset Exchange
Agreement, dated as of October 15, 1998, between Lender and Borrower,
including all amendments, modifications and supplements thereto and
any appendices, exhibits or schedules to any of the foregoing, and
shall refer to the Asset Exchange Agreement as the same may be in
effect at the time such reference becomes operative.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to
by any member of the ERISA Group.
"BORROWER" means Merry Land Properties, Inc., a Georgia
corporation.
"BORROWER'S SHARE" means Borrower's share of the liabilities or
assets, as the case may be, of a Consolidated Subsidiary based upon
Borrower's percentage ownership of such Consolidated Subsidiary, as
the case may be.
"CAPITAL LEASES" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"CAPITAL APARTMENT RESERVE" shall mean, for any period, $62.50
for each Fiscal Quarter to occur during such period.
"CAPITAL COMMERCIAL RESERVE" shall mean, for any period, $1.00
for each Fiscal Quarter to occur during such period.
"CAPITAL EXPENDITURES" as applied to any Person, means all
payments, including, without limitation, payments under Capital
Leases, for any fixed assets or improvements, or replacements,
substitutions or additions thereto, that have a useful life of more
than one year and which are required to be capitalized under GAAP.
"CASH AND CASH EQUIVALENTS" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without
limitation, treasury bills, notes and bonds, (iii) interest bearing or
discounted obligations of Federal agencies and Government sponsored
entities or pools of such instruments offered by Approved Banks and
dealers, including without limitation, Federal Home Loan Mortgage
Corporation participation sale certificates, Government National
Mortgage Association modified pass through certificates, Federal
National Mortgage Association bonds and notes, and Federal Farm Credit
System securities, (iv) time deposits, domestic and eurodollar
certificates of deposit, bankers acceptances, commercial paper rated
at least A-1 by S&P and P-1 by Moody's and/or guaranteed by an Aa
rating by Moody's, a AA rating by S&P or better rated credit, floating
rate notes, other money market instruments and letters of credit each
issued by Approved Banks (provided that the same shall cease to be a
"Cash or Cash Equivalent" if at any time any such bank shall cease to
be an Approved Bank), (v) obligations of domestic corporations,
including, without limitation, commercial paper, bonds, debentures and
loan participations, each of which is rated at least AA by S&P and/or
Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA
rating by S&P or better rated credit, (vi) obligations issued by
states and local governments or their agencies, rated at least MIG-1
by Moody's and/or SP-1 by S&P and/or guaranteed by an irrevocable
letter of credit of an Approved Bank (provided that the same shall
cease to be a "Cash or Cash Equivalent" if at any time any such bank
shall cease to be an Approved Bank), (vii) repurchase agreements with
major banks and primary government security dealers fully secured by
the U.S. Government or agency collateral equal to or exceeding the
principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA
rating given by S&P or Aa2 rating given by Moody's or better rated
credit.
"CHANGE OF CONTROL" shall mean one or more of the following
events:
(a) less than a majority of the members of Borrower's Board of
directors shall be persons who either (i) were serving as directors on
the Closing Date or (ii) were nominated as directors and approved by
the vote of the majority of the directors who are directors referred
to in clause (i) above or this clause (ii); or
(b) the stockholders of Borrower shall approve any plan or
proposal for the liquidation or dissolution of Borrower; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the capital stock of
Borrower as of the Closing Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of Borrower representing more than thirty percent (30%) of
the combined voting power of the outstanding voting securities for the
election of directors or shall have the right to elect a majority of
the Board of Directors of Borrower.
"CLOSING DATE" means the date on or after the Effective Date on
which the conditions set forth in Article III shall have been
satisfied to the satisfaction of Lender.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity which is consolidated with Borrower in accordance with
GAAP.
"CONTINGENT OBLIGATION" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to
be shown on such Person's balance sheet in accordance with GAAP, and
(ii) any obligation required to be disclosed in the footnotes to such
Person's financial statements, guaranteeing partially or in whole any
Non-Recourse Indebtedness, lease, dividend or other obligation,
exclusive of contractual indemnities (including, without limitation,
any indemnity or price-adjustment provision relating to the purchase
or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet
been called on or quantified, of such Person or of any other Person.
The amount of any Contingent Obligation described in clause (ii) shall
be deemed to be (a) with respect to a guaranty of interest or interest
and principal, or operating income guaranty, the Net Present Value of
the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to
the debt service for the note secured thereby), calculated at the
Applicable Interest Rate, through (i) in the case of an interest or
interest and principal guaranty, the stated date of maturity of the
obligation (and commencing on the date interest could first be payable
thereunder), or (ii) in the case of an operating income guaranty, the
date through which such guaranty will remain in effect, and (b) with
respect to all guarantees not covered by the preceding clause (a), an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made or, if not stated
or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder) as recorded on the balance sheet and on the footnotes to
the most recent financial statements of Borrower required to be
delivered pursuant to Section 4.4 hereof. Notwithstanding anything
contained herein to the contrary, guarantees of completion shall not
be deemed to be Contingent Obligations unless and until a claim for
payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent
Obligation in an amount equal to any such claim. Subject to the
preceding sentence, (i) in the case of a joint and several guaranty
given by such Person and another Person (but only to the extent such
guaranty is recourse, directly or indirectly to Borrower), the amount
of the guaranty shall be deemed to be 100% thereof unless and only to
the extent that such other Person has delivered Cash or Cash
Equivalents to secure all or any part of such Person's guaranteed
obligations and (ii) in the case of a guaranty (whether or not joint
and several) of an obligation otherwise constituting Indebtedness of
such Person, the amount of such guaranty shall be deemed to be only
that amount in excess of the amount of the obligation constituting
Indebtedness of such Person. Notwithstanding anything contained
herein to the contrary, "Contingent Obligations" shall be deemed not
to include guarantees of Unused Commitments or of construction loans
to the extent the same have not been drawn. All matters constituting
"Contingent Obligations" shall be calculated without duplication.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, lease, contract, undertaking, document or
instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is
subject (including without limitation any restrictive covenant
affecting such Person or any of its properties).
"CONVERTIBLE SECURITIES" means evidences of shares of stock,
limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible
into or exchangeable for, with or without payment of additional
consideration, shares of common stock of Borrower, either immediately
or upon the arrival of a specified date or the happening of a
specified event.
"DEBT RESTRUCTURING" means a restatement of, or material change
in, the amortization or other financial terms of any Indebtedness of
the Borrower or any Consolidated Subsidiary.
"DEBT SERVICE" means, for any period, Interest Expense for such
period PLUS scheduled principal amortization (excluding any individual
scheduled principal payment which exceeds 25% of the original
principal amount of an issuance of Indebtedness) for such period on
all Indebtedness of Borrower, on a consolidated basis.
"DEFAULT" means any condition or event which with the giving of
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized
by law to close.
"EBITDA" means, for any period (i) Net Income for such period,
PLUS (ii) depreciation and amortization expense and other non-cash
items deducted in the calculation of Net Income for such period, PLUS
(iii) Interest Expense deducted in the calculation of Net Income for
such period, PLUS, (iv) Taxes deducted in the calculation of Net
Income for such period, MINUS (v) the gains (and PLUS the losses) from
extraordinary items or asset sales or write-ups or forgiveness of
indebtedness included in the calculation of Net Income, for such
period, MINUS (vi) earnings of Subsidiaries for such period
distributed to third parties, all of the foregoing without
duplication. In calculating EBITDA, the effect of the Participating
Assets and the Participating Loans shall be excluded.
"EFFECTIVE DATE" means the date this Agreement becomes effective
in accordance with Section 9.8.
"ENVIRONMENTAL AFFILIATE" means any partnership, joint venture,
trust or corporation in which an equity interest is owned by the
Borrower, either directly or indirectly, and, as a result of the
ownership of such equity interest, the Borrower may have recourse
liability for Environmental Claims against such partnership, joint
venture or corporation (or the property thereof).
"ENVIRONMENTAL APPROVALS" means any permit, license, approval,
ruling, variance, exemption or other authorization required under
applicable Environmental Laws.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by
any other Person alleging potential liability of such Person for
investigatory costs, cleanup costs, governmental response costs,
natural resources damage, property damages, personal injuries, fines
or penalties arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such
Person or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law, in each case (with
respect to both (i) and (ii) above) as to which there is a reasonable
possibility of an adverse determination with respect thereto and
which, if adversely determined, would have a Material Adverse Effect
on the Borrower.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on human
health or to emissions, discharges or releases of Materials of
Environmental Concern into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern or the clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together
with the Borrower or any Subsidiary, are treated as a single employer
under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"FISCAL QUARTER" means a fiscal quarter of a Fiscal Year.
"FISCAL YEAR" means the fiscal year of Borrower which shall be
the twelve (12) month period ending on the last day of December in
each year.
"FIXED CHARGES" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, (ii) the product of the average
number of apartment units owned (directly or beneficially) by Borrower
or any Subsidiary of Borrower during such period and the Capital
Apartment Reserve for such Period, (iii) the product of the average
number of square feet of commercial property other than apartment
units owned (directly or beneficially) by Borrower or any Subsidiary
of Borrower during such period and the Capital Commercial Reserve for
such Period, and (iv) dividends on preferred shares in Borrower
payable by Borrower for such period.
"FIXED RATE INDEBTEDNESS" means all Indebtedness which accrues
interest at a fixed rate.
"FLOATING RATE INDEBTEDNESS" means all Indebtedness which is not
Fixed Rate Indebtedness and which is not a Contingent Obligation or an
Unused Commitment.
"FUNDS AVAILABLE FOR DISTRIBUTION" as applied to any Person (and
without duplication) means (i) Net Income, MINUS (ii) Capital
Expenditures, PLUS (iii) depreciation and amortization, but only to
the extent deducted in the calculation of Net Income.
"FMV CAP RATE" means 9.5%.
"GAAP" means generally accepted accounting principles recognized
as such in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
"GROSS ASSET VALUE" means, with respect to any Person or
Property, Adjusted Asset Value plus, in the case of any Person, the
value of any Cash or Cash Equivalent owned by such Person and not
subject to any Lien.
"INDEBTEDNESS" as applied to any Person (without duplication and
excluding, in any event, the principal amount of any currently
outstanding Participating Loans), means (a) all indebtedness,
obligations or other liabilities of such Person for borrowed money,
(b) all indebtedness, obligations or other liabilities of such Person
evidenced by Securities or other similar instruments, (c) all
Contingent Obligations of such Person, (d) all reimbursement
obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's
account or other similar instruments for which a contingent liability
exists, (e) all obligations of such Person to pay the deferred
purchase price of Property or services, (f) all obligations in respect
of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others
secured by a Lien on any asset of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by, or are a
personal liability of such Person, (h) all indebtedness, obligations
or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange
agreements (other than Interest Rate Contracts purchased to hedge
Indebtedness), (i) ERISA obligations currently due and payable and
(j) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such
Person.
"INDEMNITEE" has the meaning set forth in Section 9.3(b).
"INTEREST EXPENSE" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized
(including the interest component of Capital Leases but excluding
interest expense covered by an interest reserve established under a
loan facility and any interest expense with respect to a currently
outstanding Participating Loan) of Borrower, on a consolidated basis,
including without limitation all commissions, discounts and other fees
and charges owed with respect to drawn letters of credit, amortized
costs of Interest Rate Contracts incurred on or after the Closing
Date, calculated for all Fixed Rate Indebtedness, at the actual
interest rate in effect with respect to all Indebtedness outstanding
as of the last day of such Fiscal Quarter and in the case of all
Floating Rate Indebtedness, the greater of (i) (A) the Treasury Rate
plus 1.50% for taxable Indebtedness and (B) 6.0% for tax-exempt
Indebtedness, (ii) the actual rate of interest in effect with respect
to such Floating Rate Indebtedness outstanding for which no Interest
Rate Contract is in effect as of the last day of such quarter and
(iii) if an Interest Rate Contract is in effect with respect to such
Floating Rate Indebtedness, the strike rate payable under such
Interest Rate Contract, all determined on an annualized basis.
"INTEREST PAYMENT DATE" shall have the meaning assigned to such
term in Section 2.2(a) hereof.
"INTEREST RATE CONTRACTS" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate
protection.
"INVESTMENT AFFILIATE" means any Person in whom Borrower holds an
equity interest, directly or indirectly, whose financial results are
not consolidated under GAAP with the financial results of Borrower on
the consolidated financial statements of Borrower.
"JUNIOR SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of
Borrower or any of its Subsidiaries which is unsecured and which is
subordinated to the Obligations in a manner and form satisfactory to
Lender, in its sole discretion, as to right and time of payment and as
to any other rights and remedies thereunder.
"LENDER" means Merry Land & Investment Company, Inc., a Georgia
corporation, and its successors and assigns.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any
other type of preferential arrangement, in each case that has the
effect of creating a security interest, in respect of such asset. For
the purposes of this Agreement, the Borrower or any Subsidiary of
Borrower shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"LOAN" has the meaning set forth in Section 2.1(a).
"LOAN DOCUMENTS" means this Agreement and the Note.
"MARGIN STOCK" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means an effect resulting from any
circumstance or event or series of circumstances or events, of
whatever nature (but excluding general economic conditions), which
does or could reasonably be expected to, materially and adversely
(i) affect the business, operations, properties, assets or financial
condition of the Borrower and its Consolidated Subsidiaries taken as a
whole, (ii) impair the ability of the Borrower and its Consolidated
Subsidiaries, taken as a whole, to perform their respective
obligations under the Loan Documents, or (iii) cause a Default under
Sections 5.8, 5.9 or 5.12. Circumstances or events with respect to
the Participating Assets and Participating Loans (other than
liabilities incurred with respect to the Participating Assets which in
the aggregate exceed the Adjusted Asset Value thereof and for which
the Borrower or any of its Subsidiaries would be legally responsible)
shall not be taken into consideration in the determination of a
Material Adverse Effect.
"MATERIAL PLAN" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $250,000.
"MATERIALS OF ENVIRONMENTAL CONCERN" means and includes
pollutants, contaminants, hazardous wastes, toxic and hazardous
substances, asbestos, lead, petroleum and petroleum by-products.
"MATURITY DATE" shall mean the date when all of the Obligations
hereunder shall be due and payable, which shall be October 15, 2013,
unless accelerated pursuant to the terms hereof.
"MOODY'S" means Moody's Investors Services, Inc. or any successor
thereto.
"MULTIEMPLOYER PLAN" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such five year
period.
"NET INCOME" means, for any period, the net earnings (or loss)
after Taxes of Borrower, on a consolidated basis, for such period
calculated in conformity with GAAP, but excluding, in any event, the
effect of any Participating Assets or Participating Loans.
"NET OPERATING INCOME" means, for any period with respect to any
Property owned (directly or beneficially) by Borrower or its
wholly-owned Subsidiaries, the net operating income of such Property
(attributed to such Property in a manner reasonably acceptable to
Lender) for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past
practices of Borrower, and (iii) inclusive of an allocation of
reasonable management fees and administrative costs to each Property
consistent with the past practices of Borrower, except that, for
purposes of determining Net Operating Income, income shall not
(a) include security or other deposits or (b) be reduced by
depreciation or amortization.
"NET PRICE" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, PLUS (ii) the principal
amount of any note received or other deferred payment to be made in
connection with such purchase or sale (except as described in
clause (iv) below), PLUS (iii) the value of any other considerations
delivered in connection with such purchase or sale (including, without
limitation, shares of common stock or preferred stock in Borrower) (as
reasonably determined by Lender), MINUS (only in the case of a sale)
(iv) the value of any consideration deposited into escrow or subject
to disbursement or claim upon the occurrence of any event, MINUS (only
in the case of a sale) (v) the value of any consideration required to
be paid to any Person other than the Borrower and its Subsidiaries
owning a beneficial interest in such Property, MINUS (vi) reasonable
costs of sale and taxes paid or payable in connection with such
purchase or sale.
"NET PRESENT VALUE" shall mean, as to a specified or
ascertainable dollar amount, the present value, as of the date of
calculation of any such amount using a discount rate equal to the Base
Rate in effect as of the date of such calculation.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness with respect to
which recourse for payment is limited to (i) specific assets related
to a particular Property or group of Properties encumbered by a Lien
securing such Indebtedness or (ii) any Subsidiary (provided that if a
Subsidiary is a partnership, there is no recourse to Borrower as a
general partner of such partnership); provided, however, that personal
recourse of Borrower for any such Indebtedness for fraud,
misrepresentation, misapplication of cash, waste, environmental claims
and liabilities and other circumstances customarily excluded by
institutional lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financing of real
estate shall not, by itself, prevent such Indebtedness from being
characterized as Non-Recourse Indebtedness.
"NOTE" has the meaning set forth in Section 2.1(a).
"NOTE INTEREST RATE" shall mean during each year following the
Closing Date the rate set forth in the following schedule opposite
such year:
<TABLE>
<CAPTION>
YEAR RATE
---- ----
<S> <C>
First, Second,
Third, Fourth and
Fifth 8.0%
Sixth 8.25%
Seventh 8.50%
Eighth 8.75%
Ninth 9.0%
Tenth 9.25%
Eleventh 9.75%
Twelfth 10.50%
Thirteenth 11.50%
Fourteenth 12.75%
Fifteenth and
thereafter 14.25%
</TABLE>
"OBLIGATIONS" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Borrower from time
to time owing to Lender, under or in connection with this Agreement or
any other Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PARTICIPATING ASSETS" means those assets more fully described on
Schedule 1.1B hereto, but only for so long as such assets are subject
to Participating Loans.
"PARTICIPATING LOANS" means certain Non-Recourse Indebtedness
held by Lender which are currently in effect with respect to and are
secured by the Participating Assets.
"PERMITTED LIENS" means:
(a) Liens for Taxes, assessments or other governmental
charges not yet due and payable or which are being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with the terms hereof;
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not more
than sixty (60) days delinquent or which are being contested in
good faith in accordance with the terms hereof;
(c) deposits made in the ordinary course of business to
secure liabilities to insurance carriers;
(d) Liens for purchase money obligations for equipment;
PROVIDED that (i) the Indebtedness secured by any such Lien does
not exceed the purchase price of such equipment, (ii) any such
Lien encumbers only the asset so purchased and the proceeds upon
sale, disposition, loss or destruction thereof, and (iii) such
Lien, after giving effect to the Indebtedness secured thereby,
does not give rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on
Schedule B to the owner's title insurance policies, except in
connection with any Indebtedness, for any of the Real Property
Assets, so long as the foregoing do not interfere in any material
respect with the use or ordinary conduct of the business of the
owner and do not diminish in any material respect the value of
the Property to which it is attached or for which it is listed;
(f) Liens and judgments which have been or will be bonded or
released of record within thirty (30) days after the date such
Lien or judgment is entered or filed against Borrower, or any
Subsidiary;
(g) Liens, including Participating Liens on Assets to secure
Participating Loans, on Property of the Borrower or its
Subsidiaries (other than Qualifying Unencumbered Property)
securing Indebtedness which may be incurred or remain outstanding
without resulting in an Event of Default hereunder; and
(h) Liens in favor of the Borrower against any asset of any
wholly-owned Subsidiary of the Borrower.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code
and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has
at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the
ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"PREFERRED STOCK" shall mean Borrower's Redeemable Cumulative
Preferred Stock, bearing dividends at the rate and having the terms
and rights set forth in Borrower's Certificate of Incorporation as in
effect on the Effective Date.
"PREFERRED STOCK OBLIGATIONS" means, as of the date of
determination and without duplication, the liquidation value of the
outstanding Preferred Stock and all accumulated and unpaid dividends
thereon, together with any accrued and unpaid interest thereon.
"PROPERTY" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit,
or other asset owned by such Person.
"PURCHASE AND SALE AGREEMENT" shall mean the Purchase and Sale
Agreement, dated as of October 15, 1998, between ERP Operating Limited
Partnership and Borrower, including all amendments, modifications and
supplements thereto and any appendices, exhibits or schedules to any
of the foregoing, and shall refer to the Purchase and Sale Agreement
as the same may be in effect at the time such reference becomes
operative.
"QUALIFYING UNENCUMBERED PROPERTY" means any Real Property Asset
from time to time which (i) is wholly-owned (directly or beneficially)
by Borrower, (ii) is not subject (nor are any equity interests in such
Property subject) to a Lien which secures Indebtedness of any Person
other than Permitted Liens, and (iii) is not subject (nor are any
equity interests in such Property subject) to any covenant, condition,
or other restriction which prohibits or limits the creation or
assumption of any Lien upon such Property (it being understood that
covenants similar to those set forth in Section 5.8 hereof shall not
be deemed to constitute any such prohibition or limitation). In
addition, in the case of any Property that is owned by a Subsidiary of
Borrower, if such Subsidiary shall commence any proceeding under any
bankruptcy, insolvency or similar law, or any such involuntary case
shall be commenced against it and shall remain undismissed and
unstayed for a period of 60 days, then, simultaneously with the
occurrence of such conditions, such Property shall no longer
constitute a Qualifying Unencumbered Property.
"REAL PROPERTY ASSETS" means as of any time, the real property
assets (including interests in participating mortgages in which the
Borrower's interest therein is characterized as equity according to
GAAP) owned directly or indirectly by the Borrower and its
Consolidated Subsidiaries.
"RELEASE" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape,
injection, deposit, discharge, dispersal, dumping, leaching or
migration of Materials of Environmental Concern in the indoor or
outdoor environment, including the movement of Materials of
Environmental Concern through or in the air, soil, surface water,
ground water or property.
"RECOURSE DEBT" shall mean Indebtedness that is not Non-Recourse
Indebtedness.
"REGULATION U" means Regulation U of the Federal Reserve Board,
as in effect from time to time.
"SALE" shall have the meaning given such term in the Purchase and
Sale Agreement.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"SECURED DEBT" means Indebtedness of Borrower, on a consolidated
basis, the payment of which is secured by a Lien on any Property owned
or leased by Borrower, or any Subsidiary of Borrower, but excluding in
any event, any Participating Loans.
"SECURITIES" means any stock, partnership interests (other than
Multifamily Residential Property Partnership Interests), shares,
shares of beneficial interest, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities," or any certificates of
interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the obligations.
"SENIOR INDEBTEDNESS" shall mean (i) the principal amount of all
indebtedness arising under the Senior Term Loan Agreement, together
with any interest (including any interest accruing after the
commencement of any bankruptcy proceeding, and any interest which
would have accrued but for the commencement of such proceeding,
whether or not such interest is allowed as an enforceable claim in
such bankruptcy proceeding), premium, if any, and any other amount
(including any fee or expense) due in connection with such
indebtedness under the Senior Term Loan Documents, and (ii) any other
indebtedness for borrowed money of Borrower or any of its Subsidiaries
which by the documents evidencing such indebtedness is designated as
"Senior Indebtedness" by specific reference to this Agreement and
notice of which has been given to, and acknowledged by, Lender
pursuant to Section 7.10 hereof.
"SENIOR LENDER" shall mean Merry Land & Investment Company, Inc.,
its successors and assigns, and any other holder of Senior
Indebtedness.
"SENIOR TERM LOAN AGREEMENT" shall mean the Senior Term Loan
Agreement, dated as of October 15, 1998, by and between Borrower and
Merry Land & Investment Company, Inc.
"SENIOR TERM LOAN DOCUMENTS" shall mean (i) the Senior Term Loan
Agreement, together with all exhibits thereto, all other documents,
agreements and instruments executed in connection therewith and all
amendments and supplements thereto, and (ii) the loan documents
evidencing any other Senior Indebtedness.
"SOLVENT" means, with respect to any Person, that the fair
saleable value of such Person's assets exceeds the Indebtedness of
such Person.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Borrower.
"TAXES" means all federal, state, local and foreign income and
gross receipts taxes, but excluding any of the foregoing which arise
as a result of the Participating Assets or Participating Loans.
"TERM" shall mean that period from and including the Closing Date
through the Termination Date.
"TERMINATION DATE" shall mean the date on which all Obligations
hereunder have been completely discharged.
"TERMINATION EVENT" shall mean (i) a "reportable event", as such
term is described in Section 4043 of ERISA (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC), or
an event described in Section 4062(e) of ERISA, (ii) the withdrawal by
any member of the ERISA Group from a Multiemployer Plan during a plan
year in which it is a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), or the incurrence of liability by any
member of the ERISA Group under Section 4064 of ERISA upon the
termination of a Multiemployer Plan, (iii) the filing of a notice of
intent to terminate any Plan under Section 4041 of ERISA, other than
in a standard termination within the meaning of Section 4041 of ERISA,
or the treatment of a Plan amendment as a distress termination under
Section 4041 of ERISA, (iv) the institution by the PBGC of proceedings
to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or cause a trustee to be
appointed to administer, any Plan or (v) any other event or condition
that might reasonably constitute grounds for the termination of, or
the appointment of a trustee to administer, any Plan or the imposition
of any liability or encumbrance or Lien on the Real Property Assets or
any member of the ERISA Group under ERISA.
"TOTAL LIABILITIES" means, as of the date of determination and
without duplication, all Indebtedness of Borrower, on a consolidated
basis, PLUS accounts payable incurred in the ordinary course of
business.
"TRANSACTION COST AGREEMENT" has the meaning set forth in
Section 3.1(i).
"TRANSFER" shall have the meaning given such term in the Asset
Exchange Agreement.
"TREASURY RATE" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a
ten year maturity, as such yield is reported in Federal Reserve
Statistical Release H.15 -- Selected Interest Rates, published most
recently prior to the date the applicable Treasury Rate is being
determined. Such yield shall be determined by straight line linear
interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, Lender
shall select, in its reasonable discretion, an alternate basis for the
determination of Treasury yield for U.S. Treasury Constant Maturity
Series with ten year maturities.
"UNENCUMBERED APARTMENT ASSET VALUE" means (i) a fraction, the
numerator of which is the product of four (4) and the aggregate
Unencumbered Net Operating Income for the most recently ended Fiscal
Quarter which is attributable (in a manner reasonably acceptable to
Lender) to Qualifying Unencumbered Properties which are primarily
multi-family residential properties, wholly-owned (directly or
beneficially) by the Borrower for the entire Fiscal Quarter, and the
denominator of which is the FMV Cap Rate, PLUS (ii) for all Qualifying
Unencumbered Properties which are primarily multi-family residential
properties, wholly-owned (directly or beneficially) by Borrower which
have been acquired (directly or indirectly) by the Borrower during the
Fiscal Quarter most recently ended, the aggregate Net Price paid by
Borrower or its affiliates for such Qualifying Unencumbered
Properties.
"UNENCUMBERED NET OPERATING INCOME" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by
the Borrower and/or any wholly-owned Subsidiary of Borrower during the
applicable period, Net Operating Income from each such Qualifying
Unencumbered Property minus (i) with respect to any apartment units
contained in such Qualifying Unencumbered Property, an amount equal to
the product of the number of apartment units in such Qualifying
Unencumbered Property during such period and the Capital Apartment
Reserve for such period, and minus (ii) with respect to any commercial
property other than apartments units contained in such Qualifying
Unencumbered Property, an amount equal to the product of the number of
square feet of leased space in such commercial property other than
apartments units contained in such Qualifying Unencumbered Property
and the Capital Commercial Reserve for such period.
"UNIMPROVED ASSETS" means Real Property Assets upon which no
material improvements have been completed which completion is
evidenced by a certificate of occupancy or its equivalent.
"UNITED STATES" means the United States of America, including the
fifty states and the District of Columbia.
"UNSECURED DEBT" means Indebtedness of Borrower and any
Subsidiary of Borrower, which is not Secured Debt.
"UNSECURED INTEREST EXPENSE" means Interest Expense, other than
Interest Expense payable in respect of Secured Debt and other than
Interest Expense payable in respect of the Indebtedness of any Person
other than Borrower or any Subsidiary of Borrower.
"UNUSED COMMITMENTS" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction
loan) which any third party is obligated to advance to Borrower or
another Person or otherwise pursuant to any loan document, written
instrument or otherwise.
Section 0.1 Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP applied on a basis consistent
(except for changes concurred in by the Borrower's independent public
accountants) with the most recent audited consolidated financial
statements of the Borrower and its Consolidated Subsidiaries delivered
to Lender; PROVIDED that, if the Borrower notifies Lender that the
Borrower wishes to amend any covenant in Article V to eliminate the
effect of any change in GAAP on the operation of such covenant (or if
Lender notifies the Borrower that Lender wishes to amend Article V for
such purpose), then the Borrower's compliance with such covenant shall
be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner reasonably
satisfactory to the Borrower and Lender.
ARTICLE I
AMOUNT AND TERMS OF LOAN
Section 1.1 LOAN.
(a) Upon and subject to the terms and conditions hereof, Lender
agrees to make a senior subordinated term loan (the "Loan") to
Borrower on the Closing Date, in an aggregate principal amount of
Twenty Million Dollars ($20,000,000). The Loan shall be evidenced by
a promissory note to be executed and delivered by Borrower at the time
of such Loan, the form of which is attached hereto and made a part
hereof as Exhibit A (the "Note").
(b) $18,317,429 of the Loan shall be deemed to have been
disbursed by virtue of the consummation of the Transfer, and the
balance of the Loan shall be deemed to have been disbursed by virtue
of the consummation of the Sale.
(c) The aggregate principal amount of the Senior Subordinated
Term Note shall be payable on October 15, 2013.
Section 1.2 INTEREST ON THE LOAN.
(a) With respect to the Loan, Borrower shall pay interest to
Lender in arrears on each January 15, April 15, July 15 and October 15
of each year during the Term commencing on January 15, 1999 (each, an
"Interest Payment Date"), in an amount equal to the quotient of (i) an
amount equal to (A) the sum of the daily unpaid principal amounts of
the Loan outstanding on each day during the previous calendar quarter
multiplied by (B) a rate equal to the Note Interest Rate, divided by
(ii) 360.
(b) Upon the occurrence of and during the continuation of
Borrower's failure to make any payment of principal of, or interest
on, or any amount owing in respect of, the Loan or any of the other
Obligations when due and payable or declared due and payable, the
interest rate applicable to the Loan shall be increased by 5% per
annum above the rate otherwise applicable. Any interest not paid when
due and payable shall be added to principal.
(c) Notwithstanding anything to the contrary set forth in this
Section 2.2, if at any time until payment in full of all of the
Obligations the interest rate calculated pursuant to the foregoing
paragraphs of this Section 2.2 (the "Stated Rate") exceeds the highest
rate of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto
(the "Maximum Lawful Rate"), then in such event and so long as the
Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; PROVIDED,
HOWEVER, that if at any time thereafter the Stated Rate is less than
the Maximum Lawful Rate, Borrower shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total
interest received by Lender from the making of advances hereunder is
equal to the total interest which Lender would have received had the
Stated Rate been (but for the operation of this Section 2.2(c)) the
interest rate payable since the Closing Date. Thereafter, the
interest rate payable hereunder shall be the Stated Rate unless and
until the Stated Rate again exceeds the Maximum Lawful Rate, in which
event this paragraph shall again apply. In no event shall the total
interest received by Lender pursuant to the terms hereof exceed the
amount which Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. In the event the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of
days in the year in which such calculation is made. In the event that
a court of competent jurisdiction, notwithstanding the provisions of
this Section 2.2(c), shall make a final determination that Lender has
received interest hereunder or under any of the Loan Documents in
excess of the Maximum Lawful Rate, Lender shall, to the extent
permitted by applicable law, promptly apply such excess first to any
interest due and not yet paid under the Loan, then to any due and
payable principal of the Loan, then to the remaining principal amount
of the Loan, then to other unpaid Obligations and thereafter shall
refund any excess to Borrower or as a court of competent jurisdiction
may otherwise order.
Section 1.3 APPLICATION OF PAYMENTS. All monies received by Lender
pursuant to this Agreement shall be applied to any Obligations by Lender,
as Lender shall determine in its sole discretion, and Lender shall account
to Borrower for any sum remaining. Payments of interest and principal with
respect to the Loan shall be payable by federal wire transfer, pursuant to
Lender's written instructions, on the dates and in the amounts specified in
this Agreement. All other Obligations shall be payable on demand in the
manner requested by Lender.
Section 1.4 MANDATORY PREPAYMENTS. If at any time the Borrower or
any of its Consolidated Subsidiaries sells, transfers, assigns or conveys
any multifamily Real Property Asset which shall cause the Borrower in any
fiscal year period commencing after the Closing Date, to have sold,
transferred or conveyed property or assets which constitute in the
aggregate more than 30% of the Gross Asset Value of the multifamily Real
Property Assets of Borrower and its Consolidated Subsidiaries on the date
of such transfer, then at the request of Lender, Borrower shall pay to
Lender, within thirty (30) days after the date of such request, an amount
equal to the Net Proceeds of such transfer (but in no event more than the
outstanding balance of the Loan). Borrower shall make such prepayment
together with interest accrued to the date of the prepayment on the
principal amount prepaid. Amounts prepaid pursuant to this Section 2.4 may
not be reborrowed. As used in this Section 2.4, the term "NET PROCEEDS"
shall mean all amounts received by Borrower and its Consolidated
Subsidiaries in connection with such sale, transfer, assignment or
conveyance after payment of all expenses to be made by Borrower and any
Consolidated Subsidiaries in connection with such sale, transfer,
assignment or conveyance (including, without limitation, payment of then
existing Liens or encumbrances on such Real Property Asset, brokerage
commissions, title and survey costs or transfer taxes).
Section 1.5 OPTIONAL PREPAYMENTS. The Borrower may, upon at least
one (1) Domestic Business Day's notice to Lender, prepay without penalty
the Loan, in whole at any time, or from time to time in part, by paying the
principal amount to be prepaid together with accrued interest thereon to
the date of prepayment.
Section 1.6 GENERAL PROVISIONS AS TO PAYMENTS. The Borrower shall
make each payment of interest on the Loan, not later than 10:00 a.m. New
York City time on the date when due, in Federal or other funds immediately
available in Chicago, Illinois, to Lender at its address referred to in
Section 9.1. Whenever any payment of principal of, or interest on the Loan
shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business
Day. If the date for any payment of principal is extended by operation of
law or otherwise, interest thereon shall be payable for such extended time.
Section 1.7 COMPUTATION OF INTEREST. All interest shall be computed
on the basis of a year of 360 days and paid for the actual number of days
elapsed (including the first day but excluding the last day).
ARTICLE I
CONDITIONS
Section 1.7 CLOSING. The closing hereunder shall occur on the date
when each of the following conditions is satisfied, each document to be
dated the Closing Date unless otherwise indicated:
(a) the Asset Exchange Agreement has been duly executed and
delivered by and to the respective parties, all conditions precedent
to the closing and/or effectiveness of said agreement have been fully
satisfied or waived, and the Transfer has been fully consummated.
(b) the Purchase and Sale Agreement has been duly executed and
delivered by and to the respective parties, all conditions to the
closing and/or effectiveness of said agreement have been fully
satisfied or waived, and the Sale has been fully consummated.
(c) the Borrower shall have executed and delivered to Lender a
Note dated on or before the Closing Date complying with the provisions
of Section 2.1(a);
(d) the Borrower and Lender shall have executed and delivered
to the Borrower and Lender a duly executed original of this Agreement;
(e) Lender shall have received an opinion of counsel for the
Borrower, acceptable to Lender and its counsel from a law firm
acceptable to Lender and its counsel;
(f) Lender shall have received all documents Lender may
reasonably request relating to the existence of the Borrower, the
authority for and the validity of this Agreement and the other Loan
Documents, the authority and incumbency of the officers executing this
Agreement and the other Loan Documents and any other matters relevant
hereto, all in form and substance satisfactory to Lender. Such
documentation shall include, without limitation, the certificate of
incorporation of the Borrower, as amended, modified or supplemented to
the Closing Date, certified to be true, correct and complete by the
Secretary of State of Delaware as of a date not more than ten (10)
days prior to the Closing Date, together with a certificate of good
standing as to the Borrower from the Secretaries of State of Delaware
and Georgia, to be dated not more than ten (10) days prior to the
Closing Date, as well as the by-laws of the Borrower, as amended,
modified or supplemented to the Closing Date, certified to be true,
correct and complete by a senior officer of Borrower as of a date not
more than ten (10) days prior to the Closing Date;
(g) Lender shall have received all certificates, agreements and
other documents and papers referred to in this Section 3.1;
(h) the Borrower shall have taken all actions required to
authorize the execution and delivery of this Agreement and the other
Loan Documents and the performance thereof by the Borrower;
(i) Lender shall be satisfied that neither the Borrower nor any
Consolidated Subsidiary is subject to any present or contingent
environmental liability which could have a Material Adverse Effect;
(j) Lender shall have received the fees and expenses accrued
through the Closing Date as more fully provided in the Transaction
Costs Agreement of even date (the "Transaction Costs Agreement") among
Equity Residential Properties Trust, Lender and Borrower;
(k) Lender shall have received copies of all consents, licenses
and approvals, if any, required in connection with the execution,
delivery and performance by the Borrower and the applicable
Consolidated Subsidiaries, and the validity and enforceability, of the
Loan Documents, or in connection with any of the transactions
contemplated thereby, and such consents, licenses and approvals shall
be in full force and effect;
(l) Lender shall have received a certificate based upon the
pro-forma financial information contained in Borrower's Form 10
(including the assumptions with respect to such pro forma financial
information contained therein) showing compliance with the
requirements of Section 5.8 as of the Closing Date; and
(m) no Default or Event of Default shall have occurred.
ARTICLE I
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to make the Loan, the Borrower makes the
following representations and warranties as of the Closing Date. Such
representations and warranties shall survive the effectiveness of this
Agreement, the execution and delivery of the other Loan Documents and the
making of the Loan.
Section 1.7 EXISTENCE AND POWER. The Borrower is a corporation,
duly formed and validly existing and in good standing under the laws of the
State of Georgia and has all powers and all material governmental licenses,
authorizations, consents and approvals required to own its property and
assets and carry on its business as now conducted or as it presently
proposes to conduct and has been duly qualified and is in good standing in
every jurisdiction in which the failure to be so qualified and/or in good
standing is likely to have a Material Adverse Effect.
Section 1.7 POWER AND AUTHORITY. The Borrower has the corporate
power and authority to execute, deliver and carry out the terms and
provisions of each of the Loan Documents to which it is a party and has
taken all necessary corporate action, if any, to authorize the execution
and delivery on behalf of the Borrower and the performance by the Borrower
of such Loan Documents. The Borrower has duly executed and delivered each
Loan Document to which it is a party in accordance with the terms of this
Agreement, and each such Loan Document constitutes the legal, valid and
binding obligation of the Borrower, enforceable in accordance with its
terms, except as enforceability may be limited by applicable insolvency,
bankruptcy or other laws affecting creditors rights generally, or general
principles of equity, whether such enforceability is considered in a
proceeding in equity or at law.
Section 1.7 NO VIOLATION. Neither the execution, delivery or
performance by or on behalf of the Borrower of the Loan Documents to which
it is a party, nor compliance by the Borrower with the terms and provisions
thereof nor the consummation of the transactions contemplated by the Loan
Documents, (i) will materially contravene any applicable provision of any
law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will materially conflict with
or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of the Borrower or any of its Consolidated
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, or other agreement or other instrument to which the Borrower (or of
any partnership of which the Borrower is a partner) or any of its
Consolidated Subsidiaries is a party or by which it or any of its property
or assets is bound or to which it is subject, or (iii) will cause a
material default by the Borrower under any organizational document of any
Person in which the Borrower has an interest, or cause a material default
under the Borrower's agreement or certificate of limited partnership, the
consequences of which conflict, breach or default would have a Material
Adverse Effect, or result in or require the creation or imposition of any
Lien whatsoever upon any Property (except as contemplated herein).
Section 1.7 FINANCIAL INFORMATION.
(n) The historical combined consolidated balance sheet of
Borrower's predecessor as of December 31, 1997, and the related
historical combined statements of financial position of Borrower's
predecessor as of December 31, 1997, reported on by Arthur Andersen
LLP, a copy of which is in the Form 10 delivered to Lender, fairly
present, in conformity with GAAP, the consolidated financial position
of Borrower's predecessor as of such date and the combined results of
operations and cash flows for the fiscal year then ended, except as
may be otherwise stated therein. The historical combined consolidated
balance sheet of Borrower's predecessor as of June 30, 1998, and the
related historical combined financial statements of Borrower's
predecessor for the period from January 1, 1998 to June 30, 1998,
reported on by Arthur Andersen LLP, a copy of which is in the Form 10
delivered to Lender, fairly present, in conformity with GAAP, the
consolidated financial position of Borrower's predecessor as of such
date and the combined results of operations and cash flows for such
period, except as may be otherwise stated therein and subject in all
cases to year end adjustments.
(o) Since June 30, 1998, (i) except as may have been disclosed
in writing to Lender, nothing has occurred having a Material Adverse
Effect, and(ii) except as may have been disclosed in the Form 10, the
Borrower has not incurred any material indebtedness or guaranty on or
before the Closing Date.
Section 1.7 LITIGATION. Except as previously disclosed by the
Borrower in writing to Lender, there is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, (i) the Borrower or any of its Consolidated Subsidiaries,
(ii) the Loan Documents or any of the transactions contemplated by the Loan
Documents or (iii) any of their assets, before any court or arbitrator or
any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could, individually, or in the
aggregate have a Material Adverse Effect or which in any manner draws into
question the validity of this Agreement or the other Loan Documents.
Section 1.7 COMPLIANCE WITH ERISA.
(p) Except as set forth on SCHEDULE 4.6 attached hereto,
Borrower is not a member of any Plan or Multiemployer Plan or, as of
the Closing Date, any other Benefit Arrangement. After the Closing
Date, Borrower may establish or assume any Benefit Arrangement, so
long as any such event would not result in a Material Adverse Effect.
(q) The transactions contemplated by the Loan Documents will not
constitute a nonexempt prohibited transaction (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA) that could
subject Lender to any tax or penalty or prohibited transactions
imposed under Section 4975 of the Code or Section 502(i) of ERISA.
Section 1.7 ENVIRONMENTAL MATTERS. After the Closing Date, Borrower
will conduct reviews of the effect of Environmental Laws on the business,
operations and properties of the Borrower and Consolidated Subsidiaries of
either or both when necessary in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
properties presently owned, any capital or operating expenditures required
to achieve or maintain compliance with environmental protection standards
imposed by law or as a condition of any license, permit or contract, any
related constraints on operating activities, and any actual or potential
liabilities to third parties, including employees, and any related costs
and expenses). On the basis of the reviews, the Borrower will ascertain
the likelihood of such associated liabilities and costs, including the
costs of compliance with Environmental Laws, having a Material Adverse
Effect on the Borrower and its Consolidated Subsidiaries.
Section 1.7 TAXES. After the Closing Date, Borrower and its
Consolidated Subsidiaries will file all United States Federal income tax
returns and all other material tax returns which are required to be filed
by them and will pay all taxes due pursuant to such returns or pursuant to
any assessment received by the Borrower or any Consolidated Subsidiary,
except such taxes, if any, as are reserved against in accordance with GAAP,
such taxes as may be contested in good faith by appropriate proceedings or
such taxes, the failure to make payment of which when due and payable will
not have, in the aggregate, a Material Adverse Effect.
Section 1.7 FULL DISCLOSURE. All information heretofore furnished
by the Borrower to Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby or thereby is true and
accurate in all material respects on the date as of which such information
is stated or certified. The Borrower has disclosed to Lender, in writing
any and all facts which have or may have (to the extent the Borrower can
now reasonably foresee) a Material Adverse Effect.
Section 1.7 SOLVENCY. On the Closing Date and after giving effect
to the transactions contemplated by the Loan Documents occurring on the
Closing Date, the Borrower will be Solvent.
Section 1.7 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of any
Loan Document or the consummation of any of the transactions contemplated
thereby other than those that have already been duly made or obtained and
remain in full force and effect or those which, if not made or obtained,
would not have a Material Adverse Effect;
Section 1.7 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Borrower nor any Consolidated Subsidiary is (x) an
"INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY",
within the meaning of the Investment Company Act of 1940, as amended, (y) a
"HOLDING COMPANY" or a "SUBSIDIARY COMPANY" of a "HOLDING COMPANY" or an
"AFFILIATE" of either a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY" within
the meaning of the Public Utility Holding Company Act of 1935, as amended,
or (z) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
Section 1.7 PRINCIPAL OFFICES. As of the Closing Date, the
principal office, chief executive office and principal place of business of
the Borrower is 624 Ellis Street, Augusta, Georgia 30901.
Section 1.7 PATENTS, TRADEMARKS, ETC. The Borrower has obtained
and holds in full force and effect all patents, trademarks, servicemarks,
trade names, copyrights and other such rights, free from burdensome
restrictions, which are necessary for the operation of its business as
presently conducted, the impairment of which is likely to have a Material
Adverse Effect.
Section 1.7 OWNERSHIP OF PROPERTY. SCHEDULE 4.15 attached hereto
and made a part hereof sets forth all the real property owned or ground
leased by the Borrower and Persons in which the Borrower, directly or
indirectly, owns an interest as of the Closing Date.
Section 1.7 NO DEFAULT. No Event of Default or, to the best of the
Borrower's knowledge, Default exists under or with respect to any Loan
Document and the Borrower is not in default in any material respect beyond
any applicable grace period under or with respect to any other material
agreement, instrument or undertaking to which it is a party or by which it
or any of its property is bound in any respect, the existence of which
default is likely to result in a Material Adverse Effect.
Section 1.7 LICENSES, ETC. The Borrower has obtained and does hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other consents and approvals which are necessary for the operation of its
businesses as presently conducted, the absence of which is likely to have a
Material Adverse Effect.
Section 1.7 COMPLIANCE WITH LAW. To the Borrower's knowledge, the
Borrower and each of the Real Property Assets are in compliance with all
laws, rules, regulations, orders, judgments, writs and decrees, including,
without limitation, all building and zoning ordinances and codes, the
failure to comply with which is likely to have a Material Adverse Effect.
Section 1.7 NO BURDENSOME RESTRICTIONS. Except as may have been
disclosed by the Borrower in writing to Lender, Borrower is not a party to
any agreement or instrument or subject to any other obligation or any
charter or corporate or partnership restriction, as the case may be, which,
individually or in the aggregate, is likely to have a Material Adverse
Effect.
Section 1.7 BROKERS' FEES. The Borrower has not dealt with any
broker or finder with respect to the transactions contemplated by this
Agreement or otherwise in connection with this Agreement, and the Borrower
has not done any act, had any negotiations or conversation, or made any
agreements or promises which will in any way create or give rise to any
obligation or liability for the payment by the Borrower of any brokerage
fee, charge, commission or other compensation to any party with respect to
the transactions contemplated by the Loan Documents.
Section 1.7 LABOR MATTERS. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrower
and the Borrower has not suffered any strikes, walkouts, work stoppages or
other material labor difficulty within the last five years.
Section 1.7 INSURANCE. The Borrower currently maintains insurance
at 100% replacement cost insurance coverage (subject to customary
deductibles) in respect of each of the Real Property Assets, as well as
commercial general liability insurance (including "builders' risk" where
applicable) against claims for personal, and bodily injury and/or death, to
one or more persons, or property damage, as well as workers' compensation
insurance, in each case with respect to liability and casualty insurance
with insurers having an A.M. Best policyholders' rating of not less than
A-VII in amounts that prudent owner of assets such as the Real Property
Assets would maintain.
Section 1.7 ORGANIZATIONAL DOCUMENTS. The documents delivered
pursuant to Section 3.1(e) constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifications
thereof) of the Borrower. The Borrower represents that it has delivered to
Lender true, correct and complete copies of each of the documents set forth
in this Section 4.23.
Section 1.7 QUALIFYING UNENCUMBERED PROPERTIES. As of the date
hereof, each Property listed on SCHEDULE 4.24 as a Qualifying Unencumbered
Property (i) is a Real Estate Asset wholly-owned (directly or beneficially)
by Borrower or a wholly-owned Subsidiary of Borrower, (ii) is not subject
(nor are any equity interests in such Property subject) to a Lien which
secures Indebtedness of any Person, other than Permitted Liens, and
(iii) is not subject (nor are any equity interests in such Property
subject) to any covenant, condition, or other restriction which prohibits
or limits the creation or assumption of any Lien upon such Property. All
of the information set forth on SCHEDULE 4.24 is true and correct in all
material respects.
Section 1.8 INVESTMENT AFFILIATES. As of the date hereof, Borrower
has no Investment Affiliates.
ARTICLE I
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligations
remain unpaid:
Section 1.8 INFORMATION. The Borrower will deliver to Lender:
(a) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 125
days after the end of each fiscal year of the Borrower) a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
Borrower's operations and consolidated statements of Borrower's cash
flow for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on in a
manner acceptable to the Securities and Exchange Commission on
Borrower's Form 10K and reported on by Arthur Andersen LLP or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 80 days
after the end of each of the first three quarters of each fiscal year
of the Borrower), (i) a consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of the end of such quarter and the
related consolidated statements of Borrower's operations and
consolidated statements of Borrower's cash flow for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such
quarter, all reported on in the form provided to the Securities and
Exchange Commission on Borrower's Form 10Q, and (ii) and such other
information reasonably requested by Lender;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Section 5.8 on the date of such financial statements;
(ii) certifying (x) that such financial statements fairly present the
financial condition and the results of operations of the Borrower on
the dates and for the periods indicated, on the basis of GAAP, with
respect to the Borrower subject, in the case of interim financial
statements, to normally recurring year-end adjustments, and (y) that
such officer has reviewed the terms of the Loan Documents and has
made, or caused to be made under his or her supervision, a review in
reasonable detail of the business and condition of the Borrower during
the period beginning on the date through which the last such review
was made pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant to this Section 5.1(c), the Closing Date) and
ending on a date not more than ten (10) Domestic Business Days prior
to the date of such delivery and that (1) on the basis of such
financial statements and such review of the Loan Documents, no Event
of Default existed under Section 6.1(b) with respect to Sections 5.8
and 5.9 at or as of the date of said financial statements, and (2) on
the basis of such review of the Loan Documents and the business and
condition of the Borrower, to the best knowledge of such officer, as
of the last day of the period covered by such certificate no Default
or Event of Default under any other provision of Section 6.1 occurred
and is continuing or, if any such Default or Event of Default has
occurred and is continuing, specifying the nature and extent thereof
and, the action the Borrower proposes to take in respect thereof and
(3) no event has occurred and is continuing which would give rise to a
mandatory prepayment pursuant to Section 2.4 hereof. Such certificate
shall set forth the calculations required to establish the matters
described in clauses (1) and (3) above;
(d) (i) within five (5) Domestic Business Days after any officer
of the Borrower obtains knowledge of any Default, if such Default is
then continuing, a certificate of the chief financial officer, the
chief accounting officer, controller, or other executive officer of
the Borrower setting forth the details thereof and the action which
the Borrower is taking or proposes to take with respect thereto; and
(ii) promptly and in any event within five (5) Domestic Business Days
after the Borrower obtains knowledge thereof, notice of (x) any
litigation or governmental proceeding pending or threatened against
the Borrower or the Real Property Assets as to which there is a
reasonable possibility of an adverse determination and which, if
adversely determined, is likely to individually or in the aggregate,
result in a Material Adverse Effect, (y) any other event, act or
condition which is likely to result in a Material Adverse Effect, and
(z) any event giving rise to a mandatory prepayment pursuant to
Section 2.4;
(e) promptly upon the mailing thereof to the shareholders of
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) (other than the exhibits thereto,
which exhibits will be provided upon request therefor by Lender) which
Borrower shall have filed with the Securities and Exchange Commission;
(g) promptly and in any event within thirty (30) days, if and
when any member of the ERISA Group (i) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Code, a copy
of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes
any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or
other security, and in the case of clauses (i) through (vii) above,
which event could result in a Material Adverse Effect, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth details as to such occurrence and action, if
any, which the Borrower or applicable member of the ERISA Group is
required or proposes to take;
(h) promptly and in any event within ten (10) days after the
Borrower obtains actual knowledge of any of the following events, a
certificate of the Borrower, executed by an officer of the Borrower,
specifying the nature of such condition, and the Borrower's or, if the
Borrower has actual knowledge thereof, the Environmental Affiliate's
proposed initial response thereto: (i) the receipt by the Borrower,
or, if the Borrower has actual knowledge thereof, any of the
Environmental Affiliates of any communication (written or oral),
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Borrower, or, if the Borrower has
actual knowledge thereof, any of the Environmental Affiliates, is not
in compliance with applicable Environmental Laws, and such
noncompliance is likely to have a Material Adverse Effect, (ii) the
Borrower shall obtain actual knowledge that there exists any
Environmental Claim pending against the Borrower or any Environmental
Affiliate and such Environmental Claim is likely to have a Material
Adverse Effect or (iii) the Borrower obtains actual knowledge of any
release, emission, discharge or disposal of any Material of
Environmental Concern that is likely to form the basis of any
Environmental Claim against the Borrower or any Environmental
Affiliate which in any such event is likely to have a Material Adverse
Effect;
(i) promptly and in any event within five (5) Domestic Business
Days after receipt of any material notices or correspondence from any
company or agent for any company providing insurance coverage to the
Borrower relating to any loss which is likely to result in a Material
Adverse Effect, copies of such notices and correspondence; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as
Lender may reasonably request in writing.
Section 1.8 PAYMENT OF OBLIGATIONS. The Borrower and each Subsidiary
will pay and discharge, at or before maturity, all its respective material
obligations and liabilities including, without limitation, any obligation
pursuant to any agreement by which it or any of its properties is bound, in
each case where the failure to so pay or discharge such obligations or
liabilities is likely to result in a Material Adverse Effect, and will
maintain in accordance with GAAP, appropriate reserves for the accrual of
any of the same.
Section 1.8 MAINTENANCE OF PROPERTY; INSURANCE; LEASES.
(k) The Borrower will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business, including
without limitation the Real Property Assets (for so long as it
constitutes Real Property Assets), in good repair, working order and
condition, ordinary wear and tear excepted, in each case where the
failure to so maintain and repair will have a Material Adverse Effect.
(l) The Borrower shall maintain, or cause to be maintained,
insurance comparable to that described in Section 4.23 hereof with
insurers meeting the qualifications described therein, which insurance
shall in any event not provide for less coverage than insurance
customarily carried by owners of properties similar to, and in the
same locations as, the Real Property Assets. The Borrower will
deliver to Lender upon the reasonable request of Lender from time to
time (i) full information as to the insurance carried, (ii) within
five (5) days of receipt of notice from any insurer a copy of any
notice of cancellation or material change in coverage from that
existing on the date of this Agreement and (iii) forthwith, notice of
any cancellation or nonrenewal of coverage by the Borrower.
Section 1.8 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue to engage in business of the same general type as
now conducted by the Borrower, and each will preserve, renew and keep in
full force and effect, its partnership and trust existence and its
respective rights, privileges and franchises necessary for the normal
conduct of business unless the failure to maintain such rights and
franchises does not have a Material Adverse Effect.
Section 1.8 COMPLIANCE WITH LAWS. The Borrower will and will cause
its Subsidiaries to comply in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, and all
zoning and building codes with respect to the Real Property Assets and
ERISA and the rules and regulations thereunder and all federal securities
laws) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings or where the failure to do so will
not have a Material Adverse Effect or expose Lender to any material
liability therefor.
Section 1.8 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower
each will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation
to its business and activities in conformity with GAAP, modified as
required by this Agreement and applicable law; and will permit
representatives of Lender at such Lender's expense to visit and inspect any
of its properties, including without limitation the Real Property Assets,
to examine and make abstracts from any of its books and records and to
discuss its affairs, finances and accounts with its officers and
independent public accountants, all at such reasonable times during normal
business hours, upon reasonable prior notice and as often as may reasonably
be desired.
Section 1.8 EXISTENCE. The Borrower shall do or cause to be done,
all things necessary to preserve and keep in full force and effect its, and
its Subsidiaries', existence and its patents, trademarks, servicemarks,
tradenames, copyrights, franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals the nonexistence of which is likely to
have a Material Adverse Effect.
Section 1.8 FINANCIAL COVENANTS.
(m) TOTAL LIABILITIES TO GROSS ASSET VALUE. Borrower shall not
permit the ratio of (x) the sum of Total Liabilities plus the
Preferred Stock Obligations, to (y) Gross Asset Value, each determined
on a consolidated basis for Borrower and its Consolidated
Subsidiaries, to exceed 0.80:1 at any time.
(n) UNENCUMBERED POOL. Borrower shall not permit the ratio of
(x) the remainder of Unencumbered Apartment Asset Value minus
outstanding Senior Indebtedness to (y) the sum of the outstanding
Obligations plus the Preferred Stock Obligations, each determined on a
consolidated basis for Borrower and its Consolidated Subsidiaries, to
be 0.30:1 or less at any time.
(o) EBITDA TO FIXED CHARGES RATIO. Borrower shall not permit the
ratio of EBITDA for the then most recently completed Fiscal Quarter to
Fixed Charges for the then most recently completed Fiscal Quarter,
each determined on a consolidated basis for Borrower and its
Consolidated Subsidiaries, to be less than 1.15:1.
(p) DIVIDENDS. The Borrower shall not, as determined on an
aggregate annual basis, pay any dividends in excess of 90% of the
Borrower's Funds Available for Distribution for such Fiscal Year.
Section 1.8 RESTRICTION ON FUNDAMENTAL CHANGES.
(q) The Borrower shall not enter into any merger or
consolidation, unless (i) the Borrower is the surviving entity,
(ii) the entity which is merged into Borrower is predominantly in the
commercial real estate business, (iii) the creditworthiness of the
surviving entity's long term unsecured debt or implied senior debt, as
applicable, is not lower than Borrower's creditworthiness two months
immediately preceding such merger as determined by Lender in its
reasonable discretion , and (iv) in the case of any merger where the
then fair market value of the assets of the entity which is merged
into the Borrower is twenty-five percent (25%) or more of the
Borrower's then Gross Asset Value following such merger, Lender
consents thereto in writing, which consent shall not be unreasonably
withheld, conditioned or delayed. The Borrower shall not liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or series of transactions, all or
substantially all of its business or property, whether now or
hereafter acquired. Nothing in this Section shall be deemed to
prohibit the sale or leasing of portions of the Real Property Assets
in the ordinary course of business.
(r) The Borrower shall not amend organizational documents in any
manner that would have a Material Adverse Effect without Lender's
consent, which shall not be unreasonably withheld.
(s) The Borrower shall deliver to Lender copies of all amendments
to its organizational documents no less than ten (10) days after the
effective date of any such amendment.
Section 1.8 CHANGES IN BUSINESS. The Borrower shall not enter into
any business which is substantially different from that conducted by the
Borrower on the Closing Date after giving effect to the transactions
contemplated by the Loan Documents. The Borrower shall carry on its
business operations through the Borrower and its Subsidiaries.
Section 1.9 LOANS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, make any loans or advances
to any Person.
Section 1.10 INVESTMENT AFFILIATES. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, acquire or
create any Investment Affiliate.
Section 1.11 TRANSACTIONS WITH AFFILIATES.
(a) Borrower shall not and shall not permit any Subsidiary of
Borrower to enter into or be a party to any transaction with any
Affiliate of Borrower or such Subsidiary, except as otherwise provided
herein or in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Subsidiary's business and upon fair
and reasonable terms that are fully disclosed to Lender and are no
less favorable to Borrower or such Subsidiary than would obtain in a
comparable arm's length transaction with a Person not an Affiliate of
Borrower or such Subsidiary.
(b) Borrower shall not and shall not permit any Subsidiary of
Borrower to enter into any agreement or transaction to pay to any
Person any management or similar fee based on or related to Borrower's
or any of its Subsidiaries' operating performance or income or any
percentage thereof, nor pay any management or similar fee to an
Affiliate.
Section 1.12 GUARANTEED INDEBTEDNESS. Borrower shall not and shall
not permit any Subsidiary of Borrower to incur any Guaranteed Indebtedness
except (i) by endorsement of instruments of items of payment for deposit to
the general account of Borrower or such Subsidiary, and (ii) for Guaranteed
Indebtedness incurred for the benefit of Borrower or any Subsidiary of
Borrower if the primary obligation is permitted by this Agreement.
Section 1.13 PAYMENTS TO AN AFFILIATE. Borrower shall not make, or
permit any Subsidiary to make any payment to any Affiliate if a Default or
Event of Default has occurred and is continuing or if a Default or Event of
Default would occur as a result of such payment.
Section 1.14 MATERIALS OF ENVIRONMENTAL CONCERN. Borrower shall not
and shall not permit any Subsidiary to cause or permit a Release of any
Material of Environmental Concern on, at, in, under, above, to, from or
about any of the Real Estate Assets where such Release would (a) violate in
any respect, or form the basis for any Environmental Claim under, any
Environmental Laws or (b) otherwise adversely impact the value or
marketability of any of the Real Estate Assets, other than such violations
or Environmental Claims or other adverse impacts which could not reasonably
be expected to have a Material Adverse Effect.
ARTICLE I
DEFAULTS
Section 1.14 EVENTS OF DEFAULT. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of the
Loan, or the Borrower shall fail to pay when due interest on the Loan
or any other amount payable hereunder and the same shall continue for
a period of five (5) days after the same becomes due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.8, Section 5.9(a) or (b), or Section 5.10.
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (a), (b), (e), (f), (g), (h), (j), (n) or (o) of this
Section 6.1) for 30 days after written notice thereof has been given
to the Borrower by Lender, or if such default is of such a nature that
it cannot with reasonable effort be completely remedied within said
period of thirty (30) days such additional period of time as may be
reasonably necessary to cure same, provided Borrower commences such
cure within said thirty (30) day period and diligently prosecutes same
until completion, but in no event shall such extended period exceed
ninety (90) days;
(d) any representation, warranty, certification or statement
made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect
when made (or deemed made) and the defect causing such representation
or warranty to be incorrect when made (or deemed made) is not removed
within thirty (30) days after written notice thereof from Lender to
Borrower;
(e) the Borrower, or any Subsidiary shall default in the payment
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of
any Recourse Debt (other than the Obligations) for which the aggregate
outstanding principal amount exceeds $250,000 and such default shall
continue beyond the giving of any required notice and the expiration
of any applicable grace period and such default has not been waived,
in writing, by the holder of any such Debt; or the Borrower, or any
Subsidiary shall default in the performance or observance of any
obligation or condition with respect to any such Recourse Debt or any
other event shall occur or condition exist beyond the giving of any
required notice and the expiration of any applicable grace period, if
the effect of such default, event or condition is to accelerate the
maturity of any such indebtedness or to permit (without any further
requirement of notice or lapse of time) the holder or holders thereof,
or any trustee or agent for such holders, to accelerate the maturity
of any such indebtedness. Under no circumstances will defaults with
respect to Participating Loans constitute an Event of Default under
this subsection (e);
(f) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any action to authorize any of the
foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days; or an order for relief shall be
entered against the Borrower under the federal bankruptcy laws as now
or hereafter in effect;
(h) one or more final, non-appealable judgments or decrees in an
aggregate amount of $250,000 or more shall be entered by a court or
courts of competent jurisdiction against the Borrower or its
Consolidated Subsidiaries (other than any judgment as to which, and
only to the extent, a reputable insurance company has acknowledged
coverage of such claim in writing) and (i) any such judgments or
decrees shall not be stayed, discharged, paid, bonded or vacated
within thirty (30) days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgments or decrees;
(i) a Change of Control;
(j) Borrower shall cease at any time to qualify to be a publicly
traded, registered reporting company under the Securities Exchange Act
of 1934;
(k) if any Termination Event with respect to a Plan shall occur
as a result of which Termination Event or Events any member of the
ERISA Group has incurred or may incur any liability to the PBGC or any
other Person and the sum (determined as of the date of occurrence of
such Termination Event) of the insufficiency of such Plan and the
insufficiency of any and all other Plans with respect to which such a
Termination Event shall occur and be continuing (or, in the case of a
Multiple Employer Plan with respect to which a Termination Event
described in clause (ii) of the definition of Termination Event shall
occur and be continuing, the liability of the Borrower) is equal to or
greater than $250,000 and which Lender reasonably determines will have
a Material Adverse Effect;
(l) if, any member of the ERISA Group shall commit a failure
described in Section 402(f)(1) of ERISA or Section 412(n)(1) of the
Code and the amount of the lien determined under Section 402(f)(3) of
ERISA or Section 412(n)(3) of the Code that could reasonably be
expected to be imposed on any member of the ERISA Group or their
assets in respect of such failure shall be equal to or greater than
$250,000 and which Lender reasonably determines will have a Material
Adverse Effect;
(m) at any time, for any reason the Borrower seeks to repudiate
its obligations under any Loan Document;
(n) a default beyond any applicable notice or grace period under
any of the other Loan Documents; or
(o) An event of default shall occur pursuant to the terms of the
Preferred Stock Agreement, or the Senior Term Loan Agreement, each
dated October 15, 1998, and between Borrower and Merry Land &
Investment Company, Inc.
Section 1.14 RIGHTS AND REMEDIES. Upon the occurrence of any Event
of Default described in Sections 6.1(f) or (g), the Loan and any and all
other Obligations hereunder shall automatically become immediately due and
payable, with all additional interest from time to time accrued thereon and
without presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower;
and upon the occurrence and during the continuance of any other Event of
Default, Lender may, by written notice to the Borrower, declare the unpaid
principal amount of and any and all accrued and unpaid interest on the Loan
and any and all other Obligations hereunder to be, and the same shall
thereupon be, immediately due and payable with all additional interest from
time to time accrued thereon and (except as otherwise as provided in the
Loan Documents) without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or
accelerate and notice of acceleration), all of which are hereby expressly
waived by the Borrower.
ARTICLE I
SUBORDINATION
Section 1.15 AGREEMENT TO SUBORDINATE. Lender by accepting the
Note agrees that the indebtedness evidenced by the Note is subordinated in
right of payment and exercise of certain remedies, to the extent and in the
manner provided in this Article VII to the prior payment in full of all
Senior Indebtedness and that the subordination is for the benefit of Senior
Lenders.
Section 1.16 LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
distribution to creditors of Borrower in liquidation or a total or partial
dissolution or winding up of Borrower, whether voluntary or involuntary, or
in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Borrower or its property, all indebtedness evidenced
by the Note shall become due and payable, and:
(a) Senior Lenders shall receive payment in full of the Senior
Indebtedness before Lender shall be entitled to receive any payment or
distribution (including, without limitation, payments or distributions
received by set-off, counterclaim or other similar means) in respect
of the Note in cash, securities or other property whether such payment
or distribution is made to Lender by or on behalf of Borrower or from
its assets or any other source; and
(b) until the Senior Indebtedness is paid in full, any payment
or distribution to which Lender would be entitled but for this
Agreement shall be made to Senior Lenders.
For purposes of this Section 9, "paid in full" or "payment in full",
as used with respect to Senior Indebtedness, means the receipt of Cash or
Cash Equivalents of the principal amount of the Senior Indebtedness and
premium or prepayment fees, if any, and interest thereon to the date of
such payment and all fees or expenses due to Senior Lenders pursuant to the
Senior Loan Documents and the termination of any obligation of Senior
Lenders to make any further loans or advances to Borrower pursuant to the
Senior Loan Documents.
Section 1.17 DEFAULT ON SENIOR INDEBTEDNESS AND PREPAYMENT AND
ACCELERATION. No direct or indirect payment or distribution by or on
behalf of Borrower in respect of the Note, whether pursuant to the terms of
the Note or upon acceleration or otherwise, shall be made if, at the time
of such payment or distribution there exists a default in the payment of
any obligations owing to Senior Lenders with respect to Senior Indebtedness
or, prior to the payment in full of the Senior Indebtedness, any Event of
Default under Sections 6.1(f) or 6.1(g) of this Agreement (collectively a
"Payment or Bankruptcy Default"). In addition, during the continuance of
any other event of default with respect to any Senior Indebtedness pursuant
to which the maturity thereof may be accelerated (a "Covenant Default"),
upon (i) receipt by Lenders of written notice of such default and
commencement of a "Payment Blockage Period" (as defined below) from any
Senior Lender, or (ii) if such event of default results from the failure to
make any payment due with respect to the Note, the date of such failure, no
such payment or distribution may be made by or on behalf of Borrower upon
or in respect of the Note for a period ("Payment Blockage Period")
commencing on the earlier of the date of receipt of such notice or the date
of such failure and ending 90 days thereafter (unless such Payment Blockage
Period shall be terminated by written notice to Lender from Senior
Lenders). For all purposes of this Section 7.3, a Payment Blockage Period
may not be commenced by any Senior Lender, unless 364 days has passed since
the expiration or termination of any previous Payment Blockage Period, and
no facts or circumstances constituting a Covenant Default on the date a
Payment Blockage Period is commenced may be used or shall be effective as a
basis for any other Payment Blockage Period unless such Covenant Default
was waived by Senior Lenders for not less than 90 days.
Section 1.18 WHEN DISTRIBUTION MUST BE PAID OVER. If any payment or
other distribution is made by or on behalf of Borrower, or from any of its
assets or any other source (including, without limitation, any judgment to
Lender that because of this Article VII (including, without limitation,
Sections 7.2 and 7.3) should not have been made to it), Lender shall hold
such payment in trust for Senior Lenders and (whether in cash, securities
or otherwise) pay it over to Senior Lenders, for their benefit. The
forgoing notwithstanding, however, (i) Lender shall not be required to pay
any such distribution or payment to Senior Lenders, if Lender notifies
Senior Lenders that it has received such a distribution or payment and
Senior Lenders do not demand that such distribution or payment be paid to
Senior Lenders within 30 days after receipt of such notice, or (ii) if,
with respect to payments or distributions received by Lender during a
Monetary Default or Bankruptcy Period, Lender had no actual knowledge of
such applicable Payment or Bankruptcy Default and Senior Lenders do not
notify Lender of such Payment or Bankruptcy Default within 10 Business Days
after Senior Lenders obtain knowledge of such Payment or Bankruptcy
Default.
Section 1.19 ACTIONS WITH RESPECT TO SENIOR INDEBTEDNESS. The
subordination of the indebtedness evidenced by the Note pursuant to this
Article VII shall not be impaired, effected or diminished by (i) any
extension of time for payment or the performance of any obligations granted
to Borrower by Senior Lenders, (ii) any action taken under the Senior Loan
Documents by any Senior Lender in the exercise of any right thereby
conferred, or (iii) any delay, failure or omission on the part of any
Senior Lender to enforce any such right.
Section 1.20 SUBROGATION. After all Senior Indebtedness is paid in
full and until the Note is paid in full, Lender shall be subrogated to the
rights of Senior Lenders to receive distributions applicable to Senior
Indebtedness. A distribution made under this Article VII to any Senior
Lender which otherwise would have been made to Lender is not, as between
Borrower and such Senior Lender, a payment by Borrower on Senior
Indebtedness.
Section 1.21 RELATIVE RIGHTS. This Article VII defines the relative
rights of Lender and Senior Lenders. Nothing in this Agreement shall:
(a) impair, as between Borrower and Lender, the obligation of
Borrower, which is absolute and unconditional, to pay principal of and
interest on the Note in accordance with its terms, or
(b) prevent Lender from exercising its available remedies upon
an Event of Default,
subject to the terms and provisions of Section 7.3. and to the
rights of Senior Lenders to receive, pursuant to this Article VII,
amounts otherwise payable to Lender.
Section 1.22 SUBORDINATION MAY NOT BE IMPAIRED BY BORROWER. No
right of any Senior Lender to enforce the subordination of the indebtedness
evidenced by the Note shall be impaired pursuant to this Article VII by any
act or failure to act by Borrower or by Borrower's failure to comply with
this Article VII (other than Borrower's failure to comply with
Section 7.10).
Section 1.23 LENDER ENTITLED TO RELY. Upon any payment or
distribution pursuant to Section 7.2, Lender shall be entitled to rely
(i) upon any order or decree of a court of competent jurisdiction in which
any proceedings of the nature referred to in Section 7.2 are pending,
(ii) upon a certificate of the liquidating trustee or agent or other person
making such payment or distribution to Lender or (iii) upon any Senior
Lender for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other indebtedness of Borrower, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VII.
Section 1.24 NOTICE TO, AND ACKNOWLEDGMENT BY, LENDER. At least 15
days prior to incurring any additional Senior Indebtedness Borrower shall
notify Lender in writing of Borrower's intention to incur such Senior
Indebtedness and, at least 5 days prior to incurring such additional Senior
Indebtedness Borrower shall deliver to Lender drafts of the Senior Loan
Documents with respect to such Senior Indebtedness which Borrower proposes
to execute, and Lender, upon Borrower's request, PROVIDED THAT a Default or
Event of Default does not then exist and would not exist after giving
effect to the incurrence of such Senior Indebtedness, and that the Senior
Loan Documents with respect to such additional Senior Indebtedness are
substantially the same as the drafts delivered to Lender, shall acknowledge
that such Senior Indebtedness is Senior Indebtedness within the meaning of
this Agreement. Within ten days after incurring additional Senior
Indebtedness, Borrower shall deliver to Lender copies of the Senior Loan
Documents with respect to such Senior Indebtedness, as executed.
ARTICLE I
TAXES
(a) Any and all payments by the Borrower to or for the account
of Lender hereunder or under any other Loan Document shall be made
free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, EXCLUDING,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which Lender is organized or any
political subdivision thereof or by any other jurisdiction (or any
political subdivision thereof) as a result of a present or former
connection between Lender and such other jurisdiction or by the United
States (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "NON-EXCLUDED TAXES"). If the Borrower shall be
required by law to deduct any Non-Excluded Taxes from or in respect of
any sum payable hereunder or under any Note, (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Article VIII) Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to
Lender, at its address referred to in Section 9.1, the original or a
certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes and any other excise or property
taxes, or charges or similar levies which arise from any payment made
hereunder or under the Note or from the execution or delivery of, or
otherwise with respect to, this Agreement or the Note (hereinafter
referred to as "OTHER TAXES").
(c) The Borrower agrees to indemnify Lender for the full
amount of Non-Excluded Taxes or Other Taxes (including, without
limitation, any Non-Excluded Taxes or Other Taxes imposed or asserted
by any jurisdiction on amounts payable under this Article VIII) paid
by Lender and, so long as Lender has promptly paid any such
Non-Excluded Taxes or Other Taxes, any liability for penalties and
interest arising therefrom or with respect thereto. This
indemnification shall be made within 15 days from the date Lender
makes demand therefor.
ARTICLE I
MISCELLANEOUS
Section 1.24 NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission followed by telephonic confirmation or similar
writing) and shall be given to such party: (x) in the case of the
Borrower, or Lender, at its address, telex number or facsimile number set
forth on the signature pages hereof with a duplicate copy thereof, in the
case of Lender, to Lender, at 624 Ellis Street, Augusta, GA 30901, (y) in
the case of Borrower, to 624 Ellis Street, Augusta, GA 30901, or (z) in the
case of any party, such other address, telex number or facsimile number as
such party may hereafter specify for the purpose by notice to the other
party. Each such notice, request or other communication shall be effective
(i) if given by telex or facsimile transmission, when such telex or
facsimile is transmitted to the telex number or facsimile number specified
in this Section and the appropriate answerback or facsimile confirmation is
received, (ii) if given by certified registered mail, return receipt
requested, with first class postage prepaid, addressed as aforesaid, upon
receipt or refusal to accept delivery, (iii) if given by a nationally
recognized overnight carrier, 24 hours after such communication is
deposited with such carrier with postage prepaid for next day delivery, or
(iv) if given by any other means, when delivered at the address specified
in this Section; PROVIDED that notices to Lender under Article VII shall
not be effective until received.
Section 1.24 NO WAIVERS. No failure or delay by Lender in exercising
any right, power or privilege hereunder or under the Note shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 1.24 EXPENSES; INDEMNIFICATION.
(d) Subject to the terms of the Transaction Cost Agreement, the
Borrower shall pay within thirty (30) days after written notice from
Lender, (i) all reasonable out-of-pocket costs and expenses of Lender
(including reasonable fees and disbursements of its counsel) in
connection with the preparation of this Agreement, the Loan Documents
and the documents and instruments referred to therein, and any waiver
or consent hereunder or any amendment hereof or any Default or alleged
Default hereunder, (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by Lender, including fees and
disbursements of counsel for Lender, in connection with the
enforcement of the Loan Documents and the instruments referred to
therein and such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom;
(e) The Borrower agrees to indemnify Lender, their respective
affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which
may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding that may at any
time (including, without limitation, at any time following the payment
of the Obligations) be asserted against any Indemnitee, as a result
of, or arising out of, or in any way related to or by reason of,
(i) any of the transactions contemplated by the Loan Documents or the
execution, delivery or performance of any Loan Document, (ii) any
violation by the Borrower or the Environmental Affiliates of any
applicable Environmental Law, (iii) any Environmental Claim arising
out of the management, use, control, ownership or operation of
property or assets by the Borrower or any of the Environmental
Affiliates, including, without limitation, all on-site and off-site
activities of Borrower or any Environmental Affiliate involving
Materials of Environmental Concern, (iv) the breach of any
environmental representation or warranty set forth herein, but
excluding those liabilities, losses, damages, costs and expenses
(a) for which such Indemnitee has been compensated pursuant to the
terms of this Agreement, (b) incurred solely by reason of the gross
negligence, willful misconduct bad faith or fraud of any Indemnitee as
finally determined by a court of competent jurisdiction,
(c) violations of Environmental Laws relating to a Property which are
caused by the act or omission of such Indemnitee after such Indemnitee
takes possession of such Property or (d) any liability of such
Indemnitee to any third party based upon contractual obligations of
such Indemnitee owing to such third party which are not expressly set
forth in the Loan Documents. In addition, the indemnification set
forth in this Section 9.3(b) in favor of any director, officer, agent
or employee of Lender shall be solely in their respective capacities
as such director, officer, agent or employee. The Borrower's
obligations under this Section shall survive the termination of this
Agreement and the payment of the Obligations.
Section 1.24 SET-OFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any
Event of Default, Lender is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to
the Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits
(general or special, time or demand, provisional or final) and any other
indebtedness at any time held or owing by Lender to or for the credit or
the account of the Borrower against and on account of the Obligations of
the Borrower then due and payable to Lender under this Agreement or under
any of the other Loan Documents.
Section 1.24 AMENDMENTS AND WAIVERS. Any provision of this Agreement
or the Note or other Loan Documents may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower
and Lender.
Section 1.24 SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement or the other Loan Documents without the prior written consent of
Lender.
Section 1.24 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(f) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE
OF ILLINOIS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW).
(g) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of
any judgment in respect thereof may be brought in the courts of the
State of Illinois or of the United States of America for the Northern
District of Illinois, and, by execution and delivery of this
Agreement, the Borrower hereby accepts for itself and in respect of
its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and appellate courts from any
thereof. The Borrower irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or
proceeding by the hand delivery, or mailing of copies thereof by
registered or certified mail, postage prepaid, to the Borrower at its
address set forth below. The Borrower hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Agreement or any other Loan Document brought in
the courts referred to above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of Lender
to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
Section 1.24 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement constitutes the
entire agreement and understanding among the parties hereto and supersedes
any and all prior agreements and understandings, oral or written, relating
to the subject matter hereof. This Agreement shall become effective upon
receipt by Lender and the Borrower of counterparts hereof signed by each
of the parties hereto.
Section 1.24 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND LENDER
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 1.24 SURVIVAL. All indemnities set forth herein shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
Section 1.24 LIMITATION OF LIABILITY. No claim may be made by the
Borrower or any other Person acting by or through Borrower against Lender
or the affiliates, directors, officers, employees, attorneys, agent,
successors or assigns of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions contemplated by
this Agreement or by the other Loan Documents, or any act, omission or
event occurring in connection therewith; and the Borrower hereby waives,
releases and agrees not to sue upon any claim for any such damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
Section 1.24 RECOURSE OBLIGATION. This Agreement and the
Obligations hereunder are fully recourse to the Borrower. Notwithstanding
the foregoing, no recourse under or upon any obligation, covenant, or
agreement contained in this Agreement shall be had against any officer,
director, shareholder or employee of the Borrower, except in the event of
fraud or misappropriation of funds on the part of such officer, director,
shareholder or employee.
Section 1.24 CONFIDENTIALITY. Lender shall use reasonable efforts
to assure that information about Borrower and its Subsidiaries and the
Properties thereof and their operations, affairs and financial condition,
not generally disclosed to the public, which is furnished to Lender
pursuant to the provisions hereof or any other Loan Document is used only
for the purposes of this Agreement and shall not be divulged to any Person
other than Lender, and their affiliates and respective officers, directors,
employees and agents who are actively and directly participating in the
evaluation, administration or enforcement of the Loan, except: (a) to
their attorneys and accountants, (b) in connection with the enforcement of
the rights and exercise of any remedies of Lender hereunder and under the
other Loan Documents, (c) in connection with assignments and participations
and the solicitation of prospective assignees and participants, who have
agreed in writing to be bound by a confidentiality agreement substantially
equivalent to the terms of this Section 9.13, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over
Lender or by any applicable law, rule, regulation or judicial process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
BORROWER:
MERRY LAND PROPERTIES INC.
By:
Name:
Title:
Fascimile number: (706) 722-4681
Address: 624 Ellis Street
Augusta, GA 30901
LENDER:
MERRY LAND & INVESTMENT COMPANY, INC.
By:
Name:
Title:
Fascimile number: (706) 722-4681
Address: 624 Ellis Street
Augusta, GA 30901
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement"), made as of October ___,
1998, by and between ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership ("Owner") and MERRY LAND PROPERTIES, INC., a Georgia
corporation ("Developer").
R E C I T A L S:
A. Owner directly or indirectly owns all or substantially all of the
interest in certain entities which holds title to seven (7) separate
parcels of land identified by common address in Schedules DA-Recitals A-1
through DA-Recitals A-7, respectively, to the "Merry Land Disclosure
Letter" furnished pursuant to, and as defined in, the Merger Agreement (as
hereinafter defined). Each such parcel of land is referred to herein
individually as a "Property" (collectively, the "Properties").
B. Owner (or each of the aforesaid entities directly or indirectly
owned or substantially owned by Owner) is a party to the Development
Agreements (as hereinafter defined), whereby Development Consultants have
agreed to construct upon and improve each of the Properties with a
multi-family apartment complex with related facilities to be constructed in
accordance with the plans and specifications identified on the indices
attached as Schedules DA-Recitals B-1 through DA-Recitals B-7,
respectively, to the Merry Land Disclosure Letter. Each such project is
referred to herein as a "Project" (collectively, the "Projects"). The
plans and specifications for each Project as identified on Schedules DA-
Recitals B-1 through DA-Recitals B-7, as the same may be modified pursuant
to any change orders approved in writing by Owner, are referred to herein
as the "Plans and Specifications."
C. Schedules DA-Recitals C-1 through DA-Recitals C-7 to the Merry
Land Disclosure Letter are copies of the budget for the development and
initial lease-up (i.e., through the date on which 85% occupancy is
anticipated to be first achieved) of each Project (collectively, the
"Project Budgets").
D. Schedules DA-Recitals D-1 through DA-Recitals D-7 to the Merry
Land Disclosure Letter are construction schedules for the construction of
each Project (collectively, the "Construction Schedules").
E. Schedules DA-Recitals E-1 through DA-Recitals E-7 to the Merry
Land Disclosure Letter identify the construction contracts (the
"Construction Contracts") and architect's agreements (the "Architect's
Agreements") and development agreements (the "Development Agreements")
entered into by and between Owner or Owner's predecessor-in-interest with
respect to each Project, and identify the general contractor (the "General
Contractor") and the design and supervisory architect (collectively, the
"Project Architect") and development consultant (the "Development
Consultant") with respect to each Project. In the case of the Property
identified as Madison at Spring Oak, Richmond, Virginia (the "Spring Oak
Project") on Schedule DA-Recitals A-1 through DA-Recitals A-7 to the Merry
Land Disclosure Letter, Owner has not entered into the Construction
Contract for the Spring Oak Project, and such term shall be deemed to refer
to the applicable Construction Contract that Owner may enter into in the
future. In the case of the Spring Oak Project, the term General Contractor
shall be deemed to refer to the appropriate entities under the Construction
Contract with respect to the Spring Oak Project.
F. Schedules DA-Recitals F-1 through DA-Recitals F-7 to the Merry
Land Disclosure Letter identify the stages of completion of each of the
Projects as of the date hereof, including a line item by line item
reconciliation of the amount spent through the dates set forth on such
Schedules on the construction of each Project, in comparison with the
amount budgeted therefor under the applicable Project Budget.
G. Owner desires to engage Developer to perform certain services and
undertake certain obligations to Owner in connection with the development
of the Projects;
H. This Agreement is being entered into pursuant to a certain
Agreement and Plan of Merger dated July 8, 1998 by and between Equity
Residential Properties Trust, a Maryland real estate investment trust
("EQR"), and Merry Land & Investment Company, Inc., a Georgia corporation
(the "Merger Agreement").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and of the sum of Ten Dollars ($10) in hand paid, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree with each other as follows:
1. INCORPORATION OF RECITALS. The foregoing Recitals are
incorporated herein by this reference as though set forth fully
hereinbelow.
2. APPOINTMENT OF DEVELOPER.
(a) Owner hereby appoints Developer as an independent contractor
(and not as Owner's agent) to perform the services as hereinafter set
forth, and Developer hereby accepts such appointment and agrees to perform
certain development services and functions, to undertake certain other
obligations and to provide certain assurances, all as set forth herein.
Developer shall not have the authority to enter into agreements or execute
any documents or instruments in Owner's name or on Owner's behalf (other
than leases entered into in accordance with Section 4(t) herein below), and
Owner reserves the right, in Owner's sole discretion, to disapprove any
advice or recommendation made by Developer in connection with this
Agreement.
(b) Notwithstanding any other provision of this Agreement, (i)
Owner hereby appoints Developer as an independent contractor (and not as
Owner's agent) to perform the services as hereinafter set forth with
respect to the Property commonly known as Wyndham Apartments, Richmond,
Virginia (the "Wyndham Property"), which is further identified in Schedule
DA Recital A-1 through A-7 to the Merry Land Disclosure Letter, and
Developer hereby accepts such appointment and hereby agrees to perform
certain developments services and functions, to undertake certain
obligations and to provide certain assurances, all as set forth herein,
(ii) the Development Fee (as hereinafter defined) for the Wyndham Property
shall be Forty-One Thousand Dollars ($41,000) per month, and (iii) Owner
may terminate this Agreement as to the Wyndham Property (or the Property
Management Agreement relating thereto) at any time, with or without cause,
upon thirty (30) days prior written notice to Developer, upon which
termination Owner's obligation to pay, and Developer's right to receive,
any unpaid installments of the Development Fee (or any management fee, as
applicable) as to the Wyndham Property shall terminate as of the date Owner
terminates this Agreement with respect thereto.
(c) Notwithstanding any other provision of this Agreement, (i)
Owner appoints Developer as an independent contractor (and not as Owner's
agent) to perform the services as hereinafter set forth with respect to the
Prairie Creek II Apartments, Dallas, Texas (the "Prairie Creek II
Property") which is further identified in Schedule DA Recital A-1 through
A-7 to the Merry Land Disclosure Letter, and Developer hereby accepts such
appointment and hereby agrees to perform certain development services and
functions, to undertake certain obligations and to provide certain
assurances, all as set forth herein, (ii) the Development Fee for the
Prairie Creek II Property shall be Sixteen Thousand Two Hundred Fifty
Dollars ($16,250) per month, and (iii) Owner may terminate this Agreement
as to the Prairie Creek II Property (or the Management Agreement relating
thereto) at any time, with or without cause, upon thirty (30) days prior
written notice to Developer, upon which termination Owner's obligation to
pay, and Developer's right to receive, any unpaid installments of the
Development Fee (or any management fee, as applicable) as to the Prairie
Creek II Property shall terminate as of the date Owner terminates this
Agreement with respect thereto.
3. TERM OF AGREEMENT. The term of this Agreement commences
simultaneously with the execution hereof and shall terminate as provided
in Section 9 hereof, subject to the terms, provisions and conditions of
this Agreement.
4. SCOPE OF SERVICES. The services and duties to be performed by
Developer shall include all acts reasonably necessary, proper, desirable or
appropriate for the Project within the period of time hereinafter set
forth, and Developer shall provide written reports to Owner as frequently
as Developer deems appropriate, but not less often than monthly, concerning
the progress of each Project and the status of the Developer's activities.
The services to be performed by Developer with respect to each Project
shall include the following:
(a) the preparation and submission to Owner for its approval of
a complete pro forma financial analysis of said Project indicating its
projected cash flow based upon all projected development, construction,
financing and operating costs and all projected income together with
periodic revisions thereof as Owner may direct or as existing circumstances
may require in order to reflect a current financial analysis of said
Project other than in the case of Projects previously approved by Owner as
listed on Schedule DA-4(a) to the Merry Land Disclosure Letter.
(b) advising Owner, within five (5) days after Developer's
discovery thereof, of any departures from the Construction Schedule for
said Project and any variances that may exist from time to time between (x)
any component of the costs and expenses of developing said Project and the
corresponding line item therefor in the Project Budget for said Project and
(y) the aggregate expended from time to time on all line items in the
Project Budget and the aggregate budgeted expenditure for such items as
contemplated under the Project Budget for said Project.
(c) Developer shall advise Owner promptly and at any time from
time to time if said Project is not "In Balance" (as such term is
hereinafter defined). A given Project shall be deemed to be "In Balance"
only if the total of the Available Funds (as hereinafter defined) under the
applicable category of the Project Budget shall in the reasonable judgment
of Developer equal or exceed the aggregate of: (i) the amount to be paid
as retainage to persons who have supplied labor, materials or services in
connection with said Project; and (ii) the amount necessary to pay for all
unpaid costs incurred or to be incurred in the completion of the
development, construction, leasing and equipping of said Project, including
the cost of purchase and installation of all fixtures and equipment and the
cost of supplying all labor, material or other services to said Project.
As used herein, the term "Available Funds" shall mean all amounts not yet
expended by or on behalf of Owner in connection with the applicable
category of the Project Budget for said Project.
(d) making recommendations to Owner in connection with Owner's
selection of engineers, architects, contractors and other consultants and
assisting in negotiation of contracts therewith.
(e) advising and consulting with Owner with respect to and,
subject to Owner's prior written approval, arranging for the preparation
and revision (if necessary) of the schematics, design development drawings,
preliminary and final plans and specifications and contract documents for
said Project, including the design of the interior and exterior of all
buildings, sidewalks and curbings, together with the design of all
driveways, entrances, exits and parking areas including paving, curbing,
lighting, guard rails, signs, signals and directories and the design of all
utility systems and design studies of various mechanical methods and
sources of energy, including facilities providing electricity, water, gas,
telephone, heat, air conditioning, sanitary sewer and storm drainage and
the grading and landscaping plan of said Project.
(f) supervising the performance of the Construction Contract and
the Architect Contract by the General Contractor and the Project Architect
and Development Consultant, and any other contracts for construction,
architectural, engineering and planning services relating to said Project
including, without limitation, the supervision and processing of change
requests and change orders (together with Developer's recommendations as to
whether such requested changes should be approved). Owner shall approve or
disapprove any change orders or change requests required to be submitted to
Owner by Developer hereunder in accordance with the Development Agreements
after receipt thereof and, if disapproved, shall notify Developer in
reasonable detail as to the reason for disapproving the same.
(g) inspecting the actual construction of said Project to
confirm that all work and materials are in accordance with the aforesaid
plans and specifications at least once a month.
(h) with the prior written consent of Owner, procuring and/or
making arrangements for the procurement of all required governmental
authorizations, permits and licenses, zoning consents, approvals, variances
including surety bonds, as may be required for said Project and further
including negotiations for the granting and dedication of such rights-of-
way, easements, licenses, restrictions or other rights or covenants as may
be necessary, appropriate, or required to obtain utility or other services
or facilities for said Project, and taking all reasonable action necessary
to cause compliance with all applicable laws and regulations, including
environmental laws and regulations, the Fair Housing Act and the Americans
with Disabilities Act, promulgated by Federal, state and local governments
and authorities and attendance at meetings and hearings in connection with
all of the foregoing, provided that the foregoing provisions shall not be
construed as obligating Developer to expend any of its own funds in
connection with the foregoing.
(i) advising and consulting with Owner with respect to insurance
coverage necessary and appropriate during the construction of said Project
and thereafter during the operation of said Project.
(j) maintaining books, records and accounts pertaining to the
development of said Project.
(k) preparing, at the request of Owner, such information as may
be necessary to permit Owner to prepare its financial statements and tax
returns.
(l) preparing for Owner's approval, all requests for
disbursements made by the General Contractor or the Development Consultant
pursuant to the Construction Contract and by the Project Architect pursuant
to the Architect's Agreement, and any other construction, architectural,
engineering or planning service agreements for said Project including the
collection and review of documentation required to be submitted to Owner
pursuant to the Construction Contract or the Development Agreement,
confirming the accuracy thereof and making recommendations concerning such
draw requests.
(m) conducting meetings when reasonably requested by Owner to be
held with representatives of Owner to confer on matters relating to the
development of said Project.
(n) applying with the prior consent of Owner, for such zoning
changes and special exceptions as may be necessary for the construction of
said Project, provided that the foregoing provisions shall not be construed
as obligating Developer to expend any of its own funds in connection with
the foregoing.
(o) assisting, to the extent necessary, in training the
management organization for said Project and organizing the opening of each
phase of said Project upon the completion of the construction thereof.
(p) advising and consulting with Owner concerning such other
actions as may be reasonably necessary or proper or that may be delegated
to Developer to develop said Project.
(q) causing all contractors to maintain certain insurance
against such risks and other hazards and in such amounts and for such
periods as Owner shall reasonably require naming Developer and Owner as
additional insureds thereunder.
(r) upon completion of each phase of said Project, and upon
final completion of said Project, obtaining or causing the General
Contractor or Project Architect to obtain all certificates, licenses,
permits and other approvals as are necessary for said phase of said Project
to comply with pertinent rules, regulations, ordinances, statutes and laws
including without limitation the Americans with Disabilities Act and the
Fair Housing Act, provided that the foregoing provisions shall not be
construed as obligating Developer to expend any of its own funds in
connection with the foregoing.
(s) obtaining from the General Contractor such documents and
information as may be required by the Construction Contract or the
Development Agreement or as may be requested from time to time by Owner
with respect thereto.
(t) prior to the execution and delivery of the Property
Management Agreement for each Project or, as the case may be each phase of
a Project, performing all promotional and management activities required to
obtain, at the projected time of completion of each phase of each Project,
the maximum number of bona fide rent paying tenants in said Project or
phase of a Project. Developer shall use it best efforts, prior to the
completion of each Project or phase, to lease vacant space in that Project,
and in connection therewith, Developer shall advertise the Projects, or
portions thereof, prepare and secure advertising signs, circular matter and
other forms of advertising. Developer is hereby authorized to execute and
deliver leases on behalf of Owner, all in accordance with rental schedules,
rates and lease forms previously approved in writing by Owner. Developer
is authorized to employ the services of real estate brokers or apartment
locators in accordance with a budget from time to time approved in writing
by Owner. No fees or commissions shall be payable to personnel of
Developer in connection with said leasing activities except in accordance
with the express consent of Owner (in a budget therefor approved by Owner
or otherwise in writing). No other business of Developer shall be
transacted at the Project or from offices located thereon and the use of
the Project by Developer or its employees shall be limited to the
operation, maintenance and leasing of apartments at the Project for the
benefit of Owner. Notwithstanding anything to the contrary herein
contained, there shall be no corporate leases for more than five percent
(5%) of the units in any Project, bulk leases, or leases with a term in
excess of eighteen (18) months, at any Project or phase of a Project
without Owner's prior written approval, nor shall Developer commence
signing any leases for any particular phase of the Project without Owner's
approval. Notwithstanding anything to the contrary contained herein, the
foregoing provisions shall not be construed as obligating Developer to
expend any of its own funds in connection with the foregoing.
5. DEVELOPER'S ACKNOWLEDGMENTS. Developer acknowledges that
Developer is familiar with the Project Budget for each Project, the
Construction Contract, the Architect's Contract and the Development
Agreement for each Project, and the Plans and Specifications for each
Project.
6. DEVELOPER'S INSURANCE
(a) Developer agrees to carry commercial general liability and
umbrella insurance coverages in commercially reasonable amounts naming
Owner as an additional insured. Furthermore, Developer agrees to carry
workman's compensation insurance in compliance with statutory requirements.
(b) Developer shall indemnify and save harmless Owner from and
against any and all liability, liens, claims, demands, damages, expenses,
fees (including attorney's fees), costs, fines, penalties, suits,
proceedings, actions and causes of action of any and every kind and nature
arising or growing out of or in any way connected with Developer's willful
misconduct or gross negligence in performing its duties under this
Agreement.
(c) Owner shall indemnify and save harmless Developer from and
against any and all liabilities, liens, claims, demands, damages, expenses,
fees, including attorney fees, costs, fines, penalties, suits, proceedings,
actions and causes of action of any and every kind and nature arising or
growing out of or in any way connected with Owner's willful misconduct or
gross negligence in performing its duties as Owner under this Agreement.
7. DEVELOPER'S PERSONNEL.
(a) Compensation of Developer's personnel, and all expenses of
such personnel incurred in the performance of Developer's duties hereunder,
as well as, all office, overhead, general expenses, travel and
entertainment expenses of Developer, shall be borne by Developer out of the
Development Fee described below, with all other costs and expenses of the
Projects being borne by the Owner, other than costs for which Developer is
responsible under Sections 4 and 6.
(b) Developer acknowledges that, in order to perform the
services required of it hereunder, it will at all times during the term of
this Agreement at its sole cost and expense employ sufficient personnel
(including a project manager, who shall be headquartered at Developer's
home office) to enable it to efficiently and effectively perform its
obligations pursuant to this Agreement. At Owner's request, Developer
shall promptly replace any such personnel whom Owner reasonably believes
are not performing their duties under this Agreement diligently and
competently
8. DEVELOPMENT FEE.
(a) Owner shall pay to Developer as Developer's full
compensation for the services to be rendered and expenses to be incurred
hereunder, including all of Developer's general overhead, personnel,
office, travel and entertainment expenses (it being the intention of the
parties that Developer shall not seek separate reimbursement therefor), an
amount (the "Development Fee") for each Project as outlined on Exhibit "B"
hereto. The Development Fee will be paid monthly in arrears, the monthly
fee for each Project being referred to herein as the "Monthly Fee". The
Monthly Fee shall be prorated for any partial months upon the commencement
of this Agreement as it relates to each Project. Exhibit "B" hereto sets
forth the total Development Fee for each Project, the Monthly Fee and the
number of months with respect to which the Monthly Fee is payable. Owner
shall have no obligation to pay Developer a fee in excess of the
Development Fee for any given Project and Developer shall not be obligated
to perform any services under this Agreement beyond the period for which
the Monthly Fees are scheduled to be paid as set forth on Exhibit "B"
hereto; provided, however, that Developer shall continue to perform its
obligations for any given Project beyond said period, for such additional
period as may be designated by Owner, if Owner determines in its sole and
absolute discretion that Developer's services are needed for said
additional period, provided that Owner shall pay Developer the Monthly Fee
for said Project for said additional time period.
(b) Owner shall have a right of offset against the Development
Fee in the amount of any losses, costs, claims or damages suffered or
sustained by Owner by reason of Developer's willful failure or refusal to
perform its obligations under this Agreement or in the event of Developer's
gross negligence in its performance of its obligations under this
Agreement.
(c) Notwithstanding the foregoing provisions of this Section 8,
with respect to the Property commonly known as Bridford Lakes II,
Greensboro, North Carolina (the "Bridford Lakes II Property"), which is
further identified on Schedule DA Recital A-1 through A-7 to the Merry Land
Disclosure Letter, the Development Fee with respect to the Bridford Lakes
II Property shall only be payable as follows (subject to the provisions of
Section 9 hereof): (i) if the Bridford Lakes II Property is developed by
Owner, the Development Fee for the Bridford Lakes II Property shall be paid
monthly as outlined on Exhibit "B" hereto upon approval of the development
project, (ii) if the Bridford Lakes II Property is sold to a third party
purchaser, the Development Fee for the Bridford Lakes II Property shall be
paid in full to Developer upon (and only upon) the consummation of the
closing of such sale, and (iii) in the event neither of the conditions in
(i) or (ii) above have been satisfied on or prior to the date that is three
(3) years after the date hereof, the Development Fee for the Bridford Lakes
II Property shall be paid in full to Developer at the expiration of said
three (3) year period.
9. EXPIRATION AND TERMINATION. This Agreement shall expire and
terminate six (6) months after the completion of the last of the Projects
to be completed; provided that Developer's obligations shall continue until
all obligations hereunder have been fully performed and provided further
that Owner reserves the right to terminate this Agreement at any time, with
or without cause, subject to the following provisions. In the event
(a) Developer willfully fails or refuses to perform its obligations under
this Agreement or grossly neglects its obligations under this Agreement;
(b) a bankruptcy petition (or similar insolvency petition) is filed by
Developer or filed against Developer and not dismissed within ninety (90)
days of filing; or (c) Developer makes an assignment for the benefit of
creditors generally; then Owner's obligation to pay, and Developer's right
to receive, any unpaid installments of the Development Fee shall terminate
as of the date Owner terminates this Agreement. In all other events, and
upon termination of this Agreement by Owner, Owner shall pay to Developer
the full amount of the Development Fee as stated in Exhibit "B" hereto.
10. CHANGE IN SCOPE OF PROJECT. Owner shall have the right to change
the scope of any Project or costs of completing the Project as represented
by the Plans and Specifications or Project Budget for said Project as
approved by Owner, provided that the Project Budget for said Project shall
be modified to reflect any increase or decrease in the costs of completion
occasioned by said change, and that Developer shall not be required to bear
any increased costs occasioned by said change. Developer represents that,
to the best of Developer's knowledge, the Plans and Specifications for each
Project are substantially complete in all respects, containing all detail
requisite for the construction and operation of said Project in accordance
with the requirements of all governmental authorities.
11. ASSIGNMENT. This Agreement is subject to transfer or assignment,
in any manner or means whatsoever, by Owner to any entity which, directly
or indirectly, holds title to a Project and which has assumed Owner's
obligations under this Agreement with respect to such Project and with
respect to such obligations that arise from and after the date such entity
acquires title to such Project. This Agreement shall be not assigned by
Developer to any person or entity, without the prior written consent of
Owner, which may be granted or denied in Owner's sole discretion, and this
Agreement may not be pledged, encumbered or otherwise hypothecated by
Developer; provided, however, that Developer may pledge or encumber monies
due or to become due hereunder without Owner's consent. Any assignment
made by Developer which pursuant to this Section requires Owner's consent
shall be void, unless Developer obtains Owner's prior written consent.
12. NOTICES. Every notice, request, demand, consent, approval or
other communication (hereinafter in this Section referred to collectively
as "notices" and referred to singly as a "notice") which a party hereto is
required or permitted to give to the other party pursuant to this Agreement
shall be in writing and shall be delivered by recognized overnight national
courier service (such as Federal Express) or by facsimile (with the
original sent by recognized overnight national courier service) addressed
to the parties as follows (or to such other address as any party may
specify by notice furnished in accordance herewith:
(i) if to Owner c/o Equity Residential Properties Trust
Two North Riverside Plaza
Chicago, Illinois 60606
Attn: Bruce C. Strohm
(ii) if to Developer Merry Land Properties, Inc.
624 Ellis Street
Augusta, Georgia 30901
Attn: Michael N. Thompson and Dorrie Green
Any notice delivered to a party's designated address (a) by recognized
overnight national courier service shall be deemed given one (1) business
day after deposit with said courier service or (b) by facsimile shall be
deemed given at the time of receipt (as evidenced by electronic
confirmation of receipt) or on the next business day if the receipt of said
facsimile occurs after 5:00 p.m. local time on any given day.
13. MANAGEMENT.
(a) Upon commencement of leasing of each phase of a Project
(other than the Wyndham Property or the Prairie Creek II Property), Owner
(or the entity which holds title to the subject Project) and Developer
shall enter into (or may have previously entered into) a Property
Management Agreement for said phase of said Project (other than the Wyndham
Property or the Prairie Creek II Property) in the form attached hereto as
Exhibit "A", and said Property Management Agreement shall be amended from
time to time as subsequent phases are completed to reflect the addition of
said phases to the property falling within the scope of the Property
Management Agreement. As to the Wyndham Property or the Prairie Creek II
Property, Developer agrees that at the request of Owner it shall enter into
a Property Management Agreement with respect to such properties
substantially in the form of Exhibit "A" attached hereto provided that such
Property Management Agreements shall be terminable upon thirty (30) days
prior written notice without the payment of any termination fee.
(b) Unless (a) Developer, as agent under the Property Management
Agreement ("Agent"), willfully fails or refuses to perform its obligations
under the Property Management Agreement or grossly neglects its obligations
under the Property Management Agreement; (b) a bankruptcy petition (or
similar insolvency petition) is filed by Agent or filed against Agent and
not dismissed within ninety (90) days of filing; (c) Agent makes an
assignment for the benefit of creditors generally; or (d) Agent terminates
the Property Management Agreement; Agent shall be guaranteed a minimum
aggregate management fee of Five Hundred Thousand Dollars ($500,000) in
consideration for its agreement to manage the Projects (other than the
Wyndham Property or the Prairie Creek Property) notwithstanding any other
event (including the failure by Owner to complete the development of a
particular Project). Section 3.3(b) of the Property Management Agreement
provides a mechanism for Agent to receive a portion of this Five Hundred
Thousand Dollars ($500,000) fee in the event of the early termination of a
Property Management Agreement. In the event Agent has received aggregate
management fees (including any termination fees) under the Property
Management Agreements (exclusive of the Property Management Agreement for
the Wyndham Property or the Prairie Creek Property) in excess of Five
Hundred Thousand Dollars ($500,000) at the time any Property Management
Agreement is terminated early, Section 3.3(B) of the Property Management
Agreement shall be null and void and Agent shall not be entitled to any
additional payments with respect to the termination of the Property
Management Agreements; and further, in no event shall Owner be obligated to
pay any amount under Section 3.3(B) of any of the Property Management
Agreements which, when aggregated with all other fees and termination
payments under all of the Property Management Agreements (exclusive of the
Property Management Agreement for the Wyndham Property or the Prairie Creek
Property) would exceed Five Hundred Thousand Dollars ($500,000) at the time
such payment is made. In addition, in the case of the Bridford Lakes II
Property and property commonly known as Spring Oak Apartments, Richmond,
Virginia (the "Spring Oak Property"), in the event such properties are not
developed, the Owner shall pay to Agent the termination fee applicable to
such property, as set forth in Section 3.3(B) of the Property Management
Agreement, which would have been applicable if the Property Management
Agreement had been entered into, upon the earlier to occur of the date of
the closing of the sale of such property to a third party or the date which
is three (3) years after the date hereof; provided, however, that no such
termination fee shall be payable in the event that Agent has received
aggregate management fees (including any termination fees) which, when
aggregated with all other fees and termination payments under the Property
Management Agreements would exceed Five Hundred Thousand Dollars ($500,000)
at the time such payment is made.
14. MISCELLANEOUS.
(a) No consent or waiver, express or implied, by any party to
this Agreement to or of any breach or default by the other party in the
performance by the other party of its obligations hereunder shall be deemed
or construed to be a consent or waiver to or of any other breach or default
in the performance by the other party of its obligations hereunder nor
shall any such consent or waiver be deemed or construed to be a consent or
waiver to or of any other breach or default in the performance by such
other party of the same or any other obligation of such party hereunder.
All rights, privileges and remedies afforded the parties by this Agreement
shall be cumulative and not exclusive, and the exercise of any one of such
remedies shall not be deemed to be a waiver of any other right, remedy or
privilege provided for herein or available at law or equity.
(b) If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be
held invalid or unenforceable by a court of competent jurisdiction, such
invalidity shall not affect other provisions of this Agreement or the
applications thereof which can be given effect without the invalid
provision or application, and to this end the parties hereto agree that the
provisions of this Agreement are and shall be severable.
(c) This Agreement sets forth the entire agreement between the
parties, and no amendment or alteration hereof or change hereto shall be
binding unless same shall be in writing and signed by both of the parties.
(d) This Agreement shall be construed by and in accordance with
the laws of the State of Illinois, other than those relating to conflicts
of laws.
(e) DEVELOPER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY
ILLINOIS STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA
SITTING IN THE CITY OF CHICAGO, AND ANY APPELLATE COURT THEREFROM, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
IN THE COURTS OF ANY JURISDICTION.
(f) DEVELOPER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
ILLINOIS STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT.
(g) The use herein of (i) the singular number shall be deemed to
mean the plural, (ii) the masculine gender shall be deemed to mean the
feminine or neuter, and the neuter to mean the masculine or feminine,
whenever the sense of this Agreement so requires; and the words "include"
and "including" whenever used herein shall be deemed to be followed by the
words "without limitation."
(h) Nothing contained in this Agreement shall be construed to
make the Owner and Developer partners or joint venturers or to render
either of said parties liable for the debts or obligations of the other.
(i) This Agreement has been executed on behalf of Owner by the
undersigned in his capacity as a trustee or officer of EQR, which is the
sole general partner of Owner, and not individually, and neither the
trustees, officers nor shareholders of EQR shall be personally bound or
have any personal liability hereunder. Developer shall look solely to the
assets of Owner for satisfaction of any liability of Owner with respect to
this Agreement and any other agreements to which it is a party. Developer
will not seek recourse or commence any action against EQR, any of the
assets of EQR, any of the shareholders of EQR, any of the limited partners
of Owner or any of the personal assets of said shareholders or said limited
partners, and will not commence any action for money judgments against any
of the trustees or officers of EQR or seek recourse against any of their
personal assets, for the performance or payment of any obligation of Owner
hereunder.
(j) To further secure Owner's interest in the Project and the
performance of Developer's obligations hereunder, Developer shall during
the term of this Agreement maintain insurance against losses suffered as a
result of burglary, or for dishonesty, forgery and alteration by
Developer's employees ("Insurance"). The amount of such Insurance
providing coverage for dishonesty, forgery and alteration by Developer's
employees shall not be less than $1,000,000.00.
(k) Developer shall not, in performing its obligations under
this Agreement, enter into any agreement, transaction or course of dealing
with any affiliates of Developer unless such Agreement, transaction or
course of dealing is approved in writing in advance by the Owner.
(l) Developer shall maintain at its office in Augusta, Georgia
in accordance with such reasonable accounting systems and procedures as may
be requested by the Owner's independent accountant, accurate and complete
books and records in respect of the Project including general ledgers and
journals reflecting all costs and expenses incurred with respect to the
Projects, all bills received and paid and any and all other disbursements
made by Developer with respect to the Projects, including all payments made
by Developer on behalf of the Owner. Developer shall retain the originals
if available, or photocopies of all material notices requested or other
communications or documents received by Developer, on behalf of the Owner,
or otherwise with respect to the Projects, from the Architects, the General
Contractors, any other creditor of the Owner, the issuer of the Owner's
insurance policies, and any governmental, regulatory or supervisory entity.
Such records shall be maintained on a current basis and shall be available
for periodic examination by representatives of the Owner during normal
business hours upon reasonable prior notice. Developer shall maintain such
records for a minimum period of three (3) years after the completion of
each of the Projects and shall deliver them to the Owner if the Owner so
requires.
(m) Developer shall periodically inspect the Projects in order
to be apprised of the then-current status of construction of the Projects.
Developer shall promptly inform the Owner of any default or in its
reasonable opinion an anticipated default by the Project Architects or the
General Contractors under the Architect Contracts or the Construction
Contracts or under any other such agreement to which Developer has actual
knowledge.
15. This Agreement and any amendments hereto may be executed in one
or more counterparts, all of which, taken together, shall be deemed to
constitute but one Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FOR OWNER:
ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, a
Maryland real estate investment trust,
its general partner
By:
Name:
Title:
FOR DEVELOPER:
MERRY LAND PROPERTIES, INC., a Georgia
corporation
By:
Name:
Title:
SENIOR TERM LOAN AGREEMENT
DATED AS OF OCTOBER 15, 1998
BETWEEN
MERRY LAND PROPERTIES, INC.
AS BORROWER
AND
MERRY LAND & INVESTMENT COMPANY, INC.
AS LENDER
<PAGE>
TABLE OF CONTENTS
PAGE
I DEFINITIONS................................................1
1.1 Definitions...........................................1
1.2 Accounting Terms and Determinations..................19
1.3 Types of Borrowings..................................19
II THE CREDITS...............................................19
2.1 Commitment to Lend...................................19
2.2 Notice of Borrowing..................................19
2.3 [INTENTIONALLY OMITTED]..............................20
2.4 Funding of Loans.....................................20
2.5 Note.................................................20
2.6 Method of Electing Interest Rates....................20
2.7 Interest Rates.......................................21
2.8 INTENTIONALLY DELETED................................22
2.9 Maturity Date........................................22
2.10 Mandatory Prepayments...............................22
2.11 Optional Prepayments................................23
2.12 General Provisions as to Payments...................23
2.13 [INTENTIONALLY OMITTED].............................23
2.14 Computation of Interest.............................23
2.15 Use of Proceeds.....................................23
III CONDITIONS................................................23
3.1 Closing..............................................23
3.2 Borrowings...........................................25
IV REPRESENTATIONS AND WARRANTIES............................26
4.1 Existence and Power..................................26
4.2 Power and Authority..................................26
4.3 No Violation.........................................26
4.4 Financial Information................................27
4.5 Litigation...........................................27
4.6 Compliance with ERISA................................28
4.7 Environmental Matters................................28
4.8 Taxes................................................28
4.9 Full Disclosure......................................28
4.10 Solvency............................................28
4.11 Use of Proceeds; Margin Regulations.................29
4.12 Governmental Approvals..............................29
4.13 Investment Company Act; Public Utility
Holding Company Act.................................29
4.14 Principal Offices...................................29
4.15 Patents, Trademarks, etc............................29
4.16 Ownership of Property...............................29
4.17 No Default..........................................29
4.18 Licenses, etc.......................................30
4.19 Compliance With Law.................................30
4.20 No Burdensome Restrictions..........................30
4.21 Brokers' Fees.......................................30
4.22 Labor Matters.......................................30
4.23 Insurance...........................................30
4.24 Organizational Documents............................30
4.25 Qualifying Unencumbered Properties..................30
4.26 Investment Affiliates...............................31
V AFFIRMATIVE AND NEGATIVE COVENANTS........................31
5.1 Information..........................................31
5.2 Payment of Obligations...............................34
5.3 Maintenance of Property; Insurance; Leases...........34
5.4 Conduct of Business and Maintenance of Existence.....34
5.5 Compliance with Laws.................................35
5.6 Inspection of Property, Books and Records............35
5.7 Existence............................................35
5.8 Financial Covenants..................................35
5.9 Restriction on Fundamental Changes...................36
5.10 Changes in Business.................................36
5.11 Margin Stock........................................36
5.12 Loans...............................................37
5.13 Investment Affiliates...............................37
VI DEFAULTS..................................................37
6.1 Events of Default....................................37
6.2 Rights and Remedies..................................39
VII INTENTIONALLY OMITTED................................40
VIII CHANGE IN CIRCUMSTANCES..................................40
8.1 Illegality...........................................40
8.2 Taxes................................................40
IX MISCELLANEOUS.............................................41
9.1 Notices..............................................41
9.2 No Waivers...........................................42
9.3 Expenses; Indemnification............................42
9.4 Set-Off..............................................43
9.5 Amendments and Waivers...............................43
9.6 Successors and Assigns...............................43
9.7 Governing Law; Submission to Jurisdiction............43
9.8 Counterparts; Integration; Effectiveness.............44
9.9 WAIVER OF JURY TRIAL.................................44
9.10 Survival............................................44
9.11 Limitation of Liability.............................44
9.12 Recourse Obligation.................................44
9.13 Confidentiality.....................................45
<PAGE>
SENIOR TERM LOAN AGREEMENT
THIS SENIOR TERM LOAN AGREEMENT (this "AGREEMENT") dated as of
October 15, 1998 between MERRY LAND PROPERTIES, INC., a Georgia corporation
(the "BORROWER"), and MERRY LAND & INVESTMENT COMPANY, INC., a Georgia
corporation ("Lender").
W I T N E S S E T H:
The parties hereto agree as follows:
ARTICLE
DEFINITIONS
Section 0.0 DEFINITIONS. The following terms, as used herein, have
the following meanings:
"ACCOMMODATION OBLIGATIONS" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of
which that Person is liable for any Indebtedness or other obligation
or liability of another Person, including without limitation and
without duplication (i) any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising
through any agreement to purchase, repurchase or otherwise acquire
such Indebtedness, obligation or liability or any security therefor,
or to provide funds for the payment or discharge thereof (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make payment other than for value received
and (ii) any obligation of such Person arising through such Person's
status as a general partner of a general or limited partnership with
respect to any Indebtedness, obligation or liability of such general
or limited partnership.
"ADJUSTED ASSET VALUE" means, with respect to any Person or
Property (exclusive of Participating Assets), (i) for any Property
(other than Unimproved Assets or Participating Assets) for which an
acquisition or disposition has not occurred in the Fiscal Quarter most
recently ended by the Borrower and its Consolidated Subsidiaries, the
product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to any such Property owned by the
Borrower or any such Consolidated Subsidiary minus (aa) with respect
to any apartment units contained in such Property, an amount equal to
the product of the average number of apartment units in such Property
during such period and the Capital Apartment Reserve for such period,
and minus (bb) with respect to any commercial property other than
apartments units contained in such Property, an amount equal to the
product of the average number of square feet of leased space in such
commercial property other than apartments units contained in such
Property and the Capital Commercial Reserve for such period, and the
denominator of which is the FMV Cap Rate, plus (ii) for any Property
(other than Unimproved Assets or Participating Assets) which has been
acquired by the Borrower and its Consolidated Subsidiaries in the
Fiscal Quarter most recently ended, the Net Price of the Property paid
by Borrower or the Consolidated Subsidiary, plus (iii) for any
Unimproved Assets owned by the Borrower or its Consolidated
Subsidiaries on the Effective Date, the lesser of (yy) the appraised
value on the Effective Date of such Unimproved Assets owned by the
Borrower or any Consolidated Subsidiary, or (zz) the amount set forth
on Schedule 1.1 attached hereto with respect to such Unimproved
Assets, provided, however, that if Borrower has commenced the
construction of improvements on any such Unimproved Asset and a loan
facility for such construction is in place, the value thereof shall be
equal to the amount reflected on Borrower's balance sheet for
"construction in progress" with respect to such Unimproved Asset, plus
(iv) for any Unimproved Assets acquired by the Borrower and its
Consolidated Subsidiaries after the Effective Date, the Net Price of
the Unimproved Assets paid by Borrower or the Consolidated Subsidiary,
provided, however, that if Borrower has commenced the construction of
improvements on any such Unimproved Asset and a loan facility for such
construction is in place, the value thereof shall be equal to the
amount reflected on Borrower's balance sheet for "construction in
progress" with respect to such Unimproved Asset.
"AFFILIATE" shall mean with respect to any Person (i) each Person
that, directly or indirectly, owns or controls, whether beneficially,
or as a trustee, guardian or other fiduciary, 5% or more of the
capital stock having ordinary voting power in the election of
directors of such Person, (ii) each Person that controls, is
controlled by or is under common control with such Person or any
Affiliate of such Person, or (iii) each of such Person's officers,
directors, joint venturers and partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" shall mean this Credit Agreement as the same may from
time to time hereafter be modified, supplemented or amended.
"APPLICABLE INTEREST RATE" means (i) with respect to any Fixed
Rate Indebtedness, the fixed interest rate applicable to such Fixed
Rate Indebtedness at the time in question, and (ii) with respect to
any Floating Rate Indebtedness, either (x) the rate at which the
interest rate applicable to such Floating Rate Indebtedness is
actually capped (or fixed pursuant to an interest rate hedging
device), at the time of calculation, if Borrower has entered into an
interest rate cap agreement or other interest rate hedging device with
respect thereto or (y) if Borrower has not entered into an interest
rate cap agreement or other interest rate hedging device with respect
to such Floating Rate Indebtedness, the greater of (A) the rate at
which the interest rate applicable to such Floating Rate Indebtedness
could be fixed for the remaining term of such Floating Rate
Indebtedness, at the time of calculation, by Borrower's entering into
any unsecured interest rate hedging device either not requiring an
upfront payment or if requiring an upfront payment, such upfront
payment shall be amortized over the term of such device and included
in the calculation of the interest rate (or, if such rate is incapable
of being fixed by entering into an unsecured interest rate hedging
device at the time of calculation, a fixed rate equivalent reasonably
determined by Lender) or (B) the floating rate applicable to such
Floating Rate Indebtedness at the time in question.
"APPLICABLE MARGIN" means, with respect to each Loan, the
respective percentages per annum in accordance with the table set
forth below.
<TABLE>
<CAPTION>
<S> <C>
Applicable
Margin for Applicable
Base Rate Margin for Euro
(% per annum) Dollar Loans
(% per annum) (% per annum)
2% 2.5%
</TABLE>
"APPROVED BANK" shall mean banks which have (i)(a) a minimum net
worth of $500,000,000 and/or (b) total assets of $10,000,000,000, and
(ii) a minimum long term debt rating of (a) BBB+ or higher by S&P, and
(b) Baa1 or higher by Moody's.
"ASSET EXCHANGE AGREEMENT" shall mean the Asset Exchange
Agreement, dated as of October 15, 1998, between Lender and Borrower,
including all amendments, modifications and supplements thereto and
any appendices, exhibits or schedules to any of the foregoing, and
shall refer to the Asset Exchange Agreement as the same may be in
effect at the time such reference becomes operative.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"BASE RATE" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 0.5%
plus the Federal Funds Rate for such day.
"BASE RATE LOAN" means a Loan made by Lender and bearing interest
at a rate based upon the Base Rate in accordance with the applicable
Notice of Borrowing or Notice of Interest Rate Election or pursuant to
Article VIII.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to
by any member of the ERISA Group.
"BORROWER" means Merry Land Properties, Inc. a Georgia
corporation.
"BORROWER'S SHARE" means Borrower's share of the liabilities or
assets, as the case may be, of a Consolidated Subsidiary based upon
Borrower's percentage ownership of such Consolidated Subsidiary, as
the case may be.
"BORROWING" has the meaning set forth in Section 1.3.
"CAPITAL LEASES" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"CAPITAL APARTMENT RESERVE" shall mean, for any period, $62.50
for each Fiscal Quarter to occur during such period.
"CAPITAL COMMERCIAL RESERVE" shall mean, for any period, $1.00
for each Fiscal Quarter to occur during such period.
"CAPITAL EXPENDITURES" as applied to any Person, means all
payments, including, without limitation, payments under Capital
Leases, for any fixed assets or improvements, or replacements,
substitutions or additions thereto, that have a useful life of more
than one year and which are required to be capitalized under GAAP.
"CASH AND CASH EQUIVALENTS" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without
limitation, treasury bills, notes and bonds, (iii) interest bearing or
discounted obligations of Federal agencies and Government sponsored
entities or pools of such instruments offered by Approved Banks and
dealers, including without limitation, Federal Home Loan Mortgage
Corporation participation sale certificates, Government National
Mortgage Association modified pass through certificates, Federal
National Mortgage Association bonds and notes, and Federal Farm Credit
System securities, (iv) time deposits, domestic and eurodollar
certificates of deposit, bankers acceptances, commercial paper rated
at least A-1 by S&P and P-1 by Moody's and/or guaranteed by an Aa
rating by Moody's, a AA rating by S&P or better rated credit, floating
rate notes, other money market instruments and letters of credit each
issued by Approved Banks (provided that the same shall cease to be a
"Cash or Cash Equivalent" if at any time any such bank shall cease to
be an Approved Bank), (v) obligations of domestic corporations,
including, without limitation, commercial paper, bonds, debentures and
loan participations, each of which is rated at least AA by S&P and/or
Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA
rating by S&P or better rated credit, (vi) obligations issued by
states and local governments or their agencies, rated at least MIG-1
by Moody's and/or SP-1 by S&P and/or guaranteed by an irrevocable
letter of credit of an Approved Bank (provided that the same shall
cease to be a "Cash or Cash Equivalent" if at any time any such bank
shall cease to be an Approved Bank), (vii) repurchase agreements with
major banks and primary government security dealers fully secured by
the U.S. Government or agency collateral equal to or exceeding the
principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA
rating given by S&P or Aa2 rating given by Moody's or better rated
credit.
"CHANGE OF CONTROL" means one or more of the following events:
(a) less than a majority of the members of the Company's Board of
Directors shall be persons who either (i) were serving as directors
on the Closing Date or (ii) were nominated as directors and approved
by the vote of the majority of the directors who are directors
referred to in clause (i) above or this clause (ii); or
(b) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company;
or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the capital stock of the
Company as of the Closing Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing more than thirty percent (30%)
of the combined voting power of the outstanding voting securities for
the election of directors or shall have the right to elect a majority
of the Board of Directors of the Company
"CLOSING DATE" means the date on or after the Effective Date on
which the conditions set forth in Section 3.1 shall have been
satisfied to the satisfaction of Lender.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity which is consolidated with Borrower in accordance with
GAAP.
"CONTINGENT OBLIGATION" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to
be shown on such Person's balance sheet in accordance with GAAP, and
(ii) any obligation required to be disclosed in the footnotes to such
Person's financial statements, guaranteeing partially or in whole any
Non-Recourse Indebtedness, lease, dividend or other obligation,
exclusive of contractual indemnities (including, without limitation,
any indemnity or price-adjustment provision relating to the purchase
or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet
been called on or quantified, of such Person or of any other Person.
The amount of any Contingent Obligation described in clause (ii) shall
be deemed to be (a) with respect to a guaranty of interest or interest
and principal, or operating income guaranty, the Net Present Value of
the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to
the debt service for the note secured thereby), calculated at the
Applicable Interest Rate, through (i) in the case of an interest or
interest and principal guaranty, the stated date of maturity of the
obligation (and commencing on the date interest could first be payable
thereunder), or (ii) in the case of an operating income guaranty, the
date through which such guaranty will remain in effect, and (b) with
respect to all guarantees not covered by the preceding clause (a), an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made or, if not stated
or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder) as recorded on the balance sheet and on the footnotes to
the most recent financial statements of Borrower required to be
delivered pursuant to Section 4.4 hereof. Notwithstanding anything
contained herein to the contrary, guarantees of completion shall not
be deemed to be Contingent Obligations unless and until a claim for
payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent
Obligation in an amount equal to any such claim. Subject to the
preceding sentence, (i) in the case of a joint and several guaranty
given by such Person and another Person (but only to the extent such
guaranty is recourse, directly or indirectly to Borrower), the amount
of the guaranty shall be deemed to be 100% thereof unless and only to
the extent that such other Person has delivered Cash or Cash
Equivalents to secure all or any part of such Person's guaranteed
obligations and (ii) in the case of a guaranty (whether or not joint
and several) of an obligation otherwise constituting Indebtedness of
such Person, the amount of such guaranty shall be deemed to be only
that amount in excess of the amount of the obligation constituting
Indebtedness of such Person. Notwithstanding anything contained
herein to the contrary, "Contingent Obligations" shall be deemed not
to include guarantees of Unused Commitments or of construction loans
to the extent the same have not been drawn. All matters constituting
"Contingent Obligations" shall be calculated without duplication.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, lease, contract, undertaking, document or
instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is
subject (including without limitation any restrictive covenant
affecting such Person or any of its properties).
"CONVERTIBLE SECURITIES" means evidences of shares of stock,
limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible
into or exchangeable for, with or without payment of additional
consideration, shares of common stock of Borrower, either immediately
or upon the arrival of a specified date or the happening of a
specified event.
"DEBT RESTRUCTURING" means a restatement of, or material change
in, the amortization or other financial terms of any Indebtedness of
the Borrower or any Consolidated Subsidiary.
"DEBT SERVICE" means, for any period, Interest Expense for such
period PLUS scheduled principal amortization (excluding any individual
scheduled principal payment which exceeds 25% of the original
principal amount of an issuance of Indebtedness) for such period on
all Indebtedness of Borrower, on a consolidated basis.
"DEFAULT" means any condition or event which with the giving of
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.6(d).
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized
by law to close.
"EBITDA" means, for any period (i) Net Income for such period,
PLUS (ii) depreciation and amortization expense and other non-cash
items deducted in the calculation of Net Income for such period, PLUS
(iii) Interest Expense deducted in the calculation of Net Income for
such period, PLUS, (iv) Taxes deducted in the calculation of Net
Income for such period, MINUS (v) the gains (and PLUS the losses) from
extraordinary items or asset sales or write-ups or forgiveness of
indebtedness included in the calculation of Net Income, for such
period, MINUS (vi) earnings of Subsidiaries for such period
distributed to third parties, all of the foregoing without
duplication. In calculating EBITDA, the effect of the Participating
Assets and the Participating Loans shall be excluded.
"EFFECTIVE DATE" means the date this Agreement becomes effective
in accordance with Section 9.9.
"ENVIRONMENTAL AFFILIATE" means any partnership, joint venture,
trust or corporation in which an equity interest is owned by the
Borrower, either directly or indirectly, and, as a result of the
ownership of such equity interest, the Borrower may have recourse
liability for Environmental Claims against such partnership, joint
venture or corporation (or the property thereof).
"ENVIRONMENTAL APPROVALS" means any permit, license, approval,
ruling, variance, exemption or other authorization required under
applicable Environmental Laws.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by
any other Person alleging potential liability of such Person for
investigatory costs, cleanup costs, governmental response costs,
natural resources damage, property damages, personal injuries, fines
or penalties arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such
Person or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law, in each case (with
respect to both (i) and (ii) above) as to which there is a reasonable
possibility of an adverse determination with respect thereto and
which, if adversely determined, would have a Material Adverse Effect
on the Borrower.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on human
health or to emissions, discharges or releases of Materials of
Environmental Concern into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern or the clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together
with the Borrower or any Subsidiary, are treated as a single employer
under Section 414 of the Code.
"EURO-DOLLAR BORROWING" has the meaning set forth in Section 1.3.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on
which commercial banks are open for international business (including
dealings in dollar deposits) in London.
"EURO-DOLLAR LOAN" means a Loan made by Lender and bearing
interest at a rate based upon the London Interbank Offered Rate in
accordance with the applicable Notice of Borrowing or Notice of
Interest Rate Election.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.1.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Domestic Business Day next succeeding such
day, PROVIDED that (i) if such day is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business
Day, the Federal Funds Rate for such day shall be the average rate
quoted to Lender on such day on such transactions as determined by
Lender.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"FISCAL QUARTER" means a fiscal quarter of a Fiscal Year.
"FISCAL YEAR" means the fiscal year of Borrower which shall be
the twelve (12) month period ending on the last day of December in
each year.
"FIXED CHARGES" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, (ii) the product of the average
number of apartment units owned (directly or beneficially) by Borrower
or any Subsidiary of Borrower during such period and the Capital
Apartment Reserve for such Period, (iii) the product of the average
number of square feet of commercial property other than apartment
units owned (directly or beneficially) by Borrower or any Subsidiary
of Borrower during such period and the Capital Commercial Reserve for
such Period, and (iv) dividends on preferred shares in Borrower
payable by Borrower for such period.
"FIXED RATE BORROWING" has the meaning set forth in Section 1.3.
"FIXED RATE INDEBTEDNESS" means all Indebtedness which accrues
interest at a fixed rate.
"FLOATING RATE INDEBTEDNESS" means all Indebtedness which is not
Fixed Rate Indebtedness and which is not a Contingent Obligation or an
Unused Commitment.
"FUNDS AVAILABLE FOR DISTRIBUTION" as applied to any Person (and
without duplication) means (i) Net Income, MINUS (ii) Capital
Expenditures, PLUS (iii) depreciation and amortization, but only to
the extent deducted in the calculation of Net Income.
"FMV CAP RATE" means 9.5%.
"GAAP" means generally accepted accounting principles recognized
as such in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
"GROSS ASSET VALUE" means, with respect to any Person or
Property, Adjusted Asset Value plus, in the case of any Person, the
value of any Cash or Cash Equivalent owned by such Person and not
subject to any Lien.
"GROUP OF LOANS" means, at any time, a group of Loans consisting
of (i) all Loans which are Base Rate Loans at such time, or (ii) all
Euro-Dollar Loans having the same Interest Period at such time.
"INDEBTEDNESS" as applied to any Person (without duplication and
excluding, in any event, the principal amount of any currently
outstanding Participating Loans), means (a) all indebtedness,
obligations or other liabilities of such Person for borrowed money,
(b) all indebtedness, obligations or other liabilities of such Person
evidenced by Securities or other similar instruments, (c) all
Contingent Obligations of such Person, (d) all reimbursement
obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's
account or other similar instruments for which a contingent liability
exists, (e) all obligations of such Person to pay the deferred
purchase price of Property or services, (f) all obligations in respect
of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others
secured by a Lien on any asset of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by, or are a
personal liability of such Person, (h) all indebtedness, obligations
or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange
agreements (other than Interest Rate Contracts purchased to hedge
Indebtedness), (i) ERISA obligations currently due and payable and
(j) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such
Person.
"INDEMNITEE" has the meaning set forth in Section 9.3(b).
"INTEREST EXPENSE" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized
(including the interest component of Capital Leases but excluding
interest expense covered by an interest reserve established under a
loan facility and any interest expense with respect to a currently
outstanding Participating Loan) of Borrower, on a consolidated basis,
including without limitation all commissions, discounts and other fees
and charges owed with respect to drawn letters of credit, amortized
costs of Interest Rate Contracts incurred on or after the Closing
Date, calculated for all Fixed Rate Indebtedness, at the actual
interest rate in effect with respect to all Indebtedness outstanding
as of the last day of such Fiscal Quarter and in the case of all
Floating Rate Indebtedness, the greater of (i) (A) the Treasury Rate
plus 1.50% for taxable Indebtedness and (B) 6.0% for tax-exempt
Indebtedness, (ii) the actual rate of interest in effect with respect
to such Floating Rate Indebtedness outstanding for which no Interest
Rate Contract is in effect as of the last day of such quarter and
(iii) if an Interest Rate Contract is in effect with respect to such
Floating Rate Indebtedness, the strike rate payable under such
Interest Rate Contract, all determined on an annualized basis.
"INTEREST RATE CONTRACTS" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate
protection.
"INVESTMENT AFFILIATE" means any Person in whom Borrower holds an
equity interest, directly or indirectly, whose financial results are
not consolidated under GAAP with the financial results of Borrower on
the consolidated financial statements of Borrower.
"LENDER" means Merry Land & Investment Company, Inc., a Georgia
corporation, and its successors and assigns.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any
other type of preferential arrangement, in each case that has the
effect of creating a security interest, in respect of such asset. For
the purposes of this Agreement, the Borrower or any Subsidiary of
Borrower shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"LOAN" means a Base Rate Loan or a Euro-Dollar Loan; PROVIDED
that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting
from such subdivision, as the case may be, and "LOANS" means Base Rate
Loans or Euro-Dollar Loans or any combination of the foregoing.
"LOAN DOCUMENTS" means this Agreement and the Note.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in
Section 2.7(b).
"MARGIN STOCK" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means an effect resulting from any
circumstance or event or series of circumstances or events, of
whatever nature (but excluding general economic conditions), which
does or could reasonably be expected to, materially and adversely
(i) affect the business, operations, properties, assets or financial
condition of the Borrower and its Consolidated Subsidiaries taken as a
whole, (ii) impair the ability of the Borrower and its Consolidated
Subsidiaries, taken as a whole, to perform their respective
obligations under the Loan Documents, or (iii) cause a Default under
Sections 5.8, 5.9 or 5.13. Circumstances or events with respect to
the Participating Assets and Participating Loans (other than
liabilities incurred with respect to the Participating Assets which in
the aggregate exceed the Adjusted Asset Value thereof and for which
the Borrower or any of its Subsidiaries would be legally responsible)
shall not be taken into consideration in the determination of a
Material Adverse Effect.
"MATERIAL PLAN" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $250,000.
"MATERIALS OF ENVIRONMENTAL CONCERN" means and includes
pollutants, contaminants, hazardous wastes, toxic and hazardous
substances, asbestos, lead, petroleum and petroleum by-products.
"MATURITY DATE" shall mean the date when all of the Obligations
hereunder shall be due and payable which shall be October 15, 1999,
unless accelerated pursuant to the terms hereof.
"MOODY'S" means Moody's Investors Services, Inc. or any successor
thereto.
"MULTIEMPLOYER PLAN" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such five year
period.
"NET INCOME" means, for any period, the net earnings (or loss)
after Taxes of Borrower, on a consolidated basis, for such period
calculated in conformity with GAAP, but excluding, in any event, the
effect of any Participating Assets or Participating Loans.
"NET OFFERING PROCEEDS" means all cash or other assets received
by Borrower as a result of the sale of common shares of beneficial
interest, preferred shares of beneficial interest, partnership
interests, limited liability company interests, Convertible Securities
or other ownership or equity interests in Borrower LESS customary
costs and discounts of issuance paid by Borrower.
"NET OPERATING INCOME" means, for any period with respect to any
Property owned (directly or beneficially) by Borrower or its
wholly-owned Subsidiaries, the net operating income of such Property
(attributed to such Property in a manner reasonably acceptable to
Lender) for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past
practices of Borrower, and (iii) inclusive of an allocation of
reasonable management fees and administrative costs to each Property
consistent with the past practices of Borrower, except that, for
purposes of determining Net Operating Income, income shall not
(a) include security or other deposits, or (b) be reduced by
depreciation or amortization.
"NET PRICE" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, PLUS (ii) the principal
amount of any note received or other deferred payment to be made in
connection with such purchase or sale (except as described in
clause (iv) below), PLUS (iii) the value of any other considerations
delivered in connection with such purchase or sale (including, without
limitation, shares of common stock or preferred stock in Borrower) (as
reasonably determined by Lender), MINUS (only in the case of a sale)
(iv) the value of any consideration deposited into escrow or subject
to disbursement or claim upon the occurrence of any event, MINUS (only
in the case of a sale) (v) the value of any consideration required to
be paid to any Person other than the Borrower and its Subsidiaries
owning a beneficial interest in such Property, MINUS (vi) reasonable
costs of sale and taxes paid or payable in connection with such
purchase or sale.
"NET PRESENT VALUE" shall mean, as to a specified or
ascertainable dollar amount, the present value, as of the date of
calculation of any such amount using a discount rate equal to the Base
Rate in effect as of the date of such calculation.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness with respect to
which recourse for payment is limited to (i) specific assets related
to a particular Property or group of Properties encumbered by a Lien
securing such Indebtedness or (ii) any Subsidiary (provided that if a
Subsidiary is a partnership, there is no recourse to Borrower as a
general partner of such partnership); provided, however, that personal
recourse of Borrower for any such Indebtedness for fraud,
misrepresentation, misapplication of cash, waste, environmental claims
and liabilities and other circumstances customarily excluded by
institutional lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financing of real
estate shall not, by itself, prevent such Indebtedness from being
characterized as Non-Recourse Indebtedness.
"NOTE" means the promissory note of the Borrower, substantially
in the form of EXHIBIT A hereto, evidencing the obligation of the
Borrower to repay the Loans.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.4.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in
Section 2.6.
"OBLIGATIONS" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Borrower from time
to time owing to Lender, under or in connection with this Agreement or
any other Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PARTICIPATING ASSETS" means those assets more fully described on
Schedule 1.1 hereto, but only for so long as such assets are subject
to Participating Loans.
"PARTICIPATING LOANS" means certain Non-Recourse Indebtedness
held by Lender which are currently in effect with respect to and are
secured by the Participating Assets.
"PERMITTED LIENS" means:
(a) Liens for Taxes, assessments or other governmental
charges not yet due and payable or which are being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with the terms hereof;
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not more
than sixty (60) days delinquent or which are being contested in
good faith in accordance with the terms hereof;
(c) deposits made in the ordinary course of business to
secure liabilities to insurance carriers;
(d) Liens for purchase money obligations for equipment;
PROVIDED that (i) the Indebtedness secured by any such Lien does
not exceed the purchase price of such equipment, (ii) any such
Lien encumbers only the asset so purchased and the proceeds upon
sale, disposition, loss or destruction thereof, and (iii) such
Lien, after giving effect to the Indebtedness secured thereby,
does not give rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on
Schedule B to the owner's title insurance policies, except in
connection with any Indebtedness, for any of the Real Property
Assets, so long as the foregoing do not interfere in any material
respect with the use or ordinary conduct of the business of the
owner and do not diminish in any material respect the value of
the Property to which it is attached or for which it is listed;
(f) Liens and judgments which have been or will be bonded or
released of record within thirty (30) days after the date such
Lien or judgment is entered or filed against Borrower, or any
Subsidiary;
(g) Liens, including Liens on Participating Assets to secure
Participating Loans, on Property of the Borrower or its
Subsidiaries (other than Qualifying Unencumbered Property)
securing Indebtedness which may be incurred or remain outstanding
without resulting in an Event of Default hereunder; and
(h) Liens in favor of the Borrower against any asset of any
wholly-owned Subsidiary of the Borrower.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code
and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has
at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the
ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"PRIME RATE" means the rate of interest publicly announced by the
Morgan Guaranty Trust Company of New York in New York City from time
to time as its Prime Rate.
"PROPERTY" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit,
or other asset owned by such Person.
"PROPERTY INCOME" means, when used with respect to any Real
Property Asset, annual contractual rents (other than prepaid rents and
revenues and security deposits except to the extent applied in
satisfaction of tenants' obligations for rent), in effect as of the
last day of a quarter in accordance with the applicable leases, but
provided that if any tenant is more than 60 days in arrears in the
payment of base or fixed rent as of the last day of a quarter, the
annual contractual rents payable pursuant to such tenant's lease shall
not constitute "Property Income".
"QUALIFYING UNENCUMBERED PROPERTY" means any Real Property Asset
from time to time which (i) is wholly-owned (directly or beneficially)
by Borrower, (ii) is not subject (nor are any equity interests in such
Property subject) to a Lien which secures Indebtedness of any Person
other than Permitted Liens, and (iii) is not subject (nor are any
equity interests in such Property subject) to any covenant, condition,
or other restriction which prohibits or limits the creation or
assumption of any Lien upon such Property (it being understood that
covenants similar to those set forth in Section 5.8 hereof shall not
be deemed to constitute any such prohibition or limitation). In
addition, in the case of any Property that is owned by a Subsidiary of
Borrower, if such Subsidiary shall commence any proceeding under any
bankruptcy, insolvency or similar law, or any such involuntary case
shall be commenced against it and shall remain undismissed and
unstayed for a period of 60 days, then, simultaneously with the
occurrence of such conditions, such Property shall no longer
constitute a Qualifying Unencumbered Property.
"REAL PROPERTY ASSETS" means as of any time, the real property
assets (including interests in participating mortgages in which the
Borrower's interest therein is characterized as equity according to
GAAP) owned directly or indirectly by the Borrower and its
Consolidated Subsidiaries.
"RECOURSE DEBT" shall mean Indebtedness that is not Non-Recourse
Indebtedness.
"REGULATION U" means Regulation U of the Federal Reserve Board,
as in effect from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"SECURED DEBT" means Indebtedness of Borrower, on a consolidated
basis, the payment of which is secured by a Lien on any Property owned
or leased by Borrower, or any Subsidiary of Borrower, but excluding in
any event, any Participating Loans.
"SECURITIES" means any stock, partnership interests (other than
Multifamily Residential Property Partnership Interests), shares,
shares of beneficial interest, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities," or any certificates of
interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the obligations.
"SOLVENT" means, with respect to any Person, that the fair
saleable value of such Person's assets exceeds the Indebtedness of
such Person.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Borrower.
"TAXES" means all federal, state, local and foreign income and
gross receipts taxes, but excluding any of the foregoing which arise
as a result of the Participating Assets or Participating Loans.
"TERM" has the meaning set forth in Section 2.9.
"TERMINATION EVENT" shall mean (i) a "reportable event", as such
term is described in Section 4043 of ERISA (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC), or
an event described in Section 4062(e) of ERISA, (ii) the withdrawal by
any member of the ERISA Group from a Multiemployer Plan during a plan
year in which it is a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), or the incurrence of liability by any
member of the ERISA Group under Section 4064 of ERISA upon the
termination of a Multiemployer Plan, (iii) the filing of a notice of
intent to terminate any Plan under Section 4041 of ERISA, other than
in a standard termination within the meaning of Section 4041 of ERISA,
or the treatment of a Plan amendment as a distress termination under
Section 4041 of ERISA, (iv) the institution by the PBGC of proceedings
to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or cause a trustee to be
appointed to administer, any Plan or (v) any other event or condition
that might reasonably constitute grounds for the termination of, or
the appointment of a trustee to administer, any Plan or the imposition
of any liability or encumbrance or Lien on the Real Property Assets or
any member of the ERISA Group under ERISA.
"TOTAL LIABILITIES" means, as of the date of determination and
without duplication, all Indebtedness of Borrower, on a consolidated
basis, PLUS accounts payable incurred in the ordinary course of
business.
"TREASURY RATE" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a
ten year maturity, as such yield is reported in Federal Reserve
Statistical Release H.15 -- Selected Interest Rates, published most
recently prior to the date the applicable Treasury Rate is being
determined. Such yield shall be determined by straight line linear
interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, Lender
shall select, in its reasonable discretion, an alternate basis for the
determination of Treasury yield for U.S. Treasury Constant Maturity
Series with ten year maturities.
"UNENCUMBERED ASSET VALUE" means (i) a fraction, the numerator of
which is the product of four (4) and the aggregate Unencumbered Net
Operating Income for the most recently ended Fiscal Quarter which is
attributable (in a manner reasonably acceptable to Lender) to
Qualifying Unencumbered Properties (other than Unimproved Assets)
wholly-owned (directly or beneficially) by the Borrower for the entire
Fiscal Quarter and the denominator of which is the FMV Cap Rate, PLUS
(ii) for all Qualifying Unencumbered Properties (other than Unimproved
Assets) wholly-owned (directly or beneficially) by Borrower which have
been acquired (directly or indirectly) by the Borrower during the
Fiscal Quarter most recently ended, the aggregate Net Price of paid by
Borrower or its affiliates for such Qualifying Unencumbered
Properties, plus (iii) for any Qualifying Unencumbered Property
constituting Unimproved Assets wholly-owned (directly or indirectly)
by the Borrower on the Effective Date, the lesser of (aa) the
appraised value on the Effective Date of such Unimproved Assets or
(bb) the amount set forth on Schedule 1.1 attached hereto with respect
to such Unimproved Asset, plus (iv) for any Qualified Unencumbered
Property constituting Unimproved Assets wholly-owned (directly or
indirectly) by Borrower which have been acquired (directly or
indirectly) by the Borrower after the Effective Date, the Net Price of
such Unimproved Assets paid by Borrower or its affiliates for such
Unimproved Assets.
"UNENCUMBERED NET OPERATING INCOME" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by
the Borrower and/or any wholly-owned Subsidiary of Borrower during the
applicable period, Net Operating Income from each such Qualifying
Unencumbered Property minus (i) with respect to any apartment units
contained in such Qualifying Unencumbered Property, an amount equal to
the product of the number of apartment units in such Qualifying
Unencumbered Property during such period and the Capital Apartment
Reserve for such period, and minus (ii) with respect to any commercial
property other than apartments units contained in such Qualifying
Unencumbered Property, an amount equal to the product of the number of
square feet of leased space in such commercial property other than
apartments units contained in such Qualifying Unencumbered Property
and the Capital Commercial Reserve for such period.
"UNIMPROVED ASSETS" means Real Property Assets upon which no
material improvements have been completed which completion is
evidenced by a certificate of occupancy or its equivalent.
"UNITED STATES" means the United States of America, including the
fifty states and the District of Columbia.
"UNSECURED DEBT" means Indebtedness of Borrower and any
Subsidiary of Borrower, which is not Secured Debt.
"UNSECURED INTEREST EXPENSE" means Interest Expense, other than
Interest Expense payable in respect of Secured Debt and other than
Interest Expense payable in respect of the Indebtedness of any Person
other than Borrower or any Subsidiary of Borrower.
"UNUSED COMMITMENTS" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction
loan) which any third party is obligated to advance to Borrower or
another Person or otherwise pursuant to any loan document, written
instrument or otherwise.
Section 0.0 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the
most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to Lender; PROVIDED that, if the
Borrower notifies Lender that the Borrower wishes to amend any covenant in
Article V to eliminate the effect of any change in GAAP on the operation of
such covenant (or if Lender notifies the Borrower that Lender wishes to
amend Article V for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such
notice is withdrawn or such covenant is amended in a manner reasonably
satisfactory to the Borrower and Lender.
Section 0.0 TYPES OF BORROWINGS. The term "BORROWING" denotes the
aggregation of Loans of Lender to be made to the Borrower pursuant to
Article 2 on the same date, all of which Loans are of the same type
(subject to Article 8) and, except in the case of Base Rate Loans, have the
same initial Interest Period. Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans comprising such
Borrowing (E.G., a "FIXED RATE BORROWING" is a Borrowing comprised of Euro-
Dollar Loans, and a "EURO-DOLLAR BORROWING" is a Borrowing comprised of
Euro-Dollar Loans).
ARTICLE
THE CREDITS
Section 0.0 COMMITMENT TO LEND. Lender agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Borrower from
time to time during the term hereof in amounts such that the aggregate
principal amount of Loans made by Lender hereunder shall not exceed
$25,000,000. Each Borrowing outstanding under this Section 2.1 shall be in
an aggregate principal amount of $5,000,000, or an integral multiple of
$100,000 in excess thereof. Any amounts repaid may not be reborrowed.
Section 0.0 NOTICE OF BORROWING. The Borrower shall give Lender
notice not later than 2:00 p.m. (New York City time) (x) two Domestic
Business Day before each Base Rate Borrowing, or (y) four Euro-Dollar
Business Days before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base
Rate Loans or Euro-Dollar Loans.
Such notice shall be sent to both [x] and [y] at the office of the Lender
specified in Section 9.1 hereof.
Section 0.0 [INTENTIONALLY OMITTED].
Section 0.0 FUNDING OF LOANS. On the date of each Borrowing as
indicated in the notice from Borrower in accordance with Section 2.2 hereof
(each such notice being a "NOTICE OF BORROWING") Lender shall make
available such Borrowing to Borrower in Federal funds.
Section 0.0 NOTE.
(i) The Loans shall be evidenced by a single Note payable to the
order of Lender.
(j) Lender may record the date, amount, type and maturity of
each Loan made by it and the date and amount of each payment of
principal made by the Borrower with respect thereto, and may, if
Lender so elects in connection with any transfer or enforcement of its
Note, endorse on the appropriate schedule appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding; PROVIDED that the failure of Lender to make any such
recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Note. Lender is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and
make a part of its Note a continuation of any such schedule as and
when required.
(k) The Loans shall mature, and the principal amount thereof
shall be due and payable, on the Maturity Date.
Section 0.0 METHOD OF ELECTING INTEREST RATES.
(l) The Loans included in each Borrowing shall bear interest
initially at the type of rate specified by the Borrower in the
applicable Notice of Borrowing. Thereafter, the Borrower may from
time to time elect to change or continue the type of interest rate
borne by each Group of Loans (subject in each case to the provisions
of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert all or any portion of such Loans to Euro-Dollar
Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert all or any portion of such Loans to Base Rate
Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF
INTEREST RATE ELECTION") to Lender at least four (4) Euro-Dollar
Business Days before the conversion or continuation selected in such
notice is to be effective. Such notice shall be sent to both [x] and
[y] at the office of the Lender specified in Section 9.1 hereof. A
Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate principal amount of the relevant Group
of Loans; PROVIDED that (i) the portion to which such Notice applies,
and the remaining portion to which it does not apply, are each
$500,000 or any larger multiple of $100,000 and (ii) there shall be no
more than six (6) Euro-Dollar Groups of Loans outstanding at any time.
(m) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion selected in such
notice is to be effective, which shall comply with the applicable
clause of subsection (a) above; and
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans.
Section 0.0 INTEREST RATES.
(n) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made
or converted into a Base Rate Loan until the date it is repaid or
converted into a Euro-Dollar Loan pursuant to Section 2.6 or at the
Maturity Date, at a rate per annum equal to the Base Rate plus the
Applicable Margin for Base Rate Loans for such day.
(o) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made
or converted into a Euro-Dollar Loan until the date it is repaid or
converted into a Base Rate Loan pursuant to Section 2.6 or Section 8.1
or at the Maturity Date, at a rate per annum equal to the sum of the
Applicable Margin for Euro-Dollar Loans for such day plus the London
Interbank Offered Rate applicable to such day.
The "LONDON INTERBANK OFFERED RATE" applicable to any day means
the rate of interest per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing in the Eastern edition of The Wall
Street Journal in the Money Rates Section on the first Euro-Dollar
Business Day of the month in which such day falls as the London
interbank offered rate for deposits in dollars, provided, however, if
more than one rate is specified in such edition of THE WALL STREET
JOURNAL, the applicable rate shall be arithmetic mean of all such
rates. If, for any reason, such rate is not available, the term
"London Interbank Offered Rate" shall mean for any day the rate of
interest per annum (round upwards, if necessary, to the nearest 1/100
of 1%) for one-month deposits of dollars in the London InterBank
Eurocurrency Market appearing on Telerate Page 3750 (or any successor
page thereto) or, if for any reason such rate is not available, the
Reuters Screen LIBO Page at approximately 11:00 A.M. (London time) on
the first Euro-Dollar Business Day of the month in which such day
falls; provided, however, if more than one rate is specified on
Telerate Page 3750 (or any successor page thereto) or the Reuters
Screen LIBO Page, as applicable, the applicable rate shall be the
arithmetic mean of all such rates as reported by Telerate or the
Reuters Screen LIBO Page, as the case may be.
(p) In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal
amount of the Loans, and, to the extent permitted by applicable law,
overdue interest in respect of all Loans, shall bear interest at the
annual rate equal to the sum of the Base Rate and four percent (4%)
(the "DEFAULT RATE").
(q) Lender shall determine each interest rate applicable to the
Loans hereunder and Lender shall give notice to the Borrower of each
rate of interest so determined, and its determination thereof shall be
conclusive in the absence of demonstrable error.
(r) Interest on all Loans shall be payable on the first Domestic
Business Day of each calendar month and on the Maturity Date.
Section 0.0 INTENTIONALLY DELETED.
Section 0.0 MATURITY DATE. The term (the "TERM") of Lender's
obligation to make Loans hereunder shall terminate and expire on the
Maturity Date. Upon the date of the termination of the Term, any Loans
then outstanding (together with accrued interest thereon and all other
Obligations) shall be due and payable.
Section 0.0 MANDATORY PREPAYMENTS. If at any time the Borrower or
any of its Consolidated Subsidiaries sells, transfers, assigns or conveys
any multifamily Real Property Asset which shall cause the Borrower in any
fiscal year period commencing after the Closing Date, to have sold,
transferred or conveyed property or assets which constitute in the
aggregate more than 30% of the Gross Asset Value of the multifamily Real
Property Assets of Borrower and its Consolidated Subsidiaries on the date
of such transfer, then at the request of Lender, Borrower shall pay to
Lender, within thirty (30) days after the date of such request, an amount
equal to the Net Proceeds of such transfer (but in no event more than the
outstanding balance of the Loans). Borrower shall make such prepayment
together with interest accrued to the date of the prepayment on the
principal amount prepaid. Amounts prepaid pursuant to this Section 2.10
may not be reborrowed. As used in this Section 2.10, the term "NET
PROCEEDS" shall mean all amounts received by Borrower and its Consolidated
Subsidiaries in connection with such sale, transfer, assignment or
conveyance after payment of all expenses to be made by Borrower and any
Consolidated Subsidiaries in connection with such sale, transfer,
assignment or conveyance (including, without limitation, payment of then
existing Liens or encumbrances on such Real Property Asset, brokerage
commissions, title and survey costs or transfer taxes).
Section 0.0 OPTIONAL PREPAYMENTS. The Borrower may, upon at least
one (1) Domestic Business Day's notice to Lender, prepay without penalty
any Base Rate Loan or Euro-Dollar Loan, in whole at any time, or from time
to time in part, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment.
Section 0.0 GENERAL PROVISIONS AS TO PAYMENTS. The Borrower shall
make each payment of interest on the Loans and of fees hereunder, not later
than 10:00 a.m.(New York City time) on the date when due, in Federal or
other funds immediately available in Chicago, Illinois, to Lender at its
address referred to in Section 9.1. Whenever any payment of principal of,
or interest on any Loans shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. If the date for any payment of principal
is extended by operation of law or otherwise, interest thereon shall be
payable for such extended time.
Section 0.0 [INTENTIONALLY OMITTED].
Section 0.0 COMPUTATION OF INTEREST. All interest shall be
computed on the basis of a year of 360 days and paid for the actual number
of days elapsed (including the first day but excluding the last day).
Section 0.0 USE OF PROCEEDS. The Borrower shall use the proceeds
of the Loans for general corporate purposes, including, without limitation,
the acquisition of real property to be used in the Borrower's existing
business and for general working capital needs of the Borrower.
ARTICLE
CONDITIONS
Section 0.0 CLOSING. The closing hereunder shall occur on the date
when each of the following conditions is satisfied, each document to be
dated the Closing Date unless otherwise indicated:
(s) the Asset Exchange Agreement has been duly executed and
delivered by and to the respective parties, all conditions precedent
to the closing and/or effectiveness of said agreement have been fully
satisfied or waived, and the Transfer (as defined therein) has been
fully consummated.
(t) the Borrower shall have executed and delivered to Lender a
Note dated on or before the Closing Date complying with the provisions
of Section 2.4;
(u) the Borrower and Lender shall have executed and delivered
to the Borrower and Lender a duly executed original of this Agreement;
(v) Lender shall have received an opinion of counsel for the
Borrower, acceptable to Lender and its counsel from a law firm
acceptable to Lender and its counsel;
(w) Lender shall have received all documents Lender may
reasonably request relating to the existence of the Borrower, the
authority for and the validity of this Agreement and the other Loan
Documents, the authority and incumbency of the officers executing this
Agreement and the other Loan Documents and any other matters relevant
hereto, all in form and substance satisfactory to Lender. Such
documentation shall include, without limitation, the articles of
incorporation of the Borrower, as amended, modified or supplemented to
the Closing Date, certified to be true, correct and complete by the
Secretary of State of Georgia of a date not more than ten (10) days
prior to the Closing Date, together with a certificate of good
standing as to the Borrower from the Secretary of State of Georgia, to
be dated not more than ten (10) days prior to the Closing Date, as
well as the by-laws of the Borrower, as amended, modified or
supplemented to the Closing Date, certified to be true, correct and
complete by a senior officer of Borrower as of a date not more than
ten (10) days prior to the Closing Date;
(x) Lender shall have received all certificates, agreements and
other documents and papers referred to in this Section 3.1 and the
Notice of Borrowing referred to in Section 3.2, if applicable;
(y) the Borrower shall have taken all actions required to
authorize the execution and delivery of this Agreement and the other
Loan Documents and the performance thereof by the Borrower;
(z) Lender shall be satisfied that neither the Borrower nor any
Consolidated Subsidiary is subject to any present or contingent
environmental liability which could have a Material Adverse Effect;
(aa) Lender shall have received the fees and expenses accrued
through the Closing Date [as more fully provided in the Transaction
Cost Agreement of even date (the "Transaction Cost Agreement") among
Equity Residential Properties Trust, a Maryland real estate investment
trust, Lender and Borrower;
(bb) Lender shall have received copies of all consents, licenses
and approvals, if any, required in connection with the execution,
delivery and performance by the Borrower and the applicable
Consolidated Subsidiaries, and the validity and enforceability, of the
Loan Documents, or in connection with any of the transactions
contemplated thereby, and such consents, licenses and approvals shall
be in full force and effect;
(cc) Lender shall have received a certificate based upon the
pro-forma financial information contained in the Borrower's Form 10
(including the assumptions with respect to such pro forma financial
information contained therein) showing compliance with the
requirements of Section 5.8 as of the Closing Date; and
(dd) no Default or Event of Default shall have occurred.
Section 0.0 BORROWINGS. The obligation of Lender to make a Loan is
subject to the satisfaction of the following conditions:
(ee) receipt by Lender of a Notice of Borrowing as required by
Section 2.2;
(ff) immediately after such Borrowing, the aggregate principal
amount of all Loans made hereunder will not exceed the aggregate
amount of $25,000,000.00;
(gg) immediately before and after such Borrowing, no Default or
Event of Default shall have occurred and be continuing both before and
after giving effect to the making of such Loans;
(hh) the representations and warranties of the Borrower
contained in this Agreement (other than representations and warranties
which expressly speak as of a different date) shall be true and
correct in all material respects on and as of the date of such
Borrowing both before and after giving effect to the making of such
Loans;
(ii) no law or regulation shall have been adopted, no order,
judgment or decree of any governmental authority shall have been
issued, and no litigation shall be pending, which does or seeks to
enjoin, prohibit or restrain, the making or repayment of the Loans, or
the consummation of the transactions contemplated by this Agreement;
and
(jj) no event, act or condition shall have occurred after the
Closing Date which, in the reasonable judgment of Lender, has had or
is likely to have a Material Adverse Effect;
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (b), (c), (d), (e), and (f) (to the extent that
Borrower is or should have been aware of any Material Adverse Effect)
of this Section, except as otherwise disclosed in writing by Borrower
to Lender. Notwithstanding anything to the contrary, no Borrowing
shall be permitted if such Borrowing would cause Borrower to fail to
be in compliance with any of the covenants contained in this Agreement
or in any of the other Loan Documents.
ARTICLE
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to make the Loans, the Borrower makes the
following representations and warranties as of the Closing Date. Such
representations and warranties shall survive the effectiveness of this
Agreement, the execution and delivery of the other Loan Documents and the
making of the Loans.
Section 0.0 EXISTENCE AND POWER. The Borrower is a corporation,
duly formed and validly existing and in good standings of the State of
Georgia and has all powers and all material governmental licenses,
authorizations, consents and approvals required to own its property and
assets and carry on its business as now conducted or as it presently
proposes to conduct and has been duly qualified and is in good standing in
every jurisdiction in which the failure to be so qualified and/or in good
standing is likely to have a Material Adverse Effect.
Section 0.0 POWER AND AUTHORITY. The Borrower has the corporate
power and authority to execute, deliver and carry out the terms and
provisions of each of the Loan Documents to which it is a party and has
taken all necessary corporate action, if any, to authorize the execution
and delivery on behalf of the Borrower and the performance by the Borrower
of such Loan Documents. The Borrower has duly executed and delivered each
Loan Document to which it is a party in accordance with the terms of this
Agreement, and each such Loan Document constitutes the legal, valid and
binding obligation of the Borrower, enforceable in accordance with its
terms, except as enforceability may be limited by applicable insolvency,
bankruptcy or other laws affecting creditors rights generally, or general
principles of equity, whether such enforceability is considered in a
proceeding in equity or at law.
Section 0.0 NO VIOLATION. Neither the execution, delivery or
performance by or on behalf of the Borrower of the Loan Documents to which
it is a party, nor compliance by the Borrower with the terms and provisions
thereof nor the consummation of the transactions contemplated by the Loan
Documents, (i) will materially contravene any applicable provision of any
law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will materially conflict with
or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of the Borrower or any of its Consolidated
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, or other agreement or other instrument to which the Borrower (or of
any partnership of which the Borrower is a partner) or any of its
Consolidated Subsidiaries is a party or by which it or any of its property
or assets is bound or to which it is subject, or (iii) will cause a
material default by the Borrower under any organizational document of any
Person in which the Borrower has an interest, or cause a material default
under the Borrower's agreement or certificate of limited partnership, the
consequences of which conflict, breach or default would have a Material
Adverse Effect, or result in or require the creation or imposition of any
Lien whatsoever upon any Property (except as contemplated herein).
Section 0.0 FINANCIAL INFORMATION.
(kk) The historical combined consolidated balance sheet of
Borrower's predecessor as of December 31, 1997, and the related
historical combined statements of financial position of Borrower's
predecessor as of December 31, 1997, reported on by Arthur Andersen
LLP, a copy of which is contained in Borrower's Form 10 delivered to
Lender, fairly present, in conformity with GAAP, the consolidated
financial position of Borrower's predecessor as of such date and the
combined results of operations and cash flows for the fiscal year then
ended, except as may be otherwise stated therein. The historical
combined consolidated balance sheet of Borrower's predecessor as of
June 30, 1998, and the related historical combined financial
statements of Borrower's predecessor for the period from January 1,
1998 to June 30, 1998, reported on by Arthur Andersen LLP, a copy of
which is contained in Borrower's Form 10 delivered to Lender, fairly
present, in conformity with GAAP, the consolidated financial position
of Borrower's predecessor as of such date and the combined results of
operations and cash flows for such period, except as may be otherwise
stated therein and subject in all cases to year end adjustments.
(ll) Since June 30, 1998, (i) except as may have been disclosed
in writing to Lender, nothing has occurred having a Material Adverse
Effect, and(ii) except as may have been disclosed in the Form 10, the
Borrower has not incurred any material indebtedness or guaranty on or
before the Closing Date.
Section 0.0 LITIGATION. Except as previously disclosed by the
Borrower in writing to Lender, there is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, (i) the Borrower or any of its Consolidated Subsidiaries,
(ii) the Loan Documents or any of the transactions contemplated by the Loan
Documents or (iii) any of their assets, before any court or arbitrator or
any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could, individually, or in the
aggregate have a Material Adverse Effect or which in any manner draws into
question the validity of this Agreement or the other Loan Documents.
Section 0.0 COMPLIANCE WITH ERISA.
(mm) Except as set forth on SCHEDULE 4.6 attached hereto,
Borrower is not a member of any Plan or Multiemployer Plan or as of
the Closing Date, any other Benefit Arrangement. After the Closing
Date, Borrower may establish or assume any Benefit Arrangement, so
long as any such event would not result in a Material Adverse Effect.
(nn) The transactions contemplated by the Loan Documents will not
constitute a nonexempt prohibited transaction (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA) that could
subject Lender to any tax or penalty or prohibited transactions
imposed under Section 4975 of the Code or Section 502(i) of ERISA.
Section 0.0 ENVIRONMENTAL MATTERS. The Borrower conducts reviews of
the effect of Environmental Laws on the business, operations and properties
of the Borrower and Consolidated Subsidiaries of either or both when
necessary in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties
presently owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by
law or as a condition of any license, permit or contract, any related
constraints on operating activities, and any actual or potential
liabilities to third parties, including employees, and any related costs
and expenses). On the basis of this review, the Borrower has reasonably
concluded that such associated liabilities and costs, including the costs
of compliance with Environmental Laws, are unlikely to have a Material
Adverse Effect on the Borrower and its Consolidated Subsidiaries.
Section 0.0 TAXES. The Borrower and its Consolidated Subsidiaries
have filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Consolidated Subsidiary, except such taxes,
if any, as are reserved against in accordance with GAAP, such taxes as are
being contested in good faith by appropriate proceedings or such taxes, the
failure to make payment of which when due and payable will not have, in the
aggregate, a Material Adverse Effect. The charges, accruals and reserves on
the books of the Borrower and its Consolidated Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.
Section 0.0 FULL DISCLOSURE. All information heretofore furnished
by the Borrower to Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby or thereby is true and
accurate in all material respects on the date as of which such information
is stated or certified. The Borrower has disclosed to Lender, in writing
any and all facts which have or may have (to the extent the Borrower can
now reasonably foresee) a Material Adverse Effect.
Section 0.0 SOLVENCY. On the Closing Date and after giving effect
to the transactions contemplated by the Loan Documents occurring on the
Closing Date, the Borrower will be Solvent.
Section 0.0 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds of
the Loans will be used by the Borrower only in accordance with the
provisions hereof. No part of the proceeds of any Loan will be used by the
Borrower to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock in any
manner that might violate the provisions of Regulations G, T, U or X of the
Federal Reserve Board. Neither the making of any Loan nor the use of the
proceeds thereof will violate or be inconsistent with the provisions of
Regulations G, T, U or X of the Federal Reserve Board.
Section 0.0 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of any
Loan Document or the consummation of any of the transactions contemplated
thereby other than those that have already been duly made or obtained and
remain in full force and effect or those which, if not made or obtained,
would not have a Material Adverse Effect;
Section 0.0 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Borrower nor any Consolidated Subsidiary is (x) an
"INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY",
within the meaning of the Investment Company Act of 1940, as amended, (y) a
"HOLDING COMPANY" or a "SUBSIDIARY COMPANY" of a "HOLDING COMPANY" or an
"AFFILIATE" of either a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY" within
the meaning of the Public Utility Holding Company Act of 1935, as amended,
or (z) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
Section 0.0 PRINCIPAL OFFICES. As of the Closing Date, the
principal office, chief executive office and principal place of business of
the Borrower is 624 Ellis Street, Augusta, Georgia 30901.
Section 0.0 PATENTS, TRADEMARKS, ETC. The Borrower has obtained
and holds in full force and effect all patents, trademarks, servicemarks,
trade names, copyrights and other such rights, free from burdensome
restrictions, which are necessary for the operation of its business as
presently conducted, the impairment of which is likely to have a Material
Adverse Effect.
Section 0.0 OWNERSHIP OF PROPERTY. SCHEDULE 4.16 attached hereto
and made a part hereof sets forth all the real property owned or ground
leased by the Borrower and Persons in which the Borrower, directly or
indirectly, owns an interest as of the Closing Date.
Section 0.0 NO DEFAULT. No Event of Default or, to the best of the
Borrower's knowledge, Default exists under or with respect to any Loan
Document and the Borrower is not in default in any material respect beyond
any applicable grace period under or with respect to any other material
agreement, instrument or undertaking to which it is a party or by which it
or any of its property is bound in any respect, the existence of which
default is likely to result in a Material Adverse Effect.
Section 0.0 LICENSES, ETC. The Borrower has obtained and does hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other consents and approvals which are necessary for the operation of its
businesses as presently conducted, the absence of which is likely to have a
Material Adverse Effect.
Section 0.0 COMPLIANCE WITH LAW. To the Borrower's knowledge, the
Borrower and each of the Real Property Assets are in compliance with all
laws, rules, regulations, orders, judgments, writs and decrees, including,
without limitation, all building and zoning ordinances and codes, the
failure to comply with which is likely to have a Material Adverse Effect.
Section 0.0 NO BURDENSOME RESTRICTIONS. Except as may have been
disclosed by the Borrower in writing to Lender, Borrower is not a party to
any agreement or instrument or subject to any other obligation or any
charter or corporate or partnership restriction, as the case may be, which,
individually or in the aggregate, is likely to have a Material Adverse
Effect.
Section 0.0 BROKERS' FEES. The Borrower has not dealt with any
broker or finder with respect to the transactions contemplated by this
Agreement or otherwise in connection with this Agreement, and the Borrower
has not done any act, had any negotiations or conversation, or made any
agreements or promises which will in any way create or give rise to any
obligation or liability for the payment by the Borrower of any brokerage
fee, charge, commission or other compensation to any party with respect to
the transactions contemplated by the Loan Documents.
Section 0.0 LABOR MATTERS. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrower
and the Borrower has not suffered any strikes, walkouts, work stoppages or
other material labor difficulty within the last five years.
Section 0.0 INSURANCE. The Borrower currently maintains insurance
at 100% replacement cost insurance coverage (subject to customary
deductibles) in respect of each of the Real Property Assets, as well as
commercial general liability insurance (including "builders' risk" where
applicable) against claims for personal, and bodily injury and/or death, to
one or more persons, or property damage, as well as workers' compensation
insurance, in each case with respect to liability and casualty insurance
with insurers having an A.M. Best policyholders' rating of not less than
A-VII in amounts that prudent owner of assets such as the Real Property
Assets would maintain.
Section 0.0 ORGANIZATIONAL DOCUMENTS. The documents delivered
pursuant to Section 3.1(f) constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifications
thereof) of the Borrower. The Borrower represents that it has delivered to
Lender true, correct and complete copies of each of the documents set forth
in this Section 4.24.
Section 0.0 QUALIFYING UNENCUMBERED PROPERTIES. As of the date
hereof, each Property listed on EXHIBIT B as a Qualifying Unencumbered
Property (i) is a Real Estate Asset wholly-owned (directly or beneficially)
by Borrower or a wholly-owned Subsidiary of Borrower, (ii) is not subject
(nor are any equity interests in such Property subject) to a Lien which
secures Indebtedness of any Person, other than Permitted Liens, and
(iii) is not subject (nor are any equity interests in such Property
subject) to any covenant, condition, or other restriction which prohibits
or limits the creation or assumption of any Lien upon such Property. All
of the information set forth on EXHIBIT B is true and correct in all
material respects.
0.1 INVESTMENT AFFILIATES. As of the date hereof, Borrower has no
Investment Affiliates.
ARTICLE
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as Lender has any
Commitment hereunder or any Obligations remain unpaid:
Section 0.1 INFORMATION. The Borrower will deliver to Lender:
(a) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 125
days after the end of each fiscal year of the Borrower) a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
Borrower's operations and consolidated statements of Borrower's cash
flow for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on in a
manner acceptable to the Securities and Exchange Commission on
Borrower's Form 10K and reported on by Arthur Andersen LLP or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 80 days
after the end of each of the first three quarters of each fiscal year
of the Borrower), (i) a consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of the end of such quarter and the
related consolidated statements of Borrower's operations and
consolidated statements of Borrower's cash flow for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such
quarter, all reported on in the form provided to the Securities and
Exchange Commission on Borrower's Form 10Q, and (ii) and such other
information reasonably requested by Lender;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Section 5.8 on the date of such financial statements;
(ii) certifying (x) that such financial statements fairly present the
financial condition and the results of operations of the Borrower on
the dates and for the periods indicated, on the basis of GAAP, with
respect to the Borrower subject, in the case of interim financial
statements, to normally recurring year-end adjustments, and (y) that
such officer has reviewed the terms of the Loan Documents and has
made, or caused to be made under his or her supervision, a review in
reasonable detail of the business and condition of the Borrower during
the period beginning on the date through which the last such review
was made pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant to this Section 5.1(c), the Closing Date) and
ending on a date not more than ten (10) Domestic Business Days prior
to the date of such delivery and that (1) on the basis of such
financial statements and such review of the Loan Documents, no Event
of Default existed under Section 6.1(b) with respect to Sections 5.8
and 5.9 at or as of the date of said financial statements, and (2) on
the basis of such review of the Loan Documents and the business and
condition of the Borrower, to the best knowledge of such officer, as
of the last day of the period covered by such certificate no Default
or Event of Default under any other provision of Section 6.1 occurred
and is continuing or, if any such Default or Event of Default has
occurred and is continuing, specifying the nature and extent thereof
and, the action the Borrower proposes to take in respect thereof and
(3) no event has occurred and is continuing which would give rise to a
mandatory prepayment pursuant to Section 2.10 hereof. Such
certificate shall set forth the calculations required to establish the
matters described in clauses (1) and (3) above;
(d) (i) within five (5) Domestic Business Days after any officer
of the Borrower obtains knowledge of any Default, if such Default is
then continuing, a certificate of the chief financial officer, the
chief accounting officer, controller, or other executive officer of
the Borrower setting forth the details thereof and the action which
the Borrower is taking or proposes to take with respect thereto; and
(ii) promptly and in any event within five (5) Domestic Business Days
after the Borrower obtains knowledge thereof, notice of (x) any
litigation or governmental proceeding pending or threatened against
the Borrower or the Real Property Assets as to which there is a
reasonable possibility of an adverse determination and which, if
adversely determined, is likely to individually or in the aggregate,
result in a Material Adverse Effect, (y) any other event, act or
condition which is likely to result in a Material Adverse Effect, and
(z) any event giving rise to a mandatory prepayment pursuant to
Section 2.10;
(e) promptly upon the mailing thereof to the shareholders of
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) (other than the exhibits thereto,
which exhibits will be provided upon request therefor by Lender) which
Borrower shall have filed with the Securities and Exchange Commission;
(g) Promptly and in any event within thirty (30) days, if and
when any member of the ERISA Group (i) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Code, a copy
of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes
any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or
other security, and in the case of clauses (i) through (vii) above,
which event could result in a Material Adverse Effect, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth details as to such occurrence and action, if
any, which the Borrower or applicable member of the ERISA Group is
required or proposes to take;
(h) promptly and in any event within ten (10) days after the
Borrower obtains actual knowledge of any of the following events, a
certificate of the Borrower, executed by an officer of the Borrower,
specifying the nature of such condition, and the Borrower's or, if the
Borrower has actual knowledge thereof, the Environmental Affiliate's
proposed initial response thereto: (i) the receipt by the Borrower,
or, if the Borrower has actual knowledge thereof, any of the
Environmental Affiliates of any communication (written or oral),
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Borrower, or, if the Borrower has
actual knowledge thereof, any of the Environmental Affiliates, is not
in compliance with applicable Environmental Laws, and such
noncompliance is likely to have a Material Adverse Effect, (ii) the
Borrower shall obtain actual knowledge that there exists any
Environmental Claim pending against the Borrower or any Environmental
Affiliate and such Environmental Claim is likely to have a Material
Adverse Effect or (iii) the Borrower obtains actual knowledge of any
release, emission, discharge or disposal of any Material of
Environmental Concern that is likely to form the basis of any
Environmental Claim against the Borrower or any Environmental
Affiliate which in any such event is likely to have a Material Adverse
Effect;
(i) promptly and in any event within five (5) Domestic Business
Days after receipt of any material notices or correspondence from any
company or agent for any company providing insurance coverage to the
Borrower relating to any loss which is likely to result in a Material
Adverse Effect, copies of such notices and correspondence; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as
Lender may reasonably request in writing.
Section 0.1 PAYMENT OF OBLIGATIONS. The Borrower and each Subsidiary
will pay and discharge, at or before maturity, all its respective material
obligations and liabilities including, without limitation, any obligation
pursuant to any agreement by which it or any of its properties is bound, in
each case where the failure to so pay or discharge such obligations or
liabilities is likely to result in a Material Adverse Effect, and will
maintain in accordance with GAAP, appropriate reserves for the accrual of
any of the same.
Section 0.1 MAINTENANCE OF PROPERTY; INSURANCE; LEASES.
(k) The Borrower will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business, including
without limitation the Real Property Assets (for so long as it
constitutes Real Property Assets), in good repair, working order and
condition, ordinary wear and tear excepted, in each case where the
failure to so maintain and repair will have a Material Adverse Effect.
(l) The Borrower shall maintain, or cause to be maintained,
insurance comparable to that described in Section 4.23 hereof with
insurers meeting the qualifications described therein, which insurance
shall in any event not provide for less coverage than insurance
customarily carried by owners of properties similar to, and in the
same locations as, the Real Property Assets. The Borrower will
deliver to Lender upon the reasonable request of Lender from time to
time (i) full information as to the insurance carried, (ii) within
five (5) days of receipt of notice from any insurer a copy of any
notice of cancellation or material change in coverage from that
existing on the date of this Agreement and (iii) forthwith, notice of
any cancellation or nonrenewal of coverage by the Borrower.
Section 0.1 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue to engage in business of the same general type as
now conducted by the Borrower, and each will preserve, renew and keep in
full force and effect, its partnership and trust existence and its
respective rights, privileges and franchises necessary for the normal
conduct of business unless the failure to maintain such rights and
franchises does not have a Material Adverse Effect.
Section 0.1 COMPLIANCE WITH LAWS. The Borrower will and will cause
its Subsidiaries to comply in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, and all
zoning and building codes with respect to the Real Property Assets and
ERISA and the rules and regulations thereunder and all federal securities
laws) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings or where the failure to do so will
not have a Material Adverse Effect or expose Lender to any material
liability therefor.
Section 0.1 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower
each will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation
to its business and activities in conformity with GAAP, modified as
required by this Agreement and applicable law; and will permit
representatives of Lender at such Lender's expense to visit and inspect any
of its properties, including without limitation the Real Property Assets,
to examine and make abstracts from any of its books and records and to
discuss its affairs, finances and accounts with its officers and
independent public accountants, all at such reasonable times during normal
business hours, upon reasonable prior notice and as often as may reasonably
be desired.
Section 0.1 EXISTENCE. The Borrower shall do or cause to be done,
all things necessary to preserve and keep in full force and effect its, and
its Subsidiaries', existence and its patents, trademarks, servicemarks,
tradenames, copyrights, franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals the nonexistence of which is likely to
have a Material Adverse Effect.
Section V.8 FINANCIAL COVENANTS.
(m) TOTAL LIABILITIES TO GROSS ASSET VALUE. Borrower shall not
permit the ratio of Total Liabilities to Gross Asset Value, each
determined on a consolidated basis for Borrower and its Consolidated
Subsidiaries, to exceed 0.70:1 at any time.
(n) UNENCUMBERED POOL. Borrower shall not permit the ratio of
the Unencumbered Asset Value to outstanding Unsecured Debt including
the Indebtedness hereunder and any other Indebtedness of Borrower
which is pari passu or senior to the Indebtedness hereunder, each
determined on a consolidated basis for Borrower and its Consolidated
Subsidiaries to be 1.5:1 or less at any time.
(o) EBITDA TO FIXED CHARGES RATIO. Borrower shall not permit the
ratio of EBITDA for the then most recently completed Fiscal Quarter to
Fixed Charges for the then most recently completed Fiscal Quarter,
each determined on a consolidated basis for Borrower and its
Consolidated Subsidiaries, to be less than 1.5:1.
(p) UNENCUMBERED NET OPERATING INCOME TO UNSECURED INTEREST
EXPENSE. Borrower shall not permit the ratio of Unencumbered Net
Operating Income for the then most recently completed Fiscal Quarter
to Unsecured Interest Expense for the then most recently completed
Fiscal Quarter, each determined on a consolidated basis for Borrower
and its Consolidated Subsidiaries, to be less than 1.5:1.
(q) DIVIDENDS. The Borrower shall not, as determined on an
aggregate annual basis, pay any dividends in excess of 90% of the
Borrower's Funds Available for Distribution for such Fiscal Year.
Section 0.1 RESTRICTION ON FUNDAMENTAL CHANGES.
(r) The Borrower shall not enter into any merger or
consolidation, unless (i) the Borrower is the surviving entity,
(ii) the entity which is merged into Borrower is predominantly in the
commercial real estate business, (iii) the creditworthiness of the
surviving entity's long term unsecured debt or implied senior debt, as
applicable, is not lower than Borrower's creditworthiness two months
immediately preceding such merger as determined by Lender in its
reasonable discretion , and (iv) in the case of any merger where the
then fair market value of the assets of the entity which is merged
into the Borrower is twenty-five percent (25%) or more of the
Borrower's then Gross Asset Value following such merger, Lender
consents thereto in writing, which consent shall not be unreasonably
withheld, conditioned or delayed. The Borrower shall not liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or series of transactions, all or
substantially all of its business or property, whether now or
hereafter acquired. Nothing in this Section shall be deemed to
prohibit the sale or leasing of portions of the Real Property Assets
in the ordinary course of business.
(s) The Borrower shall not amend organizational documents in any
manner that would have a Material Adverse Effect without Lender's
consent, which shall not be unreasonably withheld.
(t) The Borrower shall deliver to Lender copies of all amendments
to its organizational documents no less than ten (10) days after the
effective date of any such amendment.
Section 0.1 CHANGES IN BUSINESS. The Borrower shall not enter into
any business which is substantially different from that conducted by the
Borrower on the Closing Date after giving effect to the transactions
contemplated by the Loan Documents. The Borrower shall carry on its
business operations through the Borrower and its Subsidiaries.
Section 0.1 MARGIN STOCK. None of the proceeds of the Loan will be
used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any Margin Stock in any
manner that might violate the provisions of Regulations G, T, U or X of the
Federal Reserve Board.
Section 0.2 LOANS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, make any loans or advances
to any Person.
Section 0.3 INVESTMENT AFFILIATES. The Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly,
acquire or create any Investment Affiliate.
ARTICLE
DEFAULTS
Section 0.3 EVENTS OF DEFAULT. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or the Borrower shall fail to pay when due interest on any Loan
or any fees or any other amount payable hereunder and the same shall
continue for a period of five (5) days after the same becomes due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.8, Section 5.9(a) or (b), or Sections 5.10 or
5.11;
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (a), (b), (e), (f), (g), (h), (i), (m) or (o) of this
Section 6.1) for 30 days after written notice thereof has been given
to the Borrower by Lender, or if such default is of such a nature that
it cannot with reasonable effort be completely remedied within said
period of thirty (30) days such additional period of time as may be
reasonably necessary to cure same, provided Borrower commences such
cure within said thirty (30) day period and diligently prosecutes
same, until completion, but in no event shall such extended period
exceed ninety (90) days;
(d) any representation, warranty, certification or statement
made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect
when made (or deemed made) and the defect causing such representation
or warranty to be incorrect when made (or deemed made) is not removed
within thirty (30) days after written notice thereof from Lender to
Borrower;
(e) the Borrower, or any Subsidiary shall default in the payment
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of
any Recourse Debt (other than the Obligations) for which the aggregate
outstanding principal amount exceeds $250,000 and such default shall
continue beyond the giving of any required notice and the expiration
of any applicable grace period and such default has not been waived,
in writing, by the holder of any such Debt; or the Borrower, or any
Subsidiary shall default in the performance or observance of any
obligation or condition with respect to any such Recourse Debt or any
other event shall occur or condition exist beyond the giving of any
required notice and the expiration of any applicable grace period, if
the effect of such default, event or condition is to accelerate the
maturity of any such indebtedness or to permit (without any further
requirement of notice or lapse of time) the holder or holders thereof,
or any trustee or agent for such holders, to accelerate the maturity
of any such indebtedness. Under no circumstances will defaults with
respect to the Participating Loans constitute an Event of Default
under this subsection (e);
(f) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any action to authorize any of the
foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days; or an order for relief shall be
entered against the Borrower under the federal bankruptcy laws as now
or hereafter in effect;
(h) one or more final, non-appealable judgments or decrees in an
aggregate amount of $250,000 or more shall be entered by a court or
courts of competent jurisdiction against the Borrower or its
Consolidated Subsidiaries (other than any judgment as to which, and
only to the extent, a reputable insurance company has acknowledged
coverage of such claim in writing) and (i) any such judgments or
decrees shall not be stayed, discharged, paid, bonded or vacated
within thirty (30) days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgments or decrees;
(i) a Change of Control shall occur;
(j) Borrower shall cease at any time to qualify to be a publicly
traded, registered reporting company under the Securities and Exchange
Act of 1934;
(k) if any Termination Event with respect to a Plan shall occur
as a result of which Termination Event or Events any member of the
ERISA Group has incurred or may incur any liability to the PBGC or any
other Person and the sum (determined as of the date of occurrence of
such Termination Event) of the insufficiency of such Plan and the
insufficiency of any and all other Plans with respect to which such a
Termination Event shall occur and be continuing (or, in the case of a
Multiple Employer Plan with respect to which a Termination Event
described in clause (ii) of the definition of Termination Event shall
occur and be continuing, the liability of the Borrower) is equal to or
greater than $250,000 and which Lender reasonably determines will have
a Material Adverse Effect;
(l) if, any member of the ERISA Group shall commit a failure
described in Section 402(f)(1) of ERISA or Section 412(n)(1) of the
Code and the amount of the lien determined under Section 402(f)(3) of
ERISA or Section 412(n)(3) of the Code that could reasonably be
expected to be imposed on any member of the ERISA Group or their
assets in respect of such failure shall be equal to or greater than
$250,000 and which Lender reasonably determines will have a Material
Adverse Effect;
(m) at any time, for any reason the Borrower seeks to repudiate
its obligations under any Loan Document;
(n) a default beyond any applicable notice or grace period under
any of the other Loan Documents; or
(o) An event of default shall occur pursuant to the terms of the
Preferred Stock Agreement, or the Senior Subordinated Term Loan
Agreement, each dated October 15, 1998, and between Borrower and
Lender.
Section 0.3 RIGHTS AND REMEDIES. Upon the occurrence of any Event
of Default described in Sections 6.1(f) or (g), the Commitment shall
immediately terminate and the unpaid principal amount of, and any and all
accrued interest on, the Loans and any and all accrued fees and other
Obligations hereunder shall automatically become immediately due and
payable, with all additional interest from time to time accrued thereon and
without presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower;
and upon the occurrence and during the continuance of any other Event of
Default, subject to the provisions of Section 6.2(b), Lender may, by
written notice to the Borrower, in addition to the exercise of all of the
rights and remedies permitted Lender at law or equity or under any of the
other Loan Documents, terminate any obligations to make any further Loans
hereunder and the unpaid principal amount of and any and all accrued and
unpaid interest on the Loans and any and all accrued fees and other
Obligations hereunder to be, and the same shall thereupon be, immediately
due and payable with all additional interest from time to time accrued
thereon and (except as otherwise as provided in the Loan Documents) without
presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower.
ARTICLE
INTENTIONALLY OMITTED
ARTICLE
CHANGE IN CIRCUMSTANCES
Section 0.3 ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority or
agency charged with the interpretation or administration thereof, or
compliance by Lender with any request or directive (whether or not having
the force of law) made after the Closing Date of any such authority, or
agency shall make it unlawful for any Lender to make, maintain or fund its
Euro-Dollar Loans, Lender shall forthwith give notice thereof to the
Borrower, whereupon until Lender notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the
obligation of Lender to make Euro-Dollar Loans or convert Base Rate Loans
to Euro-Dollar Loans shall be suspended and the Borrower shall be deemed to
have delivered a Notice of Interest Rate Election and all Euro-Dollar Loans
shall be converted as of such date to a Base Rate Loan.
Section 0.3 TAXES.
(p) Any and all payments by the Borrower to or for the account
of Lender hereunder or under any other Loan Document shall be made
free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, EXCLUDING,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which Lender is organized or any
political subdivision thereof or by any other jurisdiction (or any
political subdivision thereof) as a result of a present or former
connection between Lender and such other jurisdiction or by the United
States (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "NON-EXCLUDED TAXES"). If the Borrower shall be
required by law to deduct any Non-Excluded Taxes from or in respect of
any sum payable hereunder or under any Note, (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 8.2) Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to
Lender, at its address referred to in Section 9.1, the original or a
certified copy of a receipt evidencing payment thereof.
(q) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes and any other excise or property
taxes, or charges or similar levies which arise from any payment made
hereunder or under any Note or the Letter of Credit or from the
execution or delivery of, or otherwise with respect to, this Agreement
or any Note or Letter of Credit (hereinafter referred to as "OTHER
TAXES").
(r) The Borrower agrees to indemnify Lender for the full
amount of Non-Excluded Taxes or Other Taxes (including, without
limitation, any Non-Excluded Taxes or Other Taxes imposed or asserted
by any jurisdiction on amounts payable under this Section 8.4) paid by
Lender and, so long as Lender has promptly paid any such Non-Excluded
Taxes or Other Taxes, any liability for penalties and interest arising
therefrom or with respect thereto. This indemnification shall be made
within 15 days from the date Lender makes demand therefor.
ARTICLE
MISCELLANEOUS
Section 0.3 NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission followed by telephonic confirmation or similar
writing) and shall be given to such party: (x) in the case of the
Borrower, or Lender, at its address, telex number or facsimile number set
forth on the signature pages hereof with a duplicate copy thereof, in the
case of Lender, to Lender, at 624 Ellis Street, Augusta, Georgia 30901,
(y) in the case of Borrower, to 624 Ellis Street, Augusta, Georgia 30901,
or (z) in the case of any party, such other address, telex number or
facsimile number as such party may hereafter specify for the purpose by
notice to the other party. Each such notice, request or other
communication shall be effective (i) if given by telex or facsimile
transmission, when such telex or facsimile is transmitted to the telex
number or facsimile number specified in this Section and the appropriate
answerback or facsimile confirmation is received, (ii) if given by
certified registered mail, return receipt requested, with first class
postage prepaid, addressed as aforesaid, upon receipt or refusal to accept
delivery, (iii) if given by a nationally recognized overnight carrier, 24
hours after such communication is deposited with such carrier with postage
prepaid for next day delivery, or (iv) if given by any other means, when
delivered at the address specified in this Section; PROVIDED that notices
to Lender under Article II or Article VIII shall not be effective until
received.
Section 0.3 NO WAIVERS. No failure or delay by Lender in exercising
any right, power or privilege hereunder or under any Note shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 0.3 EXPENSES; INDEMNIFICATION.
(s) Subject to the terms of the Transaction Cost Agreement, the
Borrower shall pay within thirty (30) days after written notice from
Lender, (i) all reasonable out-of-pocket costs and expenses of Lender
(including reasonable fees and disbursements of its counsel) in
connection with the preparation of this Agreement, the Loan Documents
and the documents and instruments referred to therein, and any waiver
or consent hereunder or any amendment hereof or any Default or alleged
Default hereunder, (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by Lender, including fees and
disbursements of counsel for Lender, in connection with the
enforcement of the Loan Documents and the instruments referred to
therein and such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom;
(t) The Borrower agrees to indemnify Lender, their respective
affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which
may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding that may at any
time (including, without limitation, at any time following the payment
of the Obligations) be asserted against any Indemnitee, as a result
of, or arising out of, or in any way related to or by reason of,
(i) any of the transactions contemplated by the Loan Documents or the
execution, delivery or performance of any Loan Document, (ii) any
violation by the Borrower or the Environmental Affiliates of any
applicable Environmental Law, (iii) any Environmental Claim arising
out of the management, use, control, ownership or operation of
property or assets by the Borrower or any of the Environmental
Affiliates, including, without limitation, all on-site and off-site
activities of Borrower or any Environmental Affiliate involving
Materials of Environmental Concern, (iv) the breach of any
environmental representation or warranty set forth herein, but
excluding those liabilities, losses, damages, costs and expenses
(a) for which such Indemnitee has been compensated pursuant to the
terms of this Agreement, (b) incurred solely by reason of the gross
negligence, willful misconduct bad faith or fraud of any Indemnitee as
finally determined by a court of competent jurisdiction,
(c) violations of Environmental Laws relating to a Property which are
caused by the act or omission of such Indemnitee after such Indemnitee
takes possession of such Property or (d) any liability of such
Indemnitee to any third party based upon contractual obligations of
such Indemnitee owing to such third party which are not expressly set
forth in the Loan Documents. In addition, the indemnification set
forth in this Section 9.3(b) in favor of any director, officer, agent
or employee of Lender shall be solely in their respective capacities
as such director, officer, agent or employee. The Borrower's
obligations under this Section shall survive the termination of this
Agreement and the payment of the Obligations.
Section 0.3 SET-OFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any
Event of Default, Lender is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to
the Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits
(general or special, time or demand, provisional or final) and any other
indebtedness at any time held or owing by Lender to or for the credit or
the account of the Borrower against and on account of the Obligations of
the Borrower then due and payable to Lender under this Agreement or under
any of the other Loan Documents.
Section 0.3 AMENDMENTS AND WAIVERS. Any provision of this Agreement
or the Note or other Loan Documents may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower
and Lender.
Section 0.3 SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement or the other Loan Documents without the prior written consent of
Lender.
Section 0.3 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(u) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE
OF ILLINOIS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW).
(v) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of
any judgment in respect thereof may be brought in the courts of the
State of Illinois or of the United States of America for the Northern
District of Illinois, and, by execution and delivery of this
Agreement, the Borrower hereby accepts for itself and in respect of
its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and appellate courts from any
thereof. The Borrower irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or
proceeding by the hand delivery, or mailing of copies thereof by
registered or certified mail, postage prepaid, to the Borrower at its
address set forth below. The Borrower hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Agreement or any other Loan Document brought in
the courts referred to above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of Lender
to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
Section 0.3 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement constitutes the
entire agreement and understanding among the parties hereto and supersedes
any and all prior agreements and understandings, oral or written, relating
to the subject matter hereof. This Agreement shall become effective upon
receipt by Lender and the Borrower of counterparts hereof signed by each
of the parties hereto.
Section 0.3 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND LENDER
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 0.3 SURVIVAL. All indemnities set forth herein shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
Section 0.3 LIMITATION OF LIABILITY. No claim may be made by the
Borrower or any other Person acting by or through Borrower against Lender
or the affiliates, directors, officers, employees, attorneys, agent,
successors or assigns of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions contemplated by
this Agreement or by the other Loan Documents, or any act, omission or
event occurring in connection therewith; and the Borrower hereby waives,
releases and agrees not to sue upon any claim for any such damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
Section 0.3 RECOURSE OBLIGATION. This Agreement and the
Obligations hereunder are fully recourse to the Borrower. Notwithstanding
the foregoing, no recourse under or upon any obligation, covenant, or
agreement contained in this Agreement shall be had against any officer,
director, shareholder or employee of the Borrower, except in the event of
fraud or misappropriation of funds on the part of such officer, director,
shareholder or employee.
Section 0.3 CONFIDENTIALITY. Lender shall use reasonable efforts
to assure that information about Borrower, its Subsidiaries, and the
Properties thereof and their operations, affairs and financial condition,
not generally disclosed to the public, which is furnished to Lender
pursuant to the provisions hereof or any other Loan Document is used only
for the purposes of this Agreement and shall not be divulged to any Person
other than Lender, and their affiliates and respective officers, directors,
employees and agents who are actively and directly participating in the
evaluation, administration or enforcement of the Loan, except: (a) to
their attorneys and accountants, (b) in connection with the enforcement of
the rights and exercise of any remedies of Lender hereunder and under the
other Loan Documents, (c) in connection with assignments and participations
and the solicitation of prospective assignees and participants, who have
agreed in writing to be bound by a confidentiality agreement substantially
equivalent to the terms of this Section 9.13, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over
Lender or by any applicable law, rule, regulation or judicial process.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
BORROWER:
MERRY LAND PROPERTIES, INC.,
a Georgia corporation
By:
Name:
Title:
Fascimile number: (706) 722-4681
Address: 624 Ellis Street
Augusta, Georgia 30901
LENDER:
MERRY LAND & INVESTMENT
COMPANY, INC., a Georgia corporation
By:
Name:
Title:
Fascimile number: (706) 722-4681
Address: 624 Ellis Street
Augusta, Georgia 30901
MERRY LAND & INVESTMENT COMPANY, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Amended and Restated effective August 31, 1998
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. NATURE OF PLAN.............................................1
SECTION 2. DEFINITIONS................................................1
2.1 DEFINITIONS......................................................1
2.2 GENDER AND NUMBER................................................8
2.3 CROSS-REFERENCES.................................................8
SECTION 3. ELIGIBILITY AND MEMBERSHIP..................................8
3.1 ELIGIBILITY AND MEMBERSHIP.......................................8
3.2 TERMINATION OF MEMBERSHIP........................................8
3.3 REEMPLOYMENT OF FORMER MEMBERS...................................8
3.4 TRANSFER OF EMPLOYMENT TO ANOTHER EMPLOYER.......................8
3.5 MEMBER WHO CEASES TO BE AN EMPLOYEE..............................9
3.6 TRANSFER OF EMPLOYMENT TO AN AFFILIATE WHICH
HAS NOT ADOPTED THE PLAN.........................................9
3.7 VETERANS' PROTECTED BENEFITS.....................................9
SECTION 4. CONTRIBUTIONS..............................................9
4.1 EMPLOYER CONTRIBUTIONS...........................................9
4.2 TIME OF PAYMENT AND FORM OF EMPLOYER CONTRIBUTIONS..............10
4.3 MEMBER CONTRIBUTIONS............................................10
SECTION 5. INVESTMENT OF TRUST ASSETS; ACQUISITION LOANS.............10
5.1 INVESTMENT OF TRUST FUND........................................10
5.2 ACQUISITION LOANS...............................................10
SECTION 6. MEMBER ACCOUNTS...........................................13
6.1 MAINTENANCE OF MEMBER ACCOUNTS..................................13
6.2 STOCK ACCOUNTS; ACQUISITION LOAN SUSPENSE ACCOUNT...............13
6.3 OTHER INVESTMENTS ACCOUNT.......................................14
6.4 ALLOCATIONS TO MEMBER ACCOUNTS..................................14
6.5 MAXIMUM BENEFIT AND CONTRIBUTION LIMITATIONS....................17
SECTION 7. VOTING RIGHTS; EXPENSES; STOCK PURCHASE RIGHTS, ETC.......21
7.1 VOTING RIGHTS...................................................21
7.2 EXPENSES........................................................21
SECTION 8. VESTED PORTION OF MEMBER ACCOUNTS.........................22
8.1 STOCK ACCOUNTS; OTHER INVESTMENTS ACCOUNTS......................22
8.2 BREAKS IN SERVICE...............................................23
SECTION 9. DETERMINATION AND DISTRIBUTION OF BENEFITS.................24
9.1 DISTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT................24
9.2 DETERMINATION OF BENEFITS UPON RETIREMENT.......................24
9.3 DETERMINATION OF BENEFITS UPON DEATH............................25
9.4 DETERMINATION OF BENEFITS IN THE EVENT OF TOTAL DISABILITY......25
9.5 DETERMINATION OF BENEFITS UPON TERMINATION FOR REASONS OTHER
THAN RETIREMENT, DEATH, OR TOTAL DISABILITY.....................25
9.6 METHODS OF DISTRIBUTION.........................................26
9.7 DESIGNATION OF BENEFICIARY......................................28
9.8 DISTRIBUTION FOR MINOR BENEFICIARY..............................28
9.9 PROOF OF DEATH AND RIGHT OF BENEFICIARY OR OTHER PERSON.........29
9.10 REEMPLOYMENT OF FORMER MEMBER..................................29
9.11 OPTION TO REQUIRE EMPLOYER TO PURCHASE STOCK...................29
9.12 RIGHT OF FIRST REFUSAL TO PURCHASE STOCK.......................30
9.13 NO OTHER RIGHTS TO PUT OR CALL STOCK...........................30
9.14 DISTRIBUTIONS TO QUALIFIED MEMBERS.............................31
9.15 ELIGIBLE ROLLOVER DISTRIBUTIONS................................32
SECTION 10. ACCOUNTS AND RECORDS OF THE PLAN.........................33
SECTION 11. ADMINISTRATION...........................................33
11.1 ESOP PLAN COMMITTEE............................................33
11.2 ADMINISTRATIVE RESPONSIBILITY OF THE BOARD OF DIRECTORS........33
11.3 DUTIES OF THE COMMITTEE........................................33
11.4 DELEGATION AND ALLOCATION OF RESPONSIBILITIES OF THE COMMITTEE.34
11.5 COMPENSATION AND EXPENSES......................................35
11.6 MANNER OF ACTION...............................................35
11.7 DISQUALIFICATION OF A MEMBER...................................35
11.8 RECORDS........................................................35
11.9 APPLICATION FOR BENEFITS.......................................35
11.10 APPEALS FROM DENIAL OF CLAIMS.................................36
11.11 FACILITY OF PAYMENT...........................................36
SECTION 12. CONTROL AND MANAGEMENT OF ASSETS.........................37
12.1 CUSTODY OF ASSETS..............................................37
12.2 DUTIES OF TRUSTEE..............................................37
12.3 AUTHORITY OF THE BOARD OF DIRECTORS............................37
SECTION 13. AMENDMENT AND TERMINATION................................37
13.1 FUTURE OF PLAN.................................................37
13.2 CONTINUED QUALIFICATION OF PLAN................................37
13.3 TERMINATION OF PLAN............................................38
SECTION 14. FIDUCIARY LIABILITY INSURANCE AND INDEMNIFICATION........38
14.1 FIDUCIARY LIABILITY INSURANCE..................................38
14.2 INDEMNITY......................................................39
SECTION 15. TOP HEAVY PROVISIONS.....................................39
15.1 TOP HEAVY PLAN REQUIREMENTS....................................39
15.2 DEFINITIONS....................................................40
15.3 DETERMINATION OF TOP HEAVY PLAN................................42
15.4 TOP HEAVY VESTING REQUIREMENT..................................42
15.5 TOP HEAVY MINIMUM CONTRIBUTION REQUIREMENT.....................43
15.6 TOP HEAVY LIMITATION ON COMPENSATION REQUIREMENT...............44
15.7 TOP HEAVY ADJUSTMENTS IN THE MAXIMUM BENEFIT AND CONTRIBUTION
LIMITATIONS...........................................................45
SECTION 16. MISCELLANEOUS............................................45
16.1 REPRESENTATIONS TO FIDUCIARIES.................................45
16.2 STANDARD OF FIDUCIARY CONDUCT..................................45
16.3 LIMITATION ON LIABILITY........................................45
16.4 INTERPRETATION OF PLAN.........................................46
16.5 NOTICE OF ADDRESS..............................................46
16.6 FUND TO BE FOR THE EXCLUSIVE BENEFIT OF MEMBERS................46
16.7 RESTRICTIONS ON ALIENATION.....................................46
16.8 NO ENLARGEMENT OF EMPLOYEE RIGHTS..............................47
16.9 HEADINGS.......................................................47
16.10 PLAN CONTINGENT UPON INTERNAL REVENUE SERVICE APPROVAL........47
<PAGE>
MERRY LAND & INVESTMENT COMPANY, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(Amended and Restated Effective August 31, 1998)
SECTION 1. NATURE OF PLAN
Merry Land & Investment Company, Inc. maintains an employee stock
ownership plan that was established for the benefit of its eligible
Employees effective as of January 1, 1988, and which is amended and
restated in its entirety as set forth herein effective as of the
Effective Date, which plan is known as the MERRY LAND & INVESTMENT
COMPANY, INC. EMPLOYEE STOCK OWNERSHIP PLAN (hereinafter referred to
as the "Plan"). The Plan is designed to invest primarily in Stock (as
defined in subsection 2.1). To facilitate investments by the Plan in
Stock, the Plan and the related Trust are authorized to receive loans
(and other extensions of credit) to finance the acquisition of Stock
("Acquisition Loans," as further defined in subsection 2.1). The Plan
constitutes a stock bonus plan established pursuant to section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), is
intended to be funded with contributions that qualify for the income
tax deduction provided for in section 404 of the Code, is intended to
constitute an employee stock ownership plan under section 407(d)(6) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and, to the extent that the acquisition of Stock is
financed through one or more Acquisition Loans, is intended to
constitute an employee stock ownership plan under section 4975(e)(7)
of the Code.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan the following terms
shall have the respective meanings set forth below unless otherwise
expressly provided herein or unless a different meaning is plainly
required by the context:
(a) "ACQUISITION LOAN" means a loan (or other extension of
credit) made to the Trust for the purpose of financing the
acquisition of Stock pursuant to and in accordance with the
Plan, which loan may constitute an extension of credit to the
Trust from a "party in interest" (as defined in section 3(14)
of ERISA) or a "disqualified person" (as defined in section
4975(e)(2) of the Code), and is intended to fall within the
scope of the exemptions set forth in section 408(b)(3) of
ERISA and section 4975(d)(3) of the Code.
(b) "AFFILIATED CORPORATION" or "AFFILIATE" means any
corporation, or any trade or business, if it and the Plan
Sponsor are members of a controlled group of corporations, or
are under common control, or are members of an affiliated
service group, within the meaning of sections 414(b), 414(c),
414(m) or 414(o) of the Code, respectively; provided,
however, that for purposes of subsection 6.5, the definitions
prescribed by sections 414(b) and 414(c) of the Code shall be
modified as provided by section 415(h) of the Code.
(c) "ANNIVERSARY DATE" means the last day of the Plan Year;
provided, however, that solely with respect to the allocation
of Forfeitures, pursuant to subsection 6.4(b), during the
Plan Year ending December 31, 1998, Anniversary Date shall
mean August 31, 1998, and the last day of the Plan Year.
(d) "BENEFICIARY" means the person, persons, or entity, including
one or more trusts, last designated by a Member on a form
supplied by the Committee as a beneficiary, co-beneficiary,
or contingent beneficiary to receive benefits payable under
the Plan in the event of the death of the Member; provided,
however, that in the case of a married Member, the
Beneficiary shall be such Member's surviving spouse, unless
there is no surviving spouse, or unless the surviving spouse
consents, in the manner described in the next following
sentence, to the designation of another Beneficiary or
Beneficiaries. No designation by a married Member of a
Beneficiary or Beneficiaries other than his surviving spouse
shall take effect unless the spouse consents in writing to
such designation, and the spouse's consent acknowledges the
effect of such designation and is witnessed by a Plan
representative or a notary public, or it is established to
the satisfaction of a Plan representative that such consent
may not be obtained because there is no spouse, because the
spouse cannot be located, or because of such other
circumstances as may be prescribed by regulations under
section 417(a)(2) of the Code. Any consent by a spouse (or
establishment that the consent of a spouse may not be
obtained) under the preceding sentence shall be effective
only with respect to such spouse. If no such designation is
in effect at the time of death of the Member, or if no
person, persons, or entity so designated shall survive the
Member, the Beneficiary shall be the Member's surviving
spouse, if any, or if there shall be no such surviving
spouse, the Beneficiary shall be the estate of the Member.
(e) "BOARD OF DIRECTORS" means the Board of Directors of the Plan
Sponsor, including any committee appointed by the Board of
Directors.
(f) "BREAK IN SERVICE" means a Plan Year during which an Employee
is not credited with more than 500 Hours of Service with the
Employer or an Affiliate.
(g) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(h) "COMMITTEE" or "ESOP PLAN COMMITTEE" means the Committee
appointed pursuant to subsection 11.1.
(i) "COMPENSATION" means, for purposes of Plan Years commencing
on or after January 1, 1997, the total amount of all payments
made by the Employer to a Member for services rendered to the
Employer, excluding overtime, bonuses and extraordinary
commissions (if any), but including any portion of the
Member's compensation that is deferred pursuant to a salary
reduction agreement under any plan of the Employer described
in section 401(k), 402(h), 414(h) or 125 of the Code.
Compensation shall not include expense reimbursement, fringe
benefits (taxable or nontaxable), director's fees,
contributions made by the Employer under the Plan, payments
made by the Employer for group insurance, hospitalization and
like benefits, nor contributions made by the Employer under
any other employee benefit plan it maintains. Furthermore,
for purposes of a contribution or an allocation under the
Plan based on Compensation, Compensation shall only include
amounts actually paid to or for an Employee during the period
he is a Member in the Plan. For purposes of this
subsection 2.1(i), Compensation with respect to any Plan Year
commencing on or after January 1, 1994, shall not exceed the
first $150,000 of such Compensation (as adjusted from time to
time by the Secretary of the Treasury).
(j) "EFFECTIVE DATE" means August 31, 1998, the effective date of
this amended and restated Plan; provided, however, that any
provision which is contained in this amended and restated
Plan (as the same may be further amended from time to time)
and which is required to be effective before August 31, 1998,
in order to retain the qualification of the Plan under
section 401(a) of the Code shall, nevertheless, be effective
as of its required effective date under the Code.
(k) "EMPLOYEE" means any person who is employed by the Employer,
excluding (i) any person who is included in a unit of
employees covered by a collective bargaining agreement
between employee representatives and the Employer where
retirement benefits were the subject of good faith bargaining
between such employee representatives and the Employer,
unless such collective bargaining agreement expressly
provides for the inclusion of such person as a Member under
the Plan, (ii) any person who performs services for the
Employer and is classified by the Employer as an independent
contractor, and (iii) any leased employee within the meaning
of Code section 414(n.
(l) "EMPLOYER" means the Plan Sponsor, Merry Land Apartment
Communities, Inc. and ML Services, Inc. through the Effective
Time (as defined in the Merger Agreement), and any Affiliate
which adopts the Plan and becomes a party to it with the
approval of the Board of Directors; provided, however, that
an entity will cease to be an Employer when it ceases to be
an Affiliate.
(m) "EMPLOYER CONTRIBUTIONS" means the contributions made by the
Employer to the Plan on behalf of the Members pursuant to
subsection 4.1.
(n) "ENTRY DATE" means each January 1 and July 1 of a Plan Year,
so long as this Plan shall remain in effect.
(o) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
(p) "FAIR MARKET VALUE" means the fair market value of Stock, as
determined by the Trustee in accordance with the Plan, Trust
and applicable law.
(q) "FINANCED SHARES" means shares of Stock acquired by the Trust
with the proceeds of an Acquisition Loan, whether or not
pledged as collateral to secure the repayment of such
Acquisition Loan.
(r) "FISCAL YEAR" means the Employer's accounting year of twelve
(12) calendar months commencing on January 1{st} and ending
on December 31{st}.
(s) "FIVE-YEAR BREAK IN SERVICE" means any period of five (5)
consecutive one-year Breaks in Service.
(t) "FORFEITURE" means that portion of a Member Account that is
not vested, which portion is forfeited pursuant to
subsection 9.5.
(u) "FORFEITURE SUSPENSE ACCOUNT" means an account to which
Forfeitures are credited pursuant to subsection 9.5.
(v) "FORMER MEMBER" means a person who was a Member, but who has
ceased to be a Member as provided in subsection 3.2.
(w) "HOUR OF SERVICE" means (i) each hour for which an Employee
is directly or indirectly compensated (or entitled to
compensation) by the Employer or an Affiliate for the
performance of duties during the applicable computation
period; (ii) each hour for which an Employee is directly or
indirectly compensated (or entitled to compensation) by the
Employer or an Affiliate for reasons other than performance
of duties (such as vacation, holidays, sickness, disability,
lay-off, military duty, or leave of absence) during the
applicable computation period; and (iii) each hour for which
back pay is awarded or agreed to by the Employer or an
Affiliate, without regard to mitigation. Notwithstanding
(ii) above, (a) no more than 501 Hours of Service are
required to be credited to an Employee on account of any
single continuous period during which the Employee performs
no duties (whether or not such period occurs in a single
computation period), (b) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on
account of a period during which no duties are performed is
not required to be credited to the Employee if such payment
is made or due under a plan maintained solely for the purpose
of complying with applicable workers' compensation, or
unemployment compensation, or disability insurance laws; and
(c) Hours of Service are not required to be credited for a
payment which solely reimburses an Employee for medical or
medically-related expenses incurred by the Employee. For
purposes of this definition, a payment shall be deemed to be
made by or due from the Employer or an Affiliate regardless
of whether such payment is made by or due from the Employer
or Affiliate directly, or indirectly through, among others, a
trust fund, insurer, or other entity to which the Employer or
Affiliate contributes or pays premiums, and regardless of
whether contributions made or due to such trust fund,
insurer, or other entity are for the benefit of a particular
Employee or on behalf of a group of Employees in the
aggregate. Hours of Service must be counted for the purposes
of determining a Year of Service, a Break in Service, and an
Employee's employment commencement date (or reemployment
commencement date). In the case of each Employee who is not
on a Leave of Absence but who is absent from work without pay
for any period by reason of the pregnancy of the Employee, by
reason of the birth of a child of the Employee, by reason of
the placement of a child with the Employee in connection with
the adoption of such child by such Employee, or for purposes
of caring for such child for a period beginning immediately
following such birth or placement, there shall be treated as
Hours of Service, solely for purposes of determining whether
a Break in Service has occurred, the Hours of Service which
otherwise would normally have been credited to such Employee
but for such absence (or, in any case in which the Committee
is unable to determine the Hours of Service which otherwise
would normally have been credited to such Employee but for
such absence, eight Hours of Service per day of such
absence); provided, however, that the total number of hours
treated as Hours of Service under this sentence by reason of
any such pregnancy or placement shall not exceed 501 hours;
and provided, further, that no Hours of Service shall be
credited pursuant to this sentence unless the Employee
furnishes to the Committee such timely information as the
Committee may reasonably require o establish that the absence
from work is for reasons referred to in this sentence, and
the number of days for which there was such an absence. The
hours described in the preceding sentence shall be treated as
Hours of Service only in the Plan Year in which the absence
from work begins, if an Employee would be prevented from
incurring a Break in Service in such Plan Year solely because
the period of absence is so treated as Hours of Service, or,
in any other case, in the immediately following Plan Year.
The provisions of Department of Labor Regulations 2530.200b-
2(b) and (c) are incorporated herein by reference.
(x) "LATE RETIREMENT DATE" means the first day of the month
coinciding with or next following a Member's actual
retirement after having reached his Normal Retirement Date.
(y) "LEAVE OF ABSENCE" means (i) a leave of absence of a Member
approved by the Employer or an Affiliate in accordance with
rules of uniform and nondiscriminatory application to all
Members similarly situated; or (ii) a leave of absence of a
Member due to active duty for training or service in the
armed forces of the United States, including a reserve
component thereof or the Public Health Service, provided that
the Member makes application for reemployment by the Employer
or an Affiliate while he is entitled to reemployment rights
under federal law.
(z) "MEMBER" means any person who has satisfied the eligibility
and membership requirements of the Plan, and whose membership
has not terminated.
(aa) "MEMBER ACCOUNT" means the separate account maintained for
each Member that represents his total interest in the Trust
Fund, which account shall be divided into two sub-accounts:
the Stock Account; and the Other Investments Account.
(bb) "MERGER AGREEMENT" means the Agreement and Plan of Merger
between Equity Residential Properties Trust and Merry Land &
Investment Company, Inc., dated as of July 8, 1998, and the
First Amendment thereto.
(cc) "NORMAL RETIREMENT AGE" means a Member's 65{th} birthday.
(dd) "NORMAL RETIREMENT DATE" means the date a Member attains
Normal Retirement Age.
(ee) "OTHER INVESTMENTS ACCOUNT" means the sub-account of a
Member Account that reflects the Member's interest in the
Plan attributable to assets of the Trust Fund other than
Stock.
(ff) "PLAN SPONSOR" means Merry Land & Investment Company, Inc.
until October 15, 1998, and Merry Land Properties, Inc. on
and after October 15, 1998.
(gg) "PLAN YEAR" means the annual accounting period of the Plan
commencing on January 1{st} of each year and ending on
December 31{st} of the same year.
(hh) "SERVICE" means employment with the Employer and with any
Affiliate.
(ii) "STOCK" means (i) shares of voting common stock that
constitute "employer securities" within the meaning of
section 409(l) of the Code and "qualifying employer
securities" within the meaning of section 4975(e)(8) of the
Code and section 407(d)(5) of ERISA, and (ii) for a period of
twelve (12) months from the Effective Time (as defined in the
Merger Agreement), common shares of beneficial interest of
Equity Residential Properties Trust.
(jj) "STOCK ACCOUNT" means the sub-account of a Member Account
that reflects the Member's interest in Stock that is held in
the Trust Fund.
(kk) "TOTAL DISABILITY" means a total mental or physical
disability which prevents a Member from engaging in any
occupation or employment for wages or profit and which
constitutes "total disability" within the meaning of the
federal Social Security Act.
(ll) "TRUST" means the Merry Land & Investment Company, Inc.
Employee Stock Ownership Plan Trust created and maintained
pursuant to the Trust Agreement.
(mm) "TRUST AGREEMENT" means the agreement entered into between
the Employer and the Trustee pursuant to Section 12, as
amended from time to time.
(nn) "TRUST FUND" means the Stock, cash, and other assets of the
Plan held and administered by the Trustee for the benefit of
the Members and their Beneficiaries pursuant to the Trust
Agreement.
(oo) "TRUSTEE" means the Trustee or Trustees appointed by the
Employer to hold the Trust Fund pursuant to Section 12.
(pp) "VALUATION DATE" means the last business day of each Plan
Year and such other dates as the Committee shall designate
from time to time.
(qq) "VESTED BENEFIT" means that portion of a Member Account that
is nonforfeitable.
(rr) "YEAR OF SERVICE" means the computation period of twelve
(12) consecutive months, as herein set forth, during which an
Employee has at least 1,000 Hours of Service.
For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the
Employee first performs an Hour of Service. Upon completion
of the initial computation period, the participation
computation period shall be the twelve (12) consecutive
month period ending on each anniversary of the date the
initial participation computation period ended.
For vesting purposes, a Year of Service shall be a Plan Year
in which an Employee completes at least 1000 Hours of
Service.
Service with the Employer and with any Affiliate both prior
to the initial effective date of the Plan and subsequent to
such date shall be recognized for purposes of determining
Years of Service. Service with the Employer also shall
include service with each predecessor of the Employer.
2.2 GENDER AND NUMBER. Whenever used herein, a masculine pronoun
shall be deemed to include the feminine pronoun, a singular word shall
be deemed to include the singular and plural, and a plural word shall
be deemed to include the singular and plural in all cases where the
context requires.
2.3 CROSS-REFERENCES. References herein to "Section" or
"subsection" shall refer to the referenced Section or subsection of
this Plan unless otherwise indicated.
SECTION 3. ELIGIBILITY AND MEMBERSHIP
3.1 ELIGIBILITY AND MEMBERSHIP. Each person who was a Member in
the Plan immediately prior to the Effective Date shall continue to be
a Member hereunder, according to the terms of this amended and
restated Plan. Any other person who is an Employee shall become a
Member on the first Entry Date coincident with or next following the
date on which he completes one Year of Service and attains age twenty-
one (21); provided that he is employed by the Employer on such Entry
Date. If an Employee completes the requirements for participation but
is not employed on the applicable Entry Date when he would have become
a Member, he shall become a Member on the date he subsequently
completes an Hour of Service. An Employee shall automatically become
a Member on the applicable Entry Date without any requirement for an
application or any other action by the Employee.
3.2 TERMINATION OF MEMBERSHIP. Each Member shall remain a Member
such time as he has received a complete distribution (or is deemed to
have received a complete distribution) of his vested Member Account.
3.3 REEMPLOYMENT OF FORMER MEMBERS. Any Former Member who is
subsequently reemployed by the Employer and again becomes an Employee
shall immediately be eligible to again become a Member on the date of
his reemployment by the Employer, without any requirement for an
application or any other action by the Employee. For purposes of
participation in the Plan, the Plan shall not apply any Break in
Service rule.
3.4 TRANSFER OF EMPLOYMENT TO ANOTHER EMPLOYER. A Member who
transfers employment from one Employer to another Employer, and who
becomes an Employee of such other Employer, shall continue to be a
Member and shall continue to share in the allocation of Employer
Contributions, without interruption.
3.5 MEMBER WHO CEASES TO BE AN EMPLOYEE. The amounts credited to
the Member Account of a Member who remains in the employ of the
Employer but who ceases to be an Employee shall remain invested under
the Plan as long as the Member is employed by the Employer or an
Affiliate; provided, however, that no further Employer Contributions
or Forfeitures shall be credited to such Member unless and until such
Member again becomes an Employee. Any Member who either terminates
employment or becomes an employee of Equity Residential Properties
Trust or Equity Residential Properties Management Limited Partnership,
as a direct result of the transactions contemplated by the Merger
Agreement, shall cease to be a Member as of the last day of the Plan
Year which includes the Effective Time (as such term is defined in the
Merger Agreement).
3.6 TRANSFER OF EMPLOYMENT TO AN AFFILIATE WHICH HAS NOT ADOPTED
THE PLAN. The amounts credited to the Member Account of a Member who
transfers employment from the Employer to an Affiliate which has not
adopted the Plan shall remain invested under the Plan as long as the
Member is employed by the Affiliate; provided, however, that no
further Employer Contributions made to the Plan shall be credited to
such Member unless and until such Member is reemployed by an Employer
and again becomes an Employee.
3.7 VETERANS' PROTECTED BENEFITS. Notwithstanding any provision
of this Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service will be provided in
accordance with section 414(u) of the Code.
SECTION 4. CONTRIBUTIONS
4.1 EMPLOYER CONTRIBUTIONS. For each Plan Year during which the
Plan is in effect, such amount as shall be determined either by the
Board of Directors or under a formula adopted and approved by the
Board of Directors shall be contributed to the Plan on behalf of the
Members. Notwithstanding the foregoing, however, the Employer
Contribution for any Plan Year shall not in any event exceed the
maximum amount allowable as a deduction to the Employer under the
provisions of section 404 of the Code. The Trustee shall have no
right or duty to inquire into the amount of the Employer Contribution
or the method used in determining the amount of the Employer
Contribution for any Plan Year, but shall be accountable only for
funds and other property actually received by the Trustee from the
Employer. Employer Contributions to be made hereunder shall be made
by the Plan Sponsor and/or by any Affiliates that are Employers. The
Board of Directors, in its sole discretion, may determine that the
Plan Sponsor shall pay that portion of the Employer Contribution that
is allocable (as determined in subsection 6.4(a) below) to Members who
are employed by one or more Affiliates that are Employers, provided
that such payment is allowable as a deduction under the provisions of
section 404 of the Code.
4.2 TIME OF PAYMENT AND FORM OF EMPLOYER CONTRIBUTIONS. Employer
Contributions for each Plan Year shall be paid to the Trustee not
later than the time prescribed by law, including permitted extensions
of time, for the filing of the Employer's federal income tax return
for the Fiscal Year with respect to which such Employer Contribution
is made. Employer Contributions may be paid to the Trustee in cash or
in shares of Stock, as determined by the Board of Directors in its
sole discretion.
4.3 MEMBER CONTRIBUTIONS. No Member shall be required or permitted
to make contributions to this Plan.
SECTION 5. INVESTMENT OF TRUST ASSETS; ACQUISITION LOANS
5.1 INVESTMENT OF TRUST FUND. The Plan is designed to invest
primarily in Stock. The Trustee may also invest assets held as part
of the Trust Fund in such other investments as the Trustee may deem
appropriate and prudent. The Trustee may purchase shares of Stock in
the open market or from any person including, but not limited to, the
Plan Sponsor, an Employer or from any "party in interest" (as defined
in section 3(14) of ERISA) or "disqualified person" (as defined in
section 4975(e)(2) of the Code). The Trustee may invest and hold up
to 100% of the Trust Fund in Stock.
5.2 ACQUISITION LOANS. The Employer may direct the Trustee to
incur Acquisition Loans from time to time to finance the acquisition
by the Trust Fund of shares of Stock ("Financed Shares") or to repay a
prior Acquisition Loan. An Acquisition Loan may be made by a "party
in interest" (as defined in section 3(14) of ERISA) or a "disqualified
person" (as defined in section 4975(e)(2) of the Code) and may be
guaranteed by any Employer and/or one or more Affiliates and shall, to
the extent necessary to avoid a nonexempt prohibited transaction under
ERISA section 406 and/or Code section 4975, comply with the
requirements for an "exemption loan" under ERISA section 408(b)(3)
and/or Code section 4975(d)(3), and the regulations thereunder. Any
Acquisition Loan must be primarily for the benefit of the Members and
their Beneficiaries. In furtherance of the foregoing, the interest
rate payable with respect to any Acquisition Loan and the price of any
Stock to be acquired with the proceeds thereof shall not be such that
the Trust Fund might be "drained off" (as such term is used in the
applicable regulations under section 4975 of the Code), and the terms
of any Acquisition Loan, whether or not the lender is a "party in
interest" (as defined in section 3(14) of ERISA) or a "disqualified
person" (as defined in section 4975(e)(2) of the Code), must, at the
time such Acquisition Loan is made, be at least as favorable to the
Trust Fund as the terms of a comparable loan resulting from arm's-
length negotiations between independent parties would be. An
Acquisition Loan may be secured by a collateral pledge of the Financed
Shares acquired with the proceeds of such Acquisition Loan (or any
prior Acquisition Loan repaid with the proceeds from such Acquisition
Loan). No other assets of the Trust Fund (including any other shares
of Stock held as part of the Trust Fund) may be pledged as collateral
for an Acquisition Loan. An Acquisition Loan shall be for a specific
term, shall bear a reasonable rate of interest, and shall not be
payable upon demand except in the event of a default, provided,
however, that if the Acquisition Loan lender is a "party in interest"
(as defined in section 3(14) of ERISA) or a "disqualified person" (as
defined in section 4975(e)(2) of the Code), the Acquisition Loan shall
be payable upon demand in the event of a default only to the extent of
any default in any required payments due and payable under such
Acquisition Loan (without regard to any rights of acceleration on the
part of the lender). An "exempt loan" under ERISA section 408(b)(3)
and/or Code section 4975(d)(3) and the regulations thereunder must be
without recourse against the Plan, and no person entitled to payment
under such loan shall have any right to assets of the Plan other than
(i) collateral given for such loan, (ii) contributions (other than
contributions of Stock) that are made under the Plan Plan to meet its
obligations under the loan, and (iii) earnings attributable to such
collateral and the investment of such contributions. The payments
made with respect to an "exempt loan" by the Plan during a Plan Year
must not exceed an amount equal to the sum of such contributions and
earnings received during or prior to the Plan Year less such payment
in prior Plan Years. Such contributions and earnings must be
accounted for separately on the books of account of the Plan until the
loan is repaid. Any pledge of Financed Shares as collateral for an
Acquisition Loan shall provide that the value of the Financed Shares
subject to such pledge transferred in satisfaction of the Acquisition
Loan upon a default on such Acquisition Loan shall not exceed the
amount of such default. Any pledge of Financed Shares as collateral
for an Acquisition Loan shall also provide for the release of the
Financed Shares so pledged on a pro-rata basis as principal and
interest on such Acquisition Loan is paid by the Trustee, with the
number of Financed Shares to be released from any such pledge in any
Plan Year to be determined by multiplying (i) the total number of
Financed Shares subject to such pledge immediately prior to the
release for such Plan Year by (ii) a fraction, the numerator of which
is the amount of principal and interest paid on such Acquisition Loan
for such Plan Year, and the denominator of which is the sum of the
numerator plus all principal and interest to be paid with respect to
such Acquisition Loan for all future years of the term of such
Acquisition Loan (without regard to any possible extensions or renewal
periods); provided, however, that any pledge of Financed Shares as
collateral for an Acquisition Loan may provide that the number of
Financed Shares to be released from encumbrance is determined solely
with reference to principal payments provided that: (i) the
Acquisition Loan provides for annual payments of principal and
interest at a cumulative rate that is not less rapid at any time than
level annual payments of such amounts for ten (10) years;
(ii) interest included in any payment is disregarded only to the
extent that it would be determined to be interest under standard loan
amortization tables; and (iii) such release of Financed Shares from
encumbrance determined solely with reference to principal payments
will not be applied from the time that, by reason of a renewal,
extension, or refinancing, the sum of the expired duration of the
exempt loan, the renewal period, the extension period, and the
duration of a new exempt loan exceeds ten (10) years. In the event
that the interest rate payable with respect to such Acquisition Loan
is variable, the interest to be paid in future years shall be
determined for purposes of the preceding sentence as if the interest
rate applicable with respect to such Acquisition Loan at the end of
such Plan Year were to remain in effect over the remaining term of
such Acquisition Loan. Payments of principal and/or interest on any
Acquisition Loan shall be made by the Trustee only from (i) Employer
Contributions paid in cash to enable the Trustee to repay such
Acquisition Loan, (ii) any earnings of the Trust Fund attributable to
such Employer Contributions, and (iii) any cash dividends received by
the Trust Fund on Financed Shares pledged to secure the repayment of
such Acquisition Loan. The Trustee may determine at any time in its
discretion to pay principal and/or interest of an Acquisition Loan
with proceeds from the sale or other disposition of Financed Shares
pledged to secure the repayment of such Acquisition Loan.
5.3 MEMBER DIRECTION OF INVESTMENTS.
If the Committee so elects, this Plan may be operated in compliance
with ERISA section 404(c) and the regulations thereunder, with respect
to all or a percentage (as specified by the Committee) of the amounts
allocated to Member Accounts as of January1, 1998, or such other dates
as the Committee may specify. If the Committee so elects, the
following shall also apply:
(a) The Trustee shall be responsible for establishing the
investment funds selected by the Committee. The Trustee also
shall be responsible for implementing Members' investment
instructions and shall comply with such instructions to the
extent such instructions are consistent with ERISA and the
regulations thereunder. The Committee is responsible for
ensuring compliance with ERISA section 404(c) and the
regulations thereunder in all other respects, including
providing to Members all information required under such
provisions.
(b) The Committee shall select categories of investments that
constitute a broad range of investment alternatives and which
are sufficient to provide Members with a reasonable
opportunity to materially affect the potential return on
amounts in their Member Accounts and the degree of risk to
which such amounts are subject. The Committee shall select
at least three investment alternatives, each of which is
diversified, has materially different risk and return
characteristics and which will enable Members to minimize
overall risk through diversification and achieve a portfolio
with appropriate aggregate risk and return characteristics.
Stock shall be included as an investment alternative. To the
extent a Member's Member Account is invested in common shares
of beneficial interest of Equity Residential Properties
Trust, the Member may elect to rataiin those shares pursuant
to this Section 5.3.
(c) The Committee shall provide Members with sufficient
information to make informed decisions with regard to
investments in the investment alternatives available under
the Plan in accordance with ERISA section 404(c) and the
regulations thereunder.
(d) Member elections may be changed more frequently than
quarterly if the Committee determines, in its discretion,
that it is appropriate in light of market conditions,
subject, however, to any rules established by the Committee
and any rules or restrictions of any insurance company or
other entity serving as the manager or funding vehicle of any
of the investment alternatives.
(e) Amounts allocated to Member Accounts which are subject to
Member direction of investments pursuant to this Section 5.3
shall be allocated (or transferred) to the Other Investment
Accounts of the Members.
SECTION 6. MEMBER ACCOUNTS
6.1 MAINTENANCE OF MEMBER ACCOUNTS. The Committee shall establish
and maintain in the name of each Member a Member Account, which Member
Account shall be composed of two sub-accounts: a Stock Account and an
Other Investments Account. The Committee shall credit to such Member
Accounts, as of each Anniversary Date, all amounts allocated to each
such Member as hereinafter set forth.
6.2 STOCK ACCOUNTS; ACQUISITION LOAN SUSPENSE ACCOUNT.
(a) The Stock Account maintained for each Member shall be
credited at least annually, as determined by the Committee or
as otherwise provided herein, (i) with the Member's allocable
share of Stock (including fractional shares) acquired by the
Trust Fund with Employer Contributions (including
contributions in kind) or earnings thereon, or with amounts
held in the Member's Other Investments Accounts, (ii) with
any Forfeitures of Stock occurring during the Plan Year, and
(iii) with any stock dividends received during the Plan Year
on Stock allocated to the Member's Stock Account.
(b) Any Financed Shares acquired with the proceeds of an
Acquisition Loan or a prior Acquisition Loan refinanced with
a new Acquisition Loan, whether or not pledged to secure
repayment of an Acquisition Loan, shall be credited to a
separate account (the "Acquisition Loan Suspense Account")
and not to any Stock Accounts. A number of shares of Stock
equal to the number of Financed Shares released from the
pledge securing the repayment of an Acquisition Loan, as
provided for in subsection 5.2 above (or, in the case of
Financed Shares credited to the Acquisition Loan Suspense
Account that are not pledged to secure repayment of an
Acquisition Loan, that would have been so released had such
Financed Shares been so pledged), shall be withdrawn from the
Acquisition Loan Suspense Account as of the Anniversary Date
for the Plan Year with respect to which such release occurs
(or would have occurred) and shall be allocated to the Stock
Accounts of the Members as of such Anniversary Date in the
manner provided for in subsection 6.4 below.
6.3 OTHER INVESTMENTS ACCOUNT. The Other Investments Account
maintained for each Member shall be credited (or debited) at least
annually, as determined by the Committee or as otherwise provided
herein, (i) with the Member's allocable share of the net income (or
loss) of the Trust Fund, (ii) with any cash dividends received during
the Plan Year on Stock allocated to the Member's Stock Account, (iii)
with Employer Contributions made in cash, and (iv) with any
Forfeitures from Other Investments Accounts occurring during the Plan
Year. Each Other Investments Account will be debited for its share of
any cash payments made for the acquisition of Stock or for the
repayment of principal and interest on an Acquisition Loan.
6.4 ALLOCATIONS TO MEMBER ACCOUNTS. As more specifically set
forth hereinafter, all allocations made pursuant to this subsection
6.4 as of each Anniversary Date that occurs within the Plan Year which
includes the Effective Time (as such term is defined in the Merger
Agreement), shall be made, subject to subsection 6.5, to the Member
Accounts of eligible Members, including for this purpose any Member
who either terminates employment or becomes an employee of Equity
Residential Properties Trust or Equity Residential Properties
Management Limited Partnership, as a direct result of the transactions
contemplated by the Merger Agreement. The allocations to Member
Accounts for each Plan Year shall be made, subject to subsection 6.5,
as follows:
(a) EMPLOYER CONTRIBUTIONS. The Employer shall provide the
Committee with all of the information required by the
Committee to make a proper allocation of the Employer
Contribution for each Plan Year. Upon receipt by the
Committee of such information, the Committee shall allocate
the Employer Contribution to the Member Accounts, effective
as of the Anniversary Date of the Plan Year with respect to
which such Employer Contribution is made, in the same
proportion that each such Member's Compensation for such Plan
Year bears to the aggregate Compensation of all Members for
such Plan Year, provided, however, that a Member, other than
a Member who terminated employment during such Plan Year due
to retirement, death or Total Disability, who has less than
1,000 Hours of Service with the Employer (disregarding Hours
of Service with any Affiliates that are not Employers) during
any Plan Year shall not share in the Employer Contribution
made for such Plan Year; and provided further that in no
event shall more than one-third (1/3) of the aggregate amount
of the Employer Contribution made for any Plan Year under
this Plan, and under any other employee stock ownership plan
or tax credit employee stock ownership plan (within the
meaning of section 4975(e)(7) or 409 of the Code) maintained
by the Employer or an Affiliate, be allocated, in the
aggregate, to the Member Accounts of "highly compensated
employees," as defined below. For purposes of this
subsection 6.4(a), the term "highly compensated employee" for
any Plan Year shall have the meaning prescribed by section
414(q) of the Code, and the Committee shall have discretion
to determine whether to apply subclause (ii) of
section 414(q)(1)(B) of the Code when determining who is a
highly compensated employee for any Plan Year. Any portion
of the Employer Contribution for a Plan Year that would be
allocated to the Member Accounts of "highly compensated
employees" were it not for the limitation on the maximum
aggregate permitted amount of such allocation shall be
allocated to the Member Accounts of the Members who otherwise
share in the Employer Contribution for such Plan Year but who
are not "highly compensated employees," with such allocation
being made in the same proportion that each such Member's
Compensation for such Plan Year bears to the total
Compensation of all such Members who are not "highly
compensated employees." To the extent that an Employer
Contribution made for any Plan Year is applied to purchase
Stock or is applied to pay principal and/or interest on an
Acquisition Loan, with the result that shares of Stock are
released from the Acquisition Loan Suspense Account, the
shares of Stock so purchased or released shall be allocated
among the Stock Accounts of the Members in the same manner
and proportion as the Employer Contribution would be
allocated. To the extent that an Employer Contribution made
for any Plan Year is not applied to purchase Stock or to pay
principal and/or interest on an Acquisition Loan, the
Employer Contribution shall be allocated among the Other
Investments Accounts of the Members in the manner set forth
above.
(b) FORFEITURES. As of each Anniversary Date, any Forfeitures
credited to the Forfeiture Suspense Account as of such
Anniversary Date shall be allocated among the Member Accounts
in the same proportion that each such Member's Compensation
for such Plan Year (or portion thereof) bears to the total
Compensation of all Members for such Plan Year (or portion
thereof), provided, however, that a Member, other than a
Member who terminated employment during such Plan Year due to
retirement, death or Total Disability, who has less than
1,000 Hours of Service with an Employer during any Plan Year
or, to the extent that Forfeitures are allocated as of
August 31, 1998, or are allocated with respect to any other
portion of a Plan Year, less than a pro-rated number of Hours
of Service which is the product of (i) 1,000 Hours of Service
times (ii) a fraction, the numerator of which is the number
of completed months within the portion of the Plan Year for
which Forfeiture allocations are being made, and the
denominator of which is twelve (12), (disregarding Hours of
Service with any Affiliates that are not Employers), shall
not share in the Forfeitures for such Plan Year (or portion
thereof), and provided further that in the event the
allocation of Forfeitures provided for herein shall cause the
"annual addition" (as defined in subsection 6.5(a)) to any
Member Account to exceed the amount allowable by the Code,
the excess amount shall be reallocated as additional
Forfeitures among all other Members who otherwise share in
the allocation of Forfeitures for such Plan Year (or portion
thereof). To the extent that any Forfeitures for any Plan
Year (or portion thereof) consist of Stock, such Stock shall
be allocated to the Stock Accounts of the Members sharing in
such Forfeitures in the manner set forth above. Any
Forfeitures from Other Investments Accounts shall be
allocated among the Other Investments Accounts of the Members
sharing in such Forfeitures in the manner set forth above.
(c) DIVIDENDS. Any stock dividends received with respect to
Stock shall be credited pro rata to the Member Accounts (or,
in the case of Financed Shares securing the repayment of an
Acquisition Loan, to the Acquisition Loan Suspense Account)
to which the corresponding shares of Stock with respect to
which such stock dividends are received are allocated as of
the record date for which such stock dividends are declared.
Any cash dividends received with respect to shares of Stock
allocated to the Stock Accounts as of the record date for
which such dividends are declared shall be allocated to the
respective Other Investments Accounts of the Members to whose
Stock Accounts such shares of Stock are allocated as of the
record date for which such cash dividends are declared. Any
cash dividends received with respect to shares of Stock
either not allocated to Member Accounts, or allocated to the
Acquisition Loan Suspense Account, as of the record date for
which such dividends are declared shall be included in the
computation of net income (or loss) of the Trust Fund and
allocated as set forth in subsection 6.4(d) below, provided,
however, that to the extent that any such cash dividends are
applied to pay principal and/or interest on an Acquisition
Loan, with the result that shares of Stock are released from
the Acquisition Loan Suspense Account, the shares of Stock so
released shall be allocated among the Stock Accounts of the
Members in the same proportion that the balance of the Member
Account of each such Member bears to the balance of the
Member Accounts of all Members, determined in each case as of
the immediately preceding Anniversary Date or other Valuation
Date (reduced in each case by the amount of any distributions
from any such Member Accounts since such Anniversary Date or
other Valuation Date). Notwithstanding the foregoing, the
Committee in its discretion may direct the Trustee to
distribute dividends in cash to Members not later than ninety
(90) days after the close of the Plan Year in which the
dividends are paid, or to apply dividends toward the payment
of principal and/or interest on the Acquisition Loan the
proceeds of which were used to acquire the Financed Shares
with respect to which the dividend is paid, whether or not
such Financed Shares are allocated to Member Accounts;
provided that, if the dividend applied toward the payment of
principal and interest on an Acquisition Loan is paid with
respect to a Financed Share that is allocated to a Member's
Stock Account, then Stock with a Fair Market Value of not
less than the amount of such dividend shall be allocated to
such Member's Stock Account for the Plan Year such dividend
otherwise would have been allocated to such Member.
(d) NET APPRECIATION (OR DEPRECIATION) OF THE VALUE OF THE TRUST
FUND. As of each Anniversary Date and each other Valuation
Date, before the allocation of any Employer Contributions and
Forfeitures as of such Date, any net appreciation (or net
depreciation) in the value of the Trust Fund (taking into
account expenses of the Plan, and excluding cash dividends
with respect to shares of Stock allocated to the Stock
Accounts of the Members as of the record date for which such
dividends are declared, cash dividends with respect to shares
of Stock allocated to the Acquisition Loan Suspense Account
as of the record date for which such dividends are declared
to the extent that such dividends are applied to pay
principal and/or interest on an Acquisition Loan, and any
other amount applied to pay principal and/or interest on an
Acquisition Loan) shall be allocated among the Other
Investments Accounts in the same proportion that the
aggregate balance of the Stock Account and the Other
Investments Account of each Member bears to the aggregate
balance of the Stock Accounts and the Other Investments
Accounts of all such Members, determined in each case as of
the immediately preceding Anniversary Date or other Valuation
Date (reduced in each case by the amount of any distributions
from such Member Accounts since the Anniversary Date or other
Valuation Date). Amounts allocated pursuant to the
immediately preceding sentence shall include the amount of
sale proceeds or Stock released from the Acquisition Loan
Suspense Account, if any, from the sale or other disposition
of shares of Stock allocated to the Acquisition Loan Suspense
Account to the Acquisition Loan Suspense Account, to the
extent that such proceeds exceed the amount required to
satisfy the Acquisition Loan with respect to which such
shares are pledged as collateral.
6.5 MAXIMUM BENEFIT AND CONTRIBUTION LIMITATIONS.
(a) DEFINITIONS. For purposes of this subsection 6.5, the
following words and phrases shall have the following
meanings:
(i) "ANNUAL ADDITION" means, with respect to a Member covered
by this Plan for any Plan Year, the sum of:
(1) the amount of the Employer Contribution allocated to
his Member Account under this Plan, and all employer
contributions made on his behalf to all other Defined
Contribution Plans (as hereinafter defined), for such
Plan Year, provided, however, that the portion, if
any, of an Employer Contribution applied to pay
interest on one or more Acquisition Loans not later
than the time prescribed by law, including permitted
extensions of time, for the filing of the Employer's
federal income tax return for the Fiscal Year with
respect to which such Employer Contribution is made
shall not be taken into account for purposes of this
clause (1);
(2) the sum of all of his employee contributions to all
Defined Contribution Plans for such Plan Year; and
(3) the sum of his allocable share of all forfeitures
under all Defined Contribution Plans for such Plan
Year, provided, however, that Forfeitures shall not be
taken into account for purposes of this clause (3) to
the extent that such Forfeitures consist of shares of
Stock purchased with the proceeds of one or more
Acquisition Loans.
Annual Additions shall not include any proceeds from the
sale or other disposition of Financed Shares held in the
Acquisition Loan Suspense Account to an unrelated third
party in a bona fide commercial transaction.
(ii) "DEFINED BENEFIT PLAN" means any employee pension plan
established by the Employer or any Affiliated Corporation
and qualified under section 401 of the Code, other than a
Defined Contribution Plan.
(iii) "DEFINED CONTRIBUTION PLAN" means the Plan and any
other employee pension plan established by the Employer
or any Affiliated Corporation and qualified under section
401 of the Code, which provides for an individual account
for each member and for benefits based solely on the
amount contributed to the member's account, and any
income, expenses, gains and losses, and any forfeitures
of accounts of other members, which may be allocated to
such member's account.
(iv) "415 COMPENSATION" means the Member's wages, salary,
fees for professional service and other amounts received
for personal services actually rendered in the course of
employment with the Employer (including, but not limited
to, commissions paid salesmen, compensation for services
on the basis of a percentage of profits, commissions on
insurance, premiums, tips and bonuses), but shall not
include contributions made by the Employer to a qualified
plan of deferred compensation or a simplified employee
pension to the extent such contributions are not
includible in the Member's gross income or are
deductible, distributions from any qualified plan of
deferred compensation, amounts realized from the exercise
of a non-qualified stock option, amounts realized when
restricted stock (or property) held by the Member either
becomes freely transferable or is no longer subject to a
substantial risk of forfeiture, amounts realized from the
sale, exchange and other disposition of stock acquired
under a qualified stock option, and other amounts which
receive special tax benefits, such as group-term life
insurance. Notwithstanding the foregoing, for Plan Years
beginning on or after January 1, 1998, 415 Compensation
shall include (i) elective deferrals (as defined in
section 402(g)(3) of the Code) and (ii) amounts
contributed or deferred at the election of the Member and
excludable from the gross income of the Member under
section 125 of the Code.
(b) COMBINING OF PLANS. For purposes of the limitations of this
subsection 6.5, all Defined Benefit Plans (whether or not
terminated) of the Employer and all Affiliated Corporations
shall be treated as one Defined Benefit Plan, and all Defined
Contribution Plans (whether or not terminated) of the
Employer and all Affiliated Corporations shall be treated as
one Defined Contribution Plan.
(c) LIMITATION FOR THIS PLAN. In no event shall the Annual
Addition with respect to a Member for any Plan Year exceed
the lesser of: (i) $30,000; or (ii) 25% of such Member's 415
Compensation for such Plan Year. If for any Plan Year the
limitation of this subsection 6.5(c) shall be exceeded for
any Member, then to the extent necessary to eliminate such
excess, after first applying the relevant provisions of all
other Defined Contribution Plans that are applicable in the
event any such excess arises, and then applying the
provisions of paragraph (b) of subsection 6.4 above, the
amount of the Employer Contribution allocated to the Member
Account of such Member shall be reduced, and the amount of
any such reduction shall be allocated and reallocated to the
Member Accounts of the other Members as provided for in
subsection 6.4(a) above to the extent possible without
causing the limitations of this subsection 6.5(c) to be
exceeded with respect to such other Members, and to the
extent that the amount of any such reduction cannot be
allocated to the Member Accounts of the other Members by
reason of such limitations, such unallocated amount shall be
credited to and held in a "suspense account" and shall be
allocated and reallocated to the Member Accounts of the
Members for the next Plan Year pursuant to subsection 6.4(a)
above prior to the allocation of the Employer Contribution
for such Plan Year.
(d) LIMITATION ON BENEFITS IF COVERED UNDER THIS PLAN AND A
DEFINED BENEFIT PLAN. For Plan Years beginning prior to
January 1, 2000, in addition to the limitation in subsection
6.5(c), if a Member in this Plan is also included in a
Defined Benefit Plan maintained by the Employer or an
Affiliated Corporation, the maximum amount which may be
allocated to his Member Account in any Plan Year and/or his
projected annual benefit under the Defined Benefit Plan shall
be limited as follows:
(i) First, there shall be computed with respect to the
Defined Contribution Plan for each Plan Year a fraction
(the "Defined Contribution Fraction") the numerator of
which is the sum of all of the Annual Additions under
this Plan and under all other Defined Contribution Plans
determined as of the close of such Plan Year, and the
denominator of which is the sum of the lesser of the
following amounts for such Plan Year and for each prior
Plan Year of the Member's employment with the Employer
or an Affiliated Corporation:
(1) the product of 1.25 multiplied by the dollar
limitation in effect under section 415(c)(1)(A) of
the Code (determined without regard to section
415(c)(6) of the Code) for such Plan Year, or
(2) the product of 1.4 multiplied by 25% of the
Member's 415 Compensation for such Plan Year;
(ii) Second, there shall be computed with respect to the
Defined Benefit Plan for each Plan Year a fraction (the
"Defined Benefit Fraction") the numerator of which is
the Member's projected annual benefit (within the
meaning of section 415(e)(2)(A) of the Code) under the
Defined Benefit Plan determined as of the close of such
Plan Year, and the denominator of which is the lesser of
the following amounts:
(1) the product of 1.25 multiplied by $90,000 (provided,
however, that as of January 1 of each calendar year,
the dollar limitation as determined by the
Commissioner of Internal Revenue for that calendar
year pursuant to sections 415(b)(1)(A) and 415(d) of
the Code shall be substituted for the immediately
preceding dollar amount), or
(2) the product of 1.4 multiplied by 100% of the
Member's average compensation for his high three (3)
years of membership in the Defined Benefit Plan (as
defined in section 415(b)(3) of the Code).
(iii) Third, the Defined Contribution Fraction and the
Defined Benefit Fraction for such Plan Year shall be
totaled and if the resulting sum is more than one (1.0),
then to the extent necessary to produce a Defined
Contribution Fraction and a Defined Benefit Fraction for
such Plan Year which when added together will equal one
(1.0), the Committee shall take the following actions in
the following order:
(1) Apply the relevant provisions of all Defined Benefit
Plans that are applicable in the event any such
excess arises.
(2) Apply the relevant provisions of all other Defined
Contribution Plans that are applicable in the event
any such excess arises.
(3) Reallocate Forfeitures allocated to the Member
Account of such Member as provided in subsection
6.4(b) above.
(4) Reduce the amount of the Employer Contribution
allocated to the Member Account of such Member to
the extent necessary to eliminate such excess, and
allocate and reallocate the amount of any such
reduction to the Member Accounts of the other
Members as provided for in subsection 6.4(a) to the
extent possible without causing the limitations of
this subsection 6.5(d) to be exceeded with respect
to such other Members, and to the extent that the
amount of any such reduction cannot be allocated to
the Member Accounts of the other Members by reason
of such limitations, to credit such unallocated
amount to a "suspense account" and to allocate and
reallocate such amount to the Member Accounts of
the Members for the next Plan Year pursuant to
subsection 6.4(a) prior to the allocation of the
Employer Contribution for such Plan Year.
SECTION 7. VOTING RIGHTS; EXPENSES; STOCK PURCHASE RIGHTS, ETC.
7.1 VOTING RIGHTS. Each Member shall have the right to direct the
Trustee as to the manner in which to vote shares (including fractional
shares) of Stock allocated to the Member Account of such Member, and
the Trustee shall vote such shares of Stock only in accordance with
such directions from the respective Members, provided, however, that
with respect to fractional shares allocated to the Member Accounts of
the Members, the Trustee shall be deemed to have voted such fractional
shares in accordance with directions of the Members if it votes the
combined fractional shares allocated to the Members to the extent
possible to reflect the directions of the voting Members. In
furtherance of this subsection 7.1, the Employer shall furnish or
cause to be furnished to the Trustee and to Members appropriate
notices and information statements when voting rights with respect to
Stock are to be exercised, with such notices and information
statements to be provided at the same time and in the same manner, and
to have the same content, as the notices and information statements
that are required by applicable federal and state law to be provided
to holders of Stock. Any other rights with respect to shares of Stock
held as part of the Trust Fund that are ordinarily exercisable by the
holders of shares of Stock, including for example, without limitation,
any dissenters' appraisal rights or a decision whether or not to
tender shares of Stock in response to a tender offer therefor, shall
be exercised by the Trustee at the direction of the Members in a
manner consistent with the foregoing. Any shares of Stock in the
Trust Fund which are not allocated to any Member Account shall be
voted in the manner determined by the Trustee. Any shares of Stock
allocated to a Member Account with respect to which the Trustee does
not receive voting directions shall be voted in the manner determined
by the Trustee.
7.2 EXPENSES.
(a) EXPENSES OF ADMINISTRATION AND OPERATION. All expenses of
establishing and administering the Plan and the Trust Fund
(including, without limitation, compensation payable to the
Trustee under the terms of the Trust Agreement, reasonable
expenses, including legal fees and disbursements, incurred
by the Employer, the Committee, and the Trustee with respect
to establishment and administration of the Plan and the
Trust Fund, and all taxes of any kind that may be levied or
assessed under existing or future laws upon, or in respect
of, the Trust Fund or the income thereof) shall be charged
to and paid out of the Trust Fund, unless and to the extent
that the Employer elects to pay all or any portion of such
expenses. Such expenses charged to and paid out from the
Trust Fund shall be taken into account in computing the net
appreciation (or depreciation) of the Trust Fund for
purposes of subsection 6.4(d).
(b) TRANSACTION COSTS. Brokerage commissions, stamp and
transfer taxes, and other charges ordinarily incurred in
connection with the purchase and/or sale of stock and
securities that are paid or incurred by the Trustee in
connection with the purchase or sale of Stock held as part
of the Trust Fund shall be considered to constitute either
an additional cost of Stock purchased for the Trust Fund or
a reduction of the proceeds from the sale of Stock from the
Trust Fund, as the case may be, and not an expense within
the scope of subsection 7.2(a), Notwithstanding anything to
the contrary contained herein, no brokerage commissions
shall be paid from the Trust Fund with respect to
transactions between the Employer or an Affiliate and the
Trust Fund involving the sale, purchase, or transfer of
Stock, and stamp and transfer taxes and other charges with
respect to such transactions shall be paid from the Trust
Fund only if, and to the extent that, an independent party
dealing at arm's-length with the Employer or an Affiliate in
a similar transaction would ordinarily pay such taxes or
other charges.
SECTION 8. VESTED PORTION OF MEMBER ACCOUNTS
8.1 STOCK ACCOUNTS; OTHER INVESTMENTS ACCOUNTS.
(a) The vested portions of the Member Account of any Member
shall be the percentage of the total amount credited to the
Member Account of such Member determined on the basis of the
Member's total number of Years of Service in accordance with
the following vesting schedule:
YEARS OF SERVICEVESTED PERCENTAGE
Less than 5 0%
5 or more 100%
Notwithstanding the preceding sentence, a Member shall
become 100% vested in his Member Account upon the earliest
to occur of the following while employed by the Employer or
any Affiliate: his Total Disability, his attainment of his
Normal Retirement Age, or his death.
(b) A Member's Vested Benefit shall not be reduced as the result
of any direct or indirect amendment to this Section 8. In
the event that the vesting schedule set forth in subsection
8.1(a) is amended or modified (whether by application of the
provisions of Section 15 or otherwise), a Member with at
least three (3) Years of Service as of the expiration date
of the "election period" described in the second sentence
below may elect to continue to be subject to the vesting
schedule in effect prior to such amendment. If a Member
fails to make such election, then such Member shall be
subject to the new vesting schedule. The Member's "election
period" shall commence on the date of adoption of the
amendment and shall end 60 days after the latest of: (i) the
adoption date of the amendment; (ii) the effective date of
the amendment; or (iii) the date the Member receives written
notice of the amendment from the Employer or the Committee.
8.2 BREAKS IN SERVICE. For the purposes of this Section 8, if a
Former Member is reemployed by the Employer or an Affiliate after a
Break in Service has occurred, the Years of Service shall include
Years of Service prior to the Break in Service, subject to the
following rules:
(a) If a Former Member incurred a Break in Service, his pre-
break and post-break Service shall be used for computing
Years of Service (except as set forth in (b) and (c) below);
(b) A Former Member's Vested Benefit attributable to Service
prior to a Break in Service shall not be increased as a
result of Service following a Five-Year Break in Service;
(c) If a Former Member with no Vested Benefit incurs a Five-Year
Break in Service, the pre-break Service shall not be
included in computing Years of Service.
8.3 FULL VESTING ON CHANGE IN CONTROL. Notwithstanding anything
in this Plan to the contrary, a Member's Member Account shall be one
hundred percent (100%) vested if his employment terminates within five
(5) years following a "Change in Control" of the Plan Sponsor. For
this purpose, "Change in Control" means a change in control of the
Plan Sponsor of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934 as in effect on January 1,
1997 ("Exchange Act"), provided that such a change in control shall be
deemed to have occurred at such time as (i) any "person" (as that term
is used in Sections 13(d) and 14(d)(2) of the Exchange Act), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly, of securities representing 20%
or more of the combined voting power for election of directors of the
then outstanding securities of the Plan Sponsor or any successor of
the Plan Sponsor; (ii) during any period of two (2) consecutive years
or less, individuals who at the beginning of such period constitute
the Board of Directors cease, for any reason to constitute at least a
majority of the Board of Directors, unless the election or nomination
for election of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of the period; (iii) the shareholders of the Plan
Sponsor approve any merger, consolidation or share exchange as a
result of which the common stock of the Plan Sponsor shall be changed,
converted or exchanged (other than a merger with a wholly-owned
subsidiary of the Plan Sponsor), or any dissolution or liquidation of
the Plan Sponsor or any sale or the disposition of 50% or more of the
assets or business of the Plan Sponsor; or (iv) the shareholders of
the Plan Sponsor approve any merger or consolidation to which the Plan
Sponsor is a party or a share exchange in which the Plan Sponsor shall
exchange its shares for shares of another corporation as a result of
which the persons who were shareholders of the Plan Sponsor
immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of
the combined voting power for election of directors of the surviving
corporation following the effective date of such merger, consolidation
or share exchange." For purposes of this Section 8.3, a Change in
Control shall be deemed to occur as of the date the shareholders of
Merry Land & Investment Company, Inc. approve the Merger (as defined
in the Merger Agreement).
SECTION 9. DETERMINATION AND DISTRIBUTION OF BENEFITS
9.1 DISTRIBUTIONS PRIOR TO TERMINATION OF EMPLOYMENT. Except as
provided in subsection 9.14, no distribution shall be made of any
portion of the Member Account of a Member prior to such Member's
termination of employment with the Employer and its Affiliates. For
purposes of this Section 9, a Member shall not be considered to have
terminated employment with (or retired from) the Employer and its
Affiliates if the Member is immediately thereafter employed with any
other Employer or Affiliate. Notwithstanding the foregoing, a Member
shall be deemed to have terminated employment, and shall be entitled
to distribution of his Member Account in accordance with the
provisions of subsection 9.6, if the entity which employs the Member
ceases for any reason to be an Affiliate and the employing entity is
not an Employer in the Plan.
9.2 DETERMINATION OF BENEFITS UPON RETIREMENT. Upon a Member's
retirement on his Normal Retirement Date or Late Retirement Date, as
the case may be, all Vested Benefits credited to his Member Account as
of the Anniversary Date coinciding with or immediately following such
Retirement Date shall become distributable to the Member in accordance
with subsection 9.6.
9.3 DETERMINATION OF BENEFITS UPON DEATH.
(a) As of the Anniversary Date coincident with or next following
the death of a Member prior to retirement or other
termination of his employment with the Employer and its
Affiliates, the Trustee, in accordance with the provisions
of subsection 9.6, shall distribute all Vested Benefits of
such deceased Member to his Beneficiary.
(b) As of the Anniversary Date coincident with or next following
the death of a Former Member (which term, for purposes of
this subsection 9.3(b), includes any Member who terminated
employment with the Employer and its Affiliates prior to his
death), the Trustee, in accordance with the provisions of
subsection 9.6, shall distribute to his Beneficiary any
Vested Benefits remaining credited to the Member Account of
such deceased Former Member as of such Anniversary Date.
9.4 DETERMINATION OF BENEFITS IN THE EVENT OF TOTAL DISABILITY.
Upon the incurrence of a Member's Total Disability, all Vested
Benefits credited to his Member Account as of the Anniversary Date
coinciding with or immediately following such incurrence of Total
Disability shall become distributable to the Member in accordance with
subsection 9.6.
9.5 DETERMINATION OF BENEFITS UPON TERMINATION FOR REASONS OTHER
THAN RETIREMENT, DEATH, OR TOTAL DISABILITY.
(a) Upon a Member's termination of employment with the Employer
and its Affiliates for any reason other than retirement,
death, or Total Disability, all Vested Benefits credited to
his Member Account as of the Anniversary Date coinciding
with or immediately following such termination of employment
shall become distributable to the Member in accordance with
subsection 9.6.
(b) If, upon a Member's termination of employment with the
Employer and its Affiliates for any reason other than
retirement, death, or Total Disability, the Member does not
have any Vested Benefit, then:
(i) if the Member terminated employment before January 1,
1996, the amount credited to the Member's Account shall
be forfeited and credited to the Forfeiture Suspense
Account upon the Member incurring a Five-Year Break in
Service; and
(ii) if the Member terminated employment on or after
January 1, 1996, the Member shall be deemed to have
received a distribution of his entire Vested Benefit
and the nonvested portion of his Member Account shall
be forfeited and credited to the Forfeiture Suspense
Account upon the later of August 31, 1998, or the date
that the Member terminated employment.
(c) If a Former Member is deemed to receive distribution of his
Vested Benefit pursuant to subsection 9.5(b)(ii) and is
reemployed by the Employer or an Affiliate before a Five-
Year Break in Service, the amount of the Member's Account
that became a Forfeiture pursuant to subsection 9.5(b)(ii)
shall be restored to the amount on the date of such deemed
distribution. Any such restoration of a Member's Account
shall be made first from amounts then credited to the
Forfeiture Suspense Account and the Employer shall
contribute to the Plan any additional amounts necessary to
complete the restoration.
(d) This subsection 9.5 shall apply only to a Member who
terminates employment with the Employer and its Affiliates
prior to his Normal Retirement Date. Any Member who
terminates employment with the Employer and its Affiliates
on or after his Normal Retirement Date shall be deemed to
have retired for purposes of this Section 9, regardless of
the reasons therefor.
9.6 METHODS OF DISTRIBUTION. The distribution of a Member Account
under subsections 9.2, 9.3, 9.4, and 9.5 shall be made in the
following manner:
(a) Unless otherwise elected by the Member (or the Beneficiary
of a Member) in accordance with subsection 9.6(b), the
distribution of Stock from a Member Account shall be made in
whole shares of Stock, except that cash shall be distributed
in lieu of any fractional shares of Stock allocated to any
such Member Account.
(b) A Member (or the Beneficiary of a Member) may file with the
Employer an irrevocable election to receive all or a portion
(as the Member (or the Beneficiary of a Member) and the
Committee shall mutually determine) of the Member Account of
the Member distributable under subsections 9.2, 9.3, 9.4, or
9.5 in cash. Such election shall be made in writing, on a
form or forms supplied by the Committee, and must be
received by the Employer prior to the distribution of any
portion of the Stock in the Member Account of the Member
under subsection 9.6(a).
(c) The distribution of a Member's Other Investments Account
shall be made in cash, or in Stock, as the Member (or
Beneficiary) may elect.
(d) The distribution of a Member's Account shall be made in one
of the following modes of distribution, as elected in
writing by the Member (or the Beneficiary of a Member) on a
form or forms supplied by the Committee:
(i) A single lump sum distribution; or
(ii) Distribution in substantially equal annual, quarterly,
or monthly installments over a specified period, which
period may not exceed the life expectancy of the Member
or the joint life expectancy of the Member and his
spouse; or
(iii) Any combination of the foregoing.
In the absence of such an election, the distribution shall
be made in a single lump sum. Upon a Member's written
request, the Committee shall direct the Trustee to
accelerate the payment of all, or any portion, of the
Member's unpaid Vested Benefit.
(e) Except as otherwise provided in subsection 9.5(b)(ii), the
distribution shall be made or commence as soon as
practicable following the Anniversary Date of the Plan Year
in which the Member terminated employment with the Employer
for any reason; provided, however, that if the Member's
Vested Benefit exceeds $5,000, no such distribution shall be
made prior to the Member's Normal Retirement Age unless the
Member consents to an earlier distribution.
(f) Notwithstanding any other provision of this Plan to the
contrary, whenever the Trustee is to make or commence making
a distribution as of an Anniversary Date, the distribution
may be made or commenced on such date or as soon thereafter
as is practicable, but in no event later than 60 days after
the Anniversary Date, provided, however, that a distribution
of benefits hereunder in any event shall be made or
commenced not later than the earliest of the following:
(i) the 60th day after the close of the Plan Year in
which the latest of the following events occurs:
(A) the date on which the Member attains Normal
Retirement Age;
(B) the tenth (10th) anniversary of the date on
which the Member commenced participation in
the Plan;
(C) the date on which the Member terminates
employment with the Employer and its
Affiliates; or
(ii) unless the Member otherwise elects, one year after
the close of the Plan Year:
(A) in which the Member separates from Service by
reason of the attainment of Normal Retirement
Age, Total Disability, or death; or
(B) which is the fifth Plan Year following the
Plan Year in which the Member otherwise
separates from Service, except that this
clause shall not apply if the Member is
reemployed by the Employer or an Affiliate
before such Plan Year; or
(iii) the Required Beginning Date. With respect to a
Member who attains age 70 1/2 on or after January
1, 1996, and is not a Five Percent Owner (as
defined in subsection 15.2(c)) at any time during
the calendar year in which the Member attains
age 70 1/2 , the Required Beginning Date is the
April 1 following the calendar year in which the
Member attains age 70 1/2 or, if later, his
actual retirement date. Notwithstanding the
immediately preceding sentence, a Member who
attains age 70 1/2 in a calendar year prior to
1999 and has not retired may elect to have
distribution commence upon attainment of
age 70 1/2 . With respect to a Member who attains
age 70 1/2 on or after January 1, 1996, and is a
Five Percent Owner (as defined in
subsection 15.2(c)) at any time during the
calendar year in which the Member attains
age 70 1/2 , the Required Beginning Date is the
April 1 of the calendar year following the
calendar year in which the Member attains
age 70 1/2 .
9.7 DESIGNATION OF BENEFICIARY. Each Employee, upon becoming a
Member, may designate in writing a Beneficiary in accordance with the
definition of that term provided in subsection 2.1(d). Such
designation shall be made in a form satisfactory to the Committee.
Subject to the requirements of subsection 2.1(d), any Member may at
any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Committee.
9.8 DISTRIBUTION FOR MINOR BENEFICIARY. In the event a
distribution is to be made to a minor Beneficiary, then the Committee
may, in the Committee's sole discretion, direct that such distribution
be paid to the legal guardian, or if none, to a parent of such
Beneficiary or a responsible adult with whom the Beneficiary maintains
his residence, or to the custodian for such Beneficiary under the
Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a
payment to the legal guardian, parent, or custodian of a minor
Beneficiary shall fully discharge the Trustee, Employer, and Plan from
further liability on account thereof.
9.9 PROOF OF DEATH AND RIGHT OF BENEFICIARY OR OTHER PERSON. The
Committee may require and rely upon such proof of death and such
evidence of the right of any Beneficiary or other person to receive
any amounts distributable under subsection 9.6 as the Committee may
deem proper, and the Committee's determination of death and of the
right of any Beneficiary or other person to receive payments under the
Plan shall be conclusive.
9.10 REEMPLOYMENT OF FORMER MEMBER. If a Member who has terminated
employment with the Employer or an Affiliate is reemployed by the
Employer or an Affiliate on or before the distribution of the Member
Account of such Member pursuant to subsection 9.2 or 9.5 above, then,
except as provided in subsection 9.14, no distribution of such Member
Account shall be made until the Member again retires or incurs a Break
in Service.
9.11 OPTION TO REQUIRE EMPLOYER TO PURCHASE STOCK. If any Stock
distributed pursuant to this Plan is not "readily tradable on an
established securities market" (as defined in the second sentence
below) at the time distributed, then the recipient of such shares of
Stock received pursuant to such a distribution shall have the right
during the Put Option Period (as defined in the next sentence below)
to require the Employer, by notice in writing to the Employer within
such Period, to purchase such shares of Stock at a price equal to the
Fair Market Value of such shares determined as of the Valuation Date
coinciding with or immediately preceding the date of such purchase.
For purposes of this subsection 9.11, the term "Put Option Period"
shall mean (i) the sixty (60) day period commencing on the date
following the date of the distribution of the shares of Stock, and
(ii) sixty (60) days during the following Plan Year, which second 60-
day period shall be designated by the Employer in accordance with
section 409(h)(4) of the Code and the regulations thereunder,
provided, however, that such second 60-day period shall not commence
prior to (X) the first Valuation Date following termination of the
initial 60-day period set forth in (i) above, and (Y) notice, in
writing, to the Former Member of the value of the shares of Stock
determined as of such Valuation Date. Shares of Stock will be
considered not "readily tradable on an established securities market"
if such shares either are not traded on a national securities exchange
or quoted on a system sponsored by a national securities association,
or are subject to a restriction under any federal or state securities
law, any regulation thereunder, or any agreement affecting such shares
that renders such shares less freely tradable than would be the case
if such restriction did not exist. The put option right provided for
in this subsection 9.11 shall be exercisable only by a Member, his
Beneficiary, the donee of a Member or Beneficiary (but only with
respect to shares of Stock received as a gift by such donee), or the
person (including an estate or a distributee thereof) to whom shares
of Stock pass as the result of the death of the Member or his
Beneficiary. The Plan shall have a first right of refusal (but no
obligation) to purchase any shares of Stock tendered to the Employer
pursuant to this subsection 9.11. The Employer (or the Plan, in the
event that the Plan exercises its right described in the immediately
preceding sentence) shall have the right, in its sole and absolute
discretion, to elect to pay the purchase price for any shares of Stock
that were distributed as part of a total distribution (within the
meaning of section 409(h)(5) of the Code), and are purchased pursuant
to this subsection 9.11, in a single lump sum or, if adequate security
is provided, in substantially equal annual installments over a period
beginning not later than 30 days after the exercise of the put option
right provided for in this subsection 9.11 and not exceeding five (5)
years, with interest payable at a reasonable rate (as determined by
the Employer, or in the event the Plan elects to purchase such shares,
the Committee) on any unpaid installment balance. If the Employer (or
the Plan, in the event that the Plan exercises its right described in
the second preceding sentence) is required to purchase Stock pursuant
to this subsection 9.11 which Stock was distributed as part of an
installment distribution, the purchase price for such Stock shall be
paid in a single lump sum not later than 30 days after the exercise of
the put option right provided for in this subsection 9.11.
9.12 RIGHT OF FIRST REFUSAL TO PURCHASE STOCK. If any Stock
distributed pursuant to this Plan is at any time not traded on a
national securities exchange or quoted on a system sponsored by a
national securities association, then the Employer and the Plan shall
have a first right to purchase such shares of Stock prior to a
transfer thereof, by sale or otherwise, by the recipient, with such
purchase by the Employer or the Plan being at a price equal to the
greater of (i) the Fair Market Value of such shares of Stock
determined as of the date of purchase, or (ii) the purchase price and
other terms offered by a prospective buyer (other than the Plan or the
Employer) making a bona-fide good faith offer to purchase such shares
of Stock. The first right to purchase the shares of Stock pursuant to
this subsection 9.12 shall be exercisable by the Employer and the Plan
(with the Plan having priority over the Employer) for fourteen (14)
days after the Committee receives from the holder of the shares of
Stock written notice that a bona-fide good faith offer to purchase
such shares of Stock has been received from a third party, which
notice shall identify the offer or and all relevant terms (including,
without limitation, the proposed purchase price) of such offer. The
Committee may require that a Member (or Beneficiary) entitled to
receive a distribution of shares of Stock pursuant to this Plan
execute, as a condition to the distribution of such shares, a stock
transfer and restriction agreement evidencing the rights of the
Employer and the Plan under this subsection 9.12.
9.13 NO OTHER RIGHTS TO PUT OR CALL STOCK. Except as set forth in
subsections 9.11 and 9.12, and except as otherwise required by
applicable federal or state law, no shares of Stock acquired with the
proceeds of an Acquisition Loan shall be subject to any put, call, or
other option, or any buy-sell or similar agreement, either while held
by the Plan or when distributed by the Plan, irrespective of whether
or not the Plan then qualifies as an "employee stock ownership plan"
under section 4975(e)(7) of the Code. Notwithstanding anything to the
contrary contained in this Plan, this subsection 9.13 and the rights
and protections afforded Members and Beneficiaries under
subsections 9.11 and 9.12 are not subject to termination, amendment,
or modification insofar as such provisions apply to shares of Stock
acquired with the proceeds of one or more Acquisition Loans.
9.14 DISTRIBUTIONS TO QUALIFIED MEMBERS.
(a) Each Qualified Member (as defined in subsection 9.14(c)) may
elect annually within 90 days after the close of each Plan
Year in the Qualified Election Period (as defined in
subsection 9.14(d)) to withdraw not more than 25 percent of
the amounts credited to the Stock Account of such Qualified
Member as of the Anniversary Date for such Plan Year (taking
into account in applying such 25 percent limitation, or the
50 percent limitation described below, any amounts
previously withdrawn pursuant to this subsection 9.14);
provided, however, that in the case of the Plan Year with
respect to which the Qualified Member can make his last
withdrawal election pursuant to this subsection 9.14, this
sentence shall be applied by substituting "50 percent" for
"25 percent." Any election pursuant to this subsection 9.14
shall be made in writing, on a form or forms supplied by the
Committee, and must be received by the Employer not later
than 90 days after the close of the Plan Year to which the
election relates.
(b) Unless otherwise elected by the Qualified Member in
accordance with the following sentence, distributions of
amounts withdrawn from the Stock Account of a Qualified
Member pursuant to this subsection 9.14 shall be made in
whole shares of Stock, except that cash shall be distributed
in lieu of any fractional shares. A Qualified Member may
elect in writing on the election form described in
subsection 9.14(a) to receive all or a portion of the
amounts withdrawn from his Stock Account pursuant to this
subsection 9.14 in cash. Distributions of amounts withdrawn
pursuant to this subsection 9.14, whether in shares of Stock
or cash, shall be made no later than 90 days after the close
of the Qualified Election Period in which the withdrawal
election is made.
(c) For purposes of this subsection 9.14, the term "Qualified
Member" means any Member who has completed at least 10 years
of participation under the Plan and has attained age 55.
(d) For purposes of this subsection 9.14, the term Qualified
Election Period means the five Plan Year period beginning
with the Plan Year after the Plan Year in which the Member
attains age 55 (or, if later, beginning with the Plan Year
after the first Plan Year in which the Member first became a
Qualified Member).
9.15 ELIGIBLE ROLLOVER DISTRIBUTIONS.
(a) Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Member's election under this
subsection, a Member may elect, at the time and in the
manner prescribed by the Committee, to have any portion of
an eligible rollover distribution paid directly to an
eligible retirement plan specified by the Member in a direct
rollover.
(b) Definitions.
(i) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the Member, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Member or the joint lives (or joint life expectancies) of
the Member and the Member's designated Beneficiary, or for
a specified period of ten years or more; any distribution
to the extent such distribution is required under
section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(ii) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan is
an individual retirement account described in section
408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified
trust described in section 401(a) of the Code, that
accepts the Member's eligible rollover distribution.
However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(iii) MEMBER. For purposes of this subsection 9.15, a Member
includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of the Code,
are Members with regard to the interest of the spouse or
former spouse.
(iv) DIRECT ROLLOVER. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the
Member.
SECTION 10. ACCOUNTS AND RECORDS OF THE PLAN
The accounts and records of the Plan shall be maintained by the
Committee and shall accurately disclose the status of the Member
Account of each Member. Each Member shall be advised from time to
time, at least once each Plan Year, of the balance of his Member
Account.
SECTION 11. ADMINISTRATION
11.1 ESOP PLAN COMMITTEE. The Plan will be administered by an ESOP
Plan Committee (the "Committee") appointed by and serving at the
pleasure of the Board of Directors, and consisting of at least two (2)
persons who are directors or Employees of the Employer. The Committee
shall be a "named fiduciary" of the Plan under ERISA.
11.2 ADMINISTRATIVE RESPONSIBILITY OF THE BOARD OF DIRECTORS. The
Board of Directors shall have no duty with respect to the
administration of the Plan other than the appointment of members of
the Committee. Neither the Board of Directors nor any individual
member thereof shall be responsible as such for the performance of
duties of the Committee or of any other person with respect to
administration of the Plan.
11.3 DUTIES OF THE COMMITTEE. The Committee shall have the
following duties, responsibilities, and authority with respect to the
administration of the Plan:
(a) Direct the Trustee with respect to disbursement of benefits
and payment of reasonable expenses of the Plan.
(b) Make such uniform and nondiscriminatory rules, regulations,
and forms for the administration and interpretation of the
Plan as are not inconsistent with the terms hereof or
applicable law.
(c) Establish and maintain records appropriate to permit the
Plan to be administered according to its terms and the
requirements of applicable law.
(d) Prepare and file or otherwise disseminate all reports,
filings, and documents required by applicable law or
regulation.
(e) Establish in writing a claims procedure in accordance with
regulations of the Secretary of Labor and as provided under
ERISA.
(f) Employ such persons, including, but not limited to,
actuaries, accountants, and counsel, as it deems appropriate
to perform such duties as may from time to time be required
under ERISA and to render advice upon request with regard to
any matters arising under the Plan.
(g) Compute the amount of benefits payable to any Member or
Beneficiary in accordance with the provisions of the Plan.
(h) Interpret the Plan and decide any matters arising hereunder
in the administration and operation of the Plan, and any
interpretations or decisions so made will be conclusive and
binding on all persons having an interest in the Plan;
provided, however, that all such interpretations and
decisions will be applied in a uniform and nondiscriminatory
manner to all Employees similarly situated.
(i) Take all other steps deemed necessary to properly administer
the Plan in accordance with its terms and the requirements
of applicable law.
In carrying out its duties, the Committee shall have full
discretionary authority to exercise all powers and to make all
determinations, consistent with the terms of the Plan, in all matters
entrusted to it, and to remedy any ambiguities, inconsistencies or
omissions. The Committee's determinations will be given deference to
the maximum extent allowed by law.
11.4 DELEGATION AND ALLOCATION OF RESPONSIBILITIES OF THE
COMMITTEE.
(a) The Committee will elect a chairman from among its members
and a secretary who may be, but need not be, one of the
members of the Committee.
(b) In addition, the Committee may allocate its administrative
responsibility among its members and may designate persons
other than its members to carry out such responsibilities.
(c) To the extent a duty or responsibility is allocated or
delegated in accordance with the above procedure, neither
the Committee nor any member thereof (who is not the person
to whom the duty is allocated or delegated) shall be liable
for an act or omission of the person or persons carrying out
said duty or responsibility.
(d) A named fiduciary or other person to whom a responsibility
or duty of the Committee is allocated or delegated in
accordance with subsection 11.4(b) shall be responsible only
for the performance of that responsibility or duty according
to the terms of the delegation or allocation, and shall not
be liable for the act or omission of any other person with
respect thereto.
(e) A named fiduciary to whom a fiduciary responsibility of the
Committee has been allocated may designate persons other
than said named fiduciary to carry out such fiduciary
responsibility. Any such designation shall be made in the
manner described in subsection 11.4(b). To the extent such
designations are made, the named fiduciary making the
designation shall not be liable for an act or omission of
the person carrying out the delegated responsibilities.
(f) Any person or group of persons may serve in more than one
fiduciary capacity with respect to the Plan.
11.5 COMPENSATION AND EXPENSES. Each member of the Committee shall
serve without compensation for services as such if he is an Employee
of the Employer, but may receive reimbursement by the Employer of
expenses properly and actually incurred in carrying out the duties of
the Committee. All expenses incurred by the Committee, or a member
thereof, in carrying out the duties of the Committee, shall be paid or
reimbursed by the Employer to the extent they are not paid or
reimbursed by the Trust Fund.
11.6 MANNER OF ACTION. A majority of the members of the Committee
at the time in office shall constitute a quorum for the transaction of
business. All resolutions adopted and other actions taken by the
Committee at any meeting shall be by vote of a majority of those
present at any such meeting. Upon concurrence in writing of a
majority of the members of the Committee at the time in office, action
of the Committee may be taken without a meeting.
11.7 DISQUALIFICATION OF A MEMBER. A member of the Committee shall
not vote upon any question nor upon any right or option under the Plan
relating specifically to himself or his Beneficiary.
11.8 RECORDS. All resolutions, proceedings, acts and
determinations of the Committee shall be recorded by the secretary
thereof or under his supervision, and all such records, together with
such documents and instruments as may be necessary for the
administration of the Plan, shall be preserved in the custody of the
secretary.
11.9 APPLICATION FOR BENEFITS. Each person eligible for a benefit
under the Plan shall apply for such benefit by filing with the
Employer a claim for benefits, on a form or forms to be furnished by
the Committee. Each such person shall also furnish the Employer with
such documents, evidence, data, or information in support of such
claim as the Committee considers necessary or desirable.
11.10 APPEALS FROM DENIAL OF CLAIMS. If any claim for benefits
under the Plan is wholly or partially denied, the claimant shall be
given notice in writing of such denial within a reasonable period of
time, but not later than 60 days after the claim is filed. Such
notice shall set forth the following information:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary;
(d) An explanation that a full and fair review by the Committee
of the decision denying the claim may be requested by the
claimant or his authorized representative by filing with the
Committee, within 90 days after such notice of denial has
been received, a written request for such review; and
(e) If such request is so filed, the claimant or his authorized
representative may review pertinent documents and submit
issues and comments in writing within the same 90-day period
specified in subsection 11.10(d).
The decision of the Committee on review shall be made promptly, but
not later than 60 days after the Committee's receipt of the request
for review, unless special circumstances require an extension of time
for processing, in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for
review. The decision on review shall be in writing and shall include
specific reasons for the denial, written in a manner calculated to be
understood by the claimant, and shall include specific references to
the pertinent Plan provisions on which the denial is based.
11.11 FACILITY OF PAYMENT. If the Committee shall receive evidence
satisfactory to it that a person entitled to receive any payment under
the Plan is physically or mentally incompetent to receive such payment
and to give a valid release thereof, and that another person or an
institution is then maintaining or has custody of such person, and no
guardian, committee or other representative of the estate of such
person has been duly appointed by a court of competent jurisdiction,
the Committee may direct the Trustee to make such payment to such
other person or institution, and the release of such other person or
institution shall be a valid and complete discharge for such payment.
SECTION 12. CONTROL AND MANAGEMENT OF ASSETS
12.1 CUSTODY OF ASSETS. All assets of the Plan shall be held in
trust by the Trustee pursuant to a Trust Agreement not inconsistent
with the Plan or the provisions of applicable law, including ERISA.
12.2 DUTIES OF TRUSTEE. The Trustee shall have the exclusive
authority and discretion to control and manage the assets of the Plan,
subject to the direction of the Board of Directors as provided for in
subsection 5.2; provided, however, that the Board of Directors may
appoint from time to time an independent fiduciary to act in lieu of
the Trustee with respect to certain matters concerning the assets of
the Plan.
12.3 AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors
shall have the authority to appoint a Trustee and/or an independent
fiduciary to exercise control and management of assets pursuant to
subsection 12.2 and to make appropriate determinations with respect to
continuation or removal of the Trustee or independent fiduciary. The
Board of Directors may delegate the authority granted to it under this
subsection 12.3 to a committee of two or more members of the Board of
Directors or to such other persons as may be allowed by law.
SECTION 13. AMENDMENT AND TERMINATION
13.1 FUTURE OF PLAN. While it is the intention of the Employer to
continue the Plan indefinitely, the Employer shall have the right to
terminate the Plan at any time. The Plan may be amended at any time
and from time to time by action of the Board of Directors or any
person or persons to whom the Board of Directors may specify in
writing; provided, however, that no such amendment or termination
shall be effective which shall attempt to transfer assets of the Plan
to purposes other than for the exclusive benefit of Members and their
Beneficiaries, or which shall cause or permit any assets of the Plan
to revert to or become the property of the Employer prior to the
satisfaction of all liabilities of the Plan.
13.2 CONTINUED QUALIFICATION OF PLAN. Notwithstanding anything in
this Plan to the contrary, the Board of Directors may make any and all
modifications of the Plan and Trust Agreement which the Board of
Directors shall deem necessary or appropriate in order to qualify the
Plan and Trust Agreement, and to keep the Plan and Trust Agreement
qualified, under the applicable provisions of the Code and the
applicable regulations promulgated thereunder or any amendment to the
Code or such regulations, or to cause the Plan to satisfy the
requirements of sections 4975(d)(3) and (e)(7) of the Code and the
applicable provisions of ERISA relating to employee stock ownership
plans.
13.3 TERMINATION OF PLAN. In the event that the Plan is terminated
or partially terminated, or in the event of a complete discontinuance
of contributions under the Plan, the right of all "affected employees"
to benefits accrued under the Plan as of the date of such termination,
partial termination, or discontinuance of contributions shall be
nonforfeitable. For purposes of this subsection 13.3, such a
termination, partial termination or discontinuance of contributions
shall be deemed to occur as a result of any transaction or
transactions contemplated by the Merger Agreement, and the persons who
are "affected employees" for purposes of this subsection 13.3 shall be
limited solely to those Members who are employed by Merry Land &
Investment Company, Inc. or one of its Affiliates immediately prior to
the Distribution (as defined in Section 1.2(e) of the Merger
Agreement) and who either (i) are employed by Equity Residential
Properties Trust or Equity Residential Properties Management Limited
Partnership immediately after the Merger (as defined in Recital A of
the Merger Agreement), or (ii) incur an involuntary termination as the
sole and direct result of the transactions contemplated by the Merger
Agreement. For purposes of any such termination, partial termination
or discontinuance of contributions which may be deemed to occur as a
result of any transaction contemplated by the Merger Agreement, no
Member, Former Member or any other person shall be deemed to be an
"affected employee" for purposes of this subsection 13.3 if such
Member, Former Member or person (x) was deemed to have received a
distribution of his entire Vested Benefit and the nonvested portion of
his Member Account became a Forfeiture as of August 31, 1998, pursuant
to subsection 9.5(b)(ii) of the Plan, (y) voluntarily terminated
employment with any Employer, or (z) was an employee of Merry Land
Properties, Inc. or one of its Affiliates immediately following the
Distribution.
13.4 MERGER OR CONSOLIDATION OR TRANSFER. No merger or
consolidation of the Plan with, or any transfer of assets or
liabilities of the Plan to or from, any other plan shall occur unless
each Member in the Plan would be entitled to receive a benefit
immediately after such merger, consolidation, or transfer (if the Plan
had then terminated) which is equal to or greater than the benefit he
would have been entitled to receive immediately before such merger,
consolidation, or transfer (if the Plan had then terminated).
SECTION 14. FIDUCIARY LIABILITY INSURANCE AND INDEMNIFICATION
14.1 FIDUCIARY LIABILITY INSURANCE.
(a) The Plan may purchase insurance for its fiduciaries or for
itself to cover potential liability or losses occurring by
reason of the act or omission of a fiduciary, but any such
insurance purchased by the Plan must permit recourse by the
insurer against a fiduciary in the case of a breach of
fiduciary obligation by such fiduciary.
(b) A fiduciary may purchase insurance to cover potential
liability for any act or omission of said fiduciary.
(c) The Employer may purchase insurance to cover potential
liability of one or more persons who serve in a fiduciary
capacity with respect to this Plan.
(d) Nothing in this subsection 14.1 shall be construed as
requiring the purchase of any insurance.
14.2 INDEMNITY. The Plan Sponsor hereby indemnifies and saves
harmless the members of the Board of Directors, the Committee and its
members, any person or persons to whom the Board of Directors may
delegate its duties hereunder, each Employer's officers, and the
Trustee, from and against any and all liability, loss or other
financial consequence arising by reason of any omission, act or
conduct (except willful misconduct or gross negligence) in any of such
indemnified persons' official capacities in the administration,
management or operation of the Trust and/or Plan, including all
expenses reasonably incurred in their defense, in case the Employer
fails to provide such defense. The indemnification provisions of this
subsection 14.2 shall not relieve any person from any liability he may
have under ERISA. Furthermore, any of the persons indemnified
hereunder and the Plan Sponsor may execute a letter agreement further
delineating the indemnification provided under this subsection 14.2,
provided the letter agreement must be consistent with and shall not
violate ERISA.
SECTION 15. TOP HEAVY PROVISIONS
15.1 TOP HEAVY PLAN REQUIREMENTS. Notwithstanding any other
provisions of the Plan, if for any Plan Year the Plan is determined to
be a Top Heavy Plan (as defined in subsection 15.3) within the meaning
of section 416(g) of the Code, then the following requirements shall
apply:
(a) The top heavy vesting requirement of section 416(b) of the
Code set forth in subsection 15.4;
(b) The top heavy minimum contribution requirement of section
416(c) of the Code set forth in subsection 15.5;
(c) The top heavy limitation on compensation requirement of
section 416(d) of the Code set forth in subsection 15.6; and
(d) The top heavy adjustments in the maximum benefit and
contribution limitations of section 416(h) of the Code set
forth in subsection 15.7.
15.2 DEFINITIONS. For purposes of this Section 15, the following
terms shall have the respective meanings set forth below:
(a) "AGGREGATION GROUP" means either a Required Aggregation
Group (as defined in subsection 15.2(i)) or a Permissive
Aggregation Group (as defined in subsection 15.2(h)).
(b) "DETERMINATION DATE" means, with respect to any Plan Year,
(i) the last day of the immediately preceding Plan Year, or
(ii) in the case of the first Plan Year of the Plan, the
last day of such Plan Year.
(c) "FIVE PERCENT OWNER" means any person who owns (or is
considered as owning within the meaning of section 318 of
the Code, as modified by substituting "5 percent" for "50
percent" in section 318(a)(2)(C) of the Code) more than five
percent (5%) of the outstanding stock of the Employer or any
Affiliated Corporation or stock possessing more than five
percent (5%) of the total combined voting power of all stock
of the Employer or any Affiliated Corporation, or any person
who owns more than five percent (5%) of the capital or
profits interest in any Affiliate that is not a corporation.
(d) "KEY EMPLOYEE" means, for any Plan Year, any employee or
former employee of the Employer or an Affiliated Corporation
or beneficiary of such employee who, at any time during such
Plan Year or any of the four (4) preceding Plan Years, is:
(i) An officer of the Employer or an Affiliated Corporation
having an annual compensation greater than 150 percent
of the amount in effect under section 415(b)(1)(A) of
the Code for any such Plan Year within the meaning of
section 416(i)(1)(A)(i) of the Code and the regulations
thereunder;
(ii) One of the ten employees of the Employer or an
Affiliate having annual compensation (within the
meaning of section 415 of the Code) from the Employer
or an Affiliate of more than the limitation in effect
under section 415(c)(1)(A) of the Code and owning (or
considered as owning within the meaning of section 318
of the Code, as modified by substituting "5 percent"
for "50 percent" in section 318(a)(2)(C) of the Code)
both more than a 1/2 percent ownership interest in the
Employer and the largest interests in the Employer or
any Affiliate within the meaning of
section 416(i)(1)(A)(ii) of the Code and the
regulations thereunder;
(iii) A Five Percent Owner (as defined in
subsection 15.2(c)), within the meaning of
section 416(i)(1)(A)(iii) and (B)(i) of the Code and
the regulations thereunder; or
(iv) A One Percent Owner (as defined in subsection 15.2(f))
having aggregate annual compensation (within the
meaning of section 415 of the Code) from the Employer
and all Affiliates of more than $150,000, within the
meaning of section 416(i)(1)(A)(iv) and (B)(ii) of the
Code and the regulations thereunder.
(e) "NON-KEY EMPLOYEE" means any employee of the Employer or an
Affiliate or beneficiary of such employee who is not a Key
Employee, within the meaning of section 416(i)(2) of the
Code and the regulations thereunder.
(f) "ONE PERCENT OWNER" means any person who would be described
in subsection 15.2(c) as a Five Percent owner if "one
percent (1%)" were substituted for "five percent (5%)" each
place it appears in subsection 15.2(c).
(g) "PENSION PLAN" means any Defined Benefit Plan (as defined in
subsection 6.5(a)(ii)) or any Defined Contribution Plan (as
defined in subsection 6.5(a)(iii)).
(h) "PERMISSIVE AGGREGATION GROUP" means a Required Aggregation
Group (as defined in subsection 15.2(i)) that also includes
a Pension Plan of the Employer or an Affiliate which,
although not required to be included in the Required
Aggregation Group, is treated by the Employer or an
Affiliate as being part of such Required Aggregation Group,
provided that such Required Aggregation Group would continue
to meet the requirements of sections 401(a)(4) and 410 of
the Code with such Pension Plan being taken into account.
(i) "REQUIRED AGGREGATION GROUP" means (i) each Pension Plan of
the Employer or an Affiliate in which a Key Employee is a
member, and (ii) each other Pension Plan of the Employer or
an Affiliate which enables any Pension Plan described in the
immediately preceding clause (i) to meet the requirements of
section 401(a)(4) or 410 of the Code.
(j) "TOP HEAVY GROUP" means, with respect to any Plan Year, an
Aggregation Group if, as of the Determination Date with
respect to such Plan Year, (i) the sum of (1) the present
value of the cumulative accrued benefits (determined, in
accordance with section 416(g) of the Code and the
regulations thereunder, as of the most recent date which is
within a twelve (12) month period ending on such
Determination Date that is used for computing Defined
Benefit Plan costs for minimum funding) for Key Employees
under all Defined Benefit Plans (as defined in
subsection 6.5(a)(ii)) included in such Aggregation Group,
and (2) the aggregate of the accounts (determined, in
accordance with section 416(g) of the Code and the
regulations thereunder, as of the Valuation Date (as defined
in subsection 2.1) coincident with or immediately preceding
such Determination Date) of Key Employees under all Defined
Contributions Plans (as defined in subsection 6.5(a)(iii))
included in such Aggregation Group, exceeds (ii) sixty
percent (60%) of a similar sum determined for Key Employees
and Non-Key Employees; provided, however, that if any
employee is a Non-Key Employee with respect to any Pension
Plan for any Plan Year, but such employee was a Key Employee
with respect to such Pension Plan for any prior Plan Year,
any accrued benefit for such employee and any account of
such employee shall not be taken into account for purposes
of the foregoing determination, and provided further, that,
with respect to Plan Years commencing after December 31,
1984, if any employee has not performed any services for the
Employer or an Affiliate maintaining the Pension Plan (other
than benefits under the Pension Plan) at any time during the
five-year period ending on the Determination Date, any
accrued benefit for such employee and any account of such
employee shall not be taken into account. For purposes of
this subsection 15.2(j), the accrued benefit of any Non-Key
Employee shall be determined (i) under the method which is
used for accrual purposes for all Pension Plans of the
Employer and Affiliates, or (ii) if there is no method
described in clause (i), as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under
section 411(b)(1)(C) of the Code. For purposes of
determining the present value of the cumulative accrued
benefit for any employee, or the amount of the account of
any employee, such present value or amount shall be
increased by the aggregate distributions made with respect
to such employee under the Pension Plan during the five-year
period ending on the Determination Date. The preceding
sentence shall also apply to distributions under a
terminated Pension Plan which if it had not been terminated
would have been required to be included in an Aggregation
Group.
15.3 DETERMINATION OF TOP HEAVY PLAN. The Plan shall be a Top
Heavy Plan for any Plan Year commencing after December 31, 1984, in
which the Plan is included in a Top Heavy Group (as defined in
subsection 15.2(j)).
15.4 TOP HEAVY VESTING REQUIREMENT. For any Plan Year with respect
to which the Plan is determined to be a Top Heavy Plan, each Member's
Vested Benefit in his Member Account shall be determined under the
vesting schedule set forth in the first sentence of subsection 8.1(a)
or under the following vesting schedule, whichever produces the
greater percentage:
VESTING SCHEDULE
YEARS OF SERVICEVESTED PERCENTAGE
Less than 3 0%
3 or more 100%
15.5 TOP HEAVY MINIMUM CONTRIBUTION REQUIREMENT.
(a) Except as provided in subsection 15.5(b), for any Plan Year
with respect to which the Plan is determined to be a Top
Heavy Plan, the Employer shall contribute to the Plan on
behalf of each Member who is a Non-Key Employee and who is
employed by the Employer on the last day of such Plan Year
an amount which, when added to the sum of the amount of the
Employer Contribution and the amount of Forfeitures (as
defined in subsection 2.1(s)) allocated to such Member for
such Plan Year under subsection 6.4 and the amount of
employer contributions and forfeitures (but not including
any employer contribution made on the Member's behalf
pursuant to a qualified cash or deferred arrangement (within
the meaning of section 401(k)(2) of the Code) with respect
to Plan Years commencing after December 31, 1988) allocated
to such Member for such Plan Year under all other Defined
Contribution Plans (as defined in subsection 6.5(a)(iii)),
shall be not less than three percent (3%) of such Member's
415 Compensation (as defined in subsection 6.5(a)(iv)) for
such Plan Year; provided, however, that if the amount of the
Employer Contribution and the amount of the Forfeitures and
the amount of employer contributions and forfeitures under
all other such Defined Contribution Plans for such Plan Year
allocated to each Member who is a Key Employee is less than
three percent (3%) of such Member's compensation (within the
meaning of section 415 of the Code) for such Plan Year, then
the Employer shall contribute to the Plan for such Plan Year
on behalf of each Member who is a Non-Key Employee and who
is employed by the Employer on the last day of such Plan
Year an amount which, when added to the sum of the amount of
the Employer Contribution and the amount of the Forfeitures
allocated to such Member for such Plan Year under
subsection 6.4 and the amount of employer contributions and
forfeitures (but not including any employer contribution
made on the Member's behalf pursuant to a qualified cash or
deferred arrangement (within the meaning of section
401(k)(2) of the Code) with respect to Plan Years commencing
after December 31, 1988) allocated to such Member for such
Plan Year under all other Defined Contribution Plans (as
defined in subsection 6-5(a)(iii)), shall be not less than a
percentage of such Member's 415 Compensation (as defined in
subsection 6.5(a)(iv)) for such Plan Year, which percentage
shall be the ratio of the sum of the amount of the Employer
Contribution and the amount of Forfeitures and the amount of
employer contributions and forfeitures under all other such
Defined Contribution Plans to 415 Compensation (as defined
in subsection 6.5(a)(iv)) for such Plan Year for the Key
Employee for whom such ratio is the highest. All amounts
contributed to the Plan pursuant to this subsection 15.5(a)
on behalf of a Member shall be credited to such Member's
Member Account as provided for in subsection 6.4.
(b) For any Plan Year with respect to which the Plan is
determined to be a Top Heavy Plan, the Employer shall
contribute to the Plan on behalf of each Member who is (i) a
Non-Key Employee, (ii) employed by the Employer on the last
day of such Plan Year, and (iii) a member of a Defined
Benefit Plan (as defined in subsection 6.5(a)(ii)) for such
Plan Year an amount which, when added to the sum of the
amount of the Employer Contribution and the amount of
Forfeitures (as defined in subsection 2.1(s)) allocated to
such Member for such Plan Year under subsection 6.4 and the
amount of employer contributions and forfeitures (but not
including any employer contribution made on the Member's
behalf pursuant to a qualified cash or deferred arrangement
(within the meaning of section 401(k)(2) of the Code) with
respect to Plan Years commencing after December 31, 1988)
allocated to such Member for such Plan Year under all other
Defined Contribution Plans (as defined in
subsection 6.5(a)(iii)), shall be not less than five percent
(5%) (or such lesser percentage as may be required to
satisfy the combined minimum contribution and benefit
requirements of section 416(c) of the Code, taking into
account the accrued benefit derived from employer
contributions under such Defined Benefit Plan for such
Member for such Plan Year) of such Member's 415 Compensation
(as defined in subsection 6.5(a)(iv)) for such Plan Year;
provided, however, that neither subsection 15.5(a) nor this
subsection 15.5(b) shall apply to any Non-Key Employee for
any Plan Year in which such Non-Key Employee is a member of
a Defined Benefit Plan (as defined in subsection 6.5(a)(ii))
if the accrued benefit derived from employer contributions
under such Defined Benefit Plan for such Non-Key Employee
for such Plan Year equals or exceeds the minimum benefit
prescribed by section 416(c)(1) of the Code (as modified by
section 416(h)(2)(A) of the Code, if applicable).
15.6 TOP HEAVY LIMITATION ON COMPENSATION REQUIREMENT. For any
Plan Year beginning prior to January 1, 1994, with respect to which
the Plan is determined to be a Top Heavy Plan, the annual Compensation
(as defined in subsection 2.1) of each Employee taken into account
under the Plan shall not exceed the first $200,000 of such
Compensation, and for any Plan Year beginning on or after January 1,
1994, with respect to which the Plan is determined to be a Top Heavy
Plan, the annual Compensation (as defined in subsection 2.1) of each
Employee taken into account under the Plan shall not exceed the first
$150,000 (as adjusted in both cases from time to time by the Secretary
of the Treasury).
15.7 TOP HEAVY ADJUSTMENTS IN THE MAXIMUM BENEFIT AND CONTRIBUTION
LIMITATIONS. For any Plan Year with respect to which the Plan is
determined to be a Top Heavy Plan, subsections 6.5(d)(i)(1) and
6.5(d)(ii)(1) shall be applied by substituting "1.0" for "1.25";
provided, however, that this subsection 15.7 shall not apply for any
Plan Year with respect to which the Plan is determined to be a Top
Heavy Plan if (i) for such Plan Year the Plan would not be a Top Heavy
Plan if "ninety percent (90%)" were substituted for "sixty percent
(60%)" where it appears in subsection 15.2(j), (ii) the Employer
elects to substitute "four percent (4%)" for "three percent (3%)" each
place it appears in subsection 15.5(a), and (iii) the Employer elects
to substitute "seven and one-half percent (7-1/2%)" for "five percent
(5%)" where it appears in subsection 15.5(b).
SECTION 16. MISCELLANEOUS
16.1 REPRESENTATIONS TO FIDUCIARIES. Any person who is a fiduciary
with respect to this Plan shall be entitled to rely on representations
made by Members, Employees, and Beneficiaries with respect to age and
other personal facts, unless said fiduciary knows said representations
to be false.
16.2 STANDARD OF FIDUCIARY CONDUCT. Each fiduciary shall discharge
his duties and responsibilities with respect to the Plan solely in the
interest of the Members and Beneficiaries of the Plan and according to
the terms hereof, for the exclusive purpose of providing benefits to
Members and their Beneficiaries, with the care, skill, prudence and
diligence under the circumstances prevailing from time to time that a
prudent man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of like character and with
like aims.
16.3 LIMITATION ON LIABILITY. The duties and responsibilities
allocated to each fiduciary under the Plan shall be the several and
not joint responsibility of each, and no such fiduciary shall be
liable for the act or omission of any other fiduciary unless:
(i) by his failure to properly administer his specific
responsibility he has enabled such other person to
commit a breach of fiduciary responsibility,
(ii) he knowingly participates in, or knowingly undertakes
to conceal, an act or omission of another person,
knowing such act or omission to be a breach, or
(iii) having knowledge of the breach of another, he fails to
make reasonable efforts under the circumstances to
remedy said breach.
16.4 INTERPRETATION OF PLAN. To the extent not preempted by ERISA
or other federal law, the provisions and validity and construction of
this Plan shall be subject to and governed by the laws of the State of
Georgia (excluding the choice of law rules thereof).
16.5 NOTICE OF ADDRESS. Each person entitled to benefits under the
Plan must file with the Committee, in writing, his mailing address and
each change of mailing address. Any communication, statement or
notice addressed to such person at such address shall be deemed
sufficient for all purposes of the Plan, and there shall be no
obligation on the part of the Employer, the Committee or the Trustee
to search for or to ascertain the location of such person.
16.6 FUND TO BE FOR THE EXCLUSIVE BENEFIT OF MEMBERS. The Employer
Contributions to the Trust Fund shall be for the exclusive purpose of
providing benefits to the Members and their Beneficiaries and no part
of the Trust Fund shall revert to the Employer, except as follows:
(a) If any part or all of an Employer Contribution is disallowed
as a deduction under section 404 of the Code with respect to
the Employer, then to the extent of such disallowance it may
be returned to the Employer within one (1) year after the
disallowance.
(b) If the Internal Revenue Service shall refuse to issue, or
after the expiration of 270 days following the submission of
a request for a determination shall have failed to issue, an
initial determination letter stating that the Plan as
contained herein meets the requirements of section 401(a) of
the Code, the Employer shall be entitled to receive a return
of all Employer Contributions made hereunder. Any such
request for a return of Employer Contributions must be made
by the Employer within one (1) year after such refusal or
failure to issue a determination letter.
(c) If any part of any Employee Contribution or payment is
made by an Employer
to the Plan by a mistake of fact, such
contribution or payment may be returned
to the Employer within one (1) year
after payment of the contribution.
16.7 RESTRICTIONS ON ALIENATION. Except with respect to the
creation, assignment, or recognition of a right to a benefit payable
with respect to a Member pursuant to a qualified domestic relations
order (as defined in Section 414(p) of the Code), no benefit payable
under the Plan to any person shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void.
No such benefit shall be in any manner liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of any person nor
shall it be subject to attachment or legal process for, or against,
any person, and the same shall not be recognized under the Plan,
except to such extent as may be provided pursuant to a qualified
domestic relations order or otherwise required by law.
16.8 NO ENLARGEMENT OF EMPLOYEE RIGHTS. Nothing contained in the
Plan shall be deemed to give an Employee the right to be retained in
the service of the Employer or to interfere with the right of the
Employer to discharge or retire any Employee at any time.
16.9 HEADINGS. The headings of the Plan are inserted for
convenience of reference only and shall have no effect upon the
meaning of the provisions hereof.
16.10 PLAN CONTINGENT UPON INTERNAL REVENUE SERVICE APPROVAL. The
Plan, as amended and restated herein, shall be submitted to the
Internal Revenue Service for, and is contingent upon receipt of, a
determination that the Plan qualifies as a stock bonus plan under
section 401(a) of the Code, and that the related trust qualifies for
tax-exempt status under section 501(a) of the Code.
This Plan is executed as of the dates indicated below.
MERRY LAND & INVESTMENT COMPANY, INC.
By:_______________________________________
ATTEST: Title:_________________________
__________________________ Date:_____________________________________
MERRY LAND PROPERTIES, INC.
By:_______________________________________
ATTEST: Title:_____________________________________
_________________________ Date:_____________________________________
CONSENT
The Trustee hereby consents to this amendment and restatement of
the Merry Land & Investment Company, Inc. Employee Stock Ownership
Plan.
TRUSTEE:
WITNESS: ___________________________
W. TENNENT HOUSTON
_____________________ Date:______________________
ASSET EXCHANGE AGREEMENT
ASSET EXCHANGE AGREEMENT ("Agreement"), dated as of October 15, 1998,
by and between MERRY LAND & INVESTMENT COMPANY, INC., a Georgia corporation
("Merry Land"), and MERRY LAND PROPERTIES, INC., a Georgia corporation
("Merry Land Properties").
RECITALS:
WHEREAS, Merry Land and Equity Residential Properties Trust, a
Maryland real estate investment trust ("EQR"), have entered into an
Agreement and Plan of Merger dated as of July 8, 1998, as amended by the
First Amendment to Agreement and Plan of Merger dated as of September 4,
1998 (the "Merger Agreement"), providing for the merger of EQR with Merry
Land (the "Merger"), with EQR continuing as the surviving entity of the
Merger, upon the terms and subject to the conditions set forth in the
Merger Agreement;
WHEREAS, the Board of Directors of Merry Land has determined that
Merry Land can maximize the value of certain of its assets by not including
them in the Merger, and EQR has indicated that it has no interest in
acquiring such assets;
WHEREAS, the Board of Directors of Merry Land has deemed it
appropriate and advisable, in order to enhance value for the shareholders
of Merry Land, prior to the Merger and as provided in certain Resolutions
adopted by the Board of Directors of Merry Land, to (i) transfer to Merry
Land Properties certain of the assets and liabilities of Merry Land and
(ii) distribute, immediately prior to the Merger, as a taxable distribution
to the holders of common stock, $0.01 par value, of Merry Land (the "Merry
Land Common Stock"), all of the outstanding shares of common stock, $0.01
par value, of Merry Land Properties owned by Merry Land (the "Merry Land
Properties Common Stock");
WHEREAS, Merry Land is prepared to enter into the "Transfer" (as such
term is hereinafter defined) in consideration of the issuance to Merry Land
of the Merry Land Properties Common Stock and the "Preferred Stock" (as
such term is hereinafter defined) and the execution and delivery by Merry
Land Properties of the "Senior Debt Documents" (as such term is hereinafter
defined) and the "Subordinated Debt Documents" (as such term is hereinafter
defined);
WHEREAS, the Board of Directors of Merry Land Properties has deemed it
appropriate and advisable, in order to enhance value for the shareholders
of Merry Land Properties, to accept the Transfer and, in consideration
thereof, issue the Merry Land Properties Common Stock and the Preferred
Stock to Merry Land and execute and deliver to Merry Land the Senior Debt
Documents and the Subordinated Debt Documents;
WHEREAS, following the Transfer and distribution, EQR shall acquire
the remaining businesses, operations, assets and liabilities of Merry Land
and its remaining direct and indirect subsidiaries pursuant to the Merger;
and
WHEREAS, Merry Land and Merry Land Properties have determined that it
is necessary and desirable to set forth the transactions required to effect
such contribution and distribution and to set forth other agreements that
will govern certain other matters following such distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Action" means any action, suit, arbitration, inquiry, regulatory
action, enforcement action proceeding or investigation by or before any
court, any Governmental Authority or any arbitration tribunal, including
without limitation, matters arising under or in connection with
Environmental Laws (including matters relating to Pre-Existing
Environmental Matters).
"Affiliate" means, when used with respect to a specified person,
another person that, directly or indirectly, controls, is controlled by, or
is under common control with, the person specified.
"Agent" means the distribution agent to be appointed by Merry Land to
distribute to the Holders the shares of Merry Land Properties Common Stock
pursuant to the Distribution.
"Agreed Value" means the agreed value for each of the Properties, as
set forth in Schedule 5.23A to the Merry Land Disclosure Letter (as said
Schedule may have been amended pursuant to the Merger Agreement), which
identifies a separate Agreed Value for each of the Apartment Projects,
together with an aggregate Agreed Value for all of the Properties combined.
"Agreed Value Balance Sheet" means a balance sheet reflecting the
assets (determined in accordance with the Agreed Values for said assets)
and Liabilities of Merry Land Properties immediately following the
consummation of the transaction contemplated under Articles 2 and 3 of this
Agreement. The Agreed Value Balance Sheet shall be prepared in accordance
with the Agreed Values and shall not vary in any material respect from the
Pro Forma Balance Sheet; provided that to the extent that the Agreed Value
of the Apartment Projects is less than $51,644,547 because fewer than five
Apartment Projects are being transferred pursuant to this Agreement, then
the assets and Liabilities reflected on the Agreed Value Balance Sheet
shall be adjusted from the levels set forth on the Pro Forma Balance Sheet
to reflect the reduced number of Apartment Projects being Transferred
pursuant to this Agreement, and the corresponding adjustment to the
outstanding principal balance under the Senior Debt Documents and the
Subordinated Debt Documents pursuant to Section 3.1 below; it being
understood, however, that the common stockholders' equity in Merry Land
Properties shall not be altered, by virtue of any such adjustments, from
the value for the common stockholders' equity in Merry Land Properties as
set forth on the Pro Forma Balance Sheet.
"Apartment Leases" means, collectively, all of the leases pursuant to
which Merry Land is leasing space in the Apartment Buildings to the
occupants thereof.
"Apartment Projects" means the Properties that are identified on
Schedule 5.23A of the Merry Land Disclosure Letter as being apartment
projects that are to be transferred to Merry Land Properties pursuant to
this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. <section><section> 9601 ET SEQ, as amended
from time to time.
"Clay Contracts" means all agreements or grants of rights between
Merry Land and any other party with respect to the removal, restoration,
sale, transport or manufacturing of any clay or soils containing clay
located on any of the Properties, including any leases, licenses, permits
or other arrangements in connection therewith. The Clay Contracts are
identified on Schedule 5.23A to the Merry Land Disclosure Letter.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, including any successor
legislation.
"Commercial Buildings" means the Properties that are identified on
Schedule 5.23A of the Merry Land Disclosure Letter.
"Commercial Leases" means, collectively, all of the leases pursuant to
which Merry Land is leasing space in the Commercial Buildings to the
occupants thereof. The Commercial Leases are identified on Schedule 5.23A
of the Merry Land Disclosure Letter.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" has the meaning set forth in Section 4.3.
"Distribution" means the distribution to the "Holders" (as such term
is hereinafter defined) by Merry Land, prior to the effective time of the
Merger, of all the outstanding shares of Merry Land Properties Common Stock
owned by Merry Land on the Distribution Date.
"Distribution Date" means the date determined pursuant to Section 3.1
on which the Distribution will be effected, which date will be the same
date as the record date for determining the shareholders of Merry Land
entitled to receive consideration in connection with the Merger.
"Distribution Record Date" means the close of business on the date to
be determined by the Board of Directors of Merry Land as the record date
for determining the shareholders of Merry Land entitled to receive Merry
Land Properties Common Stock in the Distribution, which will be the date on
which the Merger is effected.
"Effective Time" means the time on the Distribution Date when Merry
Land delivers to the Agent instructions directing the Agent to effect the
Distribution, which time will be immediately prior to the consummation of
the Merger.
"Environmental Laws" means and includes, without limitation, all
federal, state, local and foreign laws, statutes, regulations, codes,
orders, decrees, rules or ordinances or any judicial or administrative
order or judgment, and all principles of common law, in each case
pertaining to, touching or concerning Hazardous Materials, health,
industrial hygiene, pollution, occupational or public safety or health, or
environmental or ecological conditions, or wetlands as any of the same may
be amended and in effect from time to time.
"ERP Operating Partnership" means ERP Operating Limited Partnership,
an Illinois limited partnership, of which EQR is the general partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Hazardous Material" means any hazardous, toxic or radioactive
substance, material, matter or waste which is or becomes regulated by any
Environmental Law and shall include, but not be limited to, asbestos,
petroleum products and the terms "hazardous substance," "hazardous waste"
and "special waste" as defined in CERCLA or RCRA.
"Headquarters Lease" means the lease of even date herewith entered
into by and between Merry Land and Merry Land Properties pursuant to
Section 1.2(e) of the Merger Agreement with respect to certain office space
in Augusta, Georgia.
"Holder" means a holder of record of Merry Land Common Shares on the
Distribution Record Date.
"Intellectual Property Rights" has the meaning set forth in
Section 2.1.
"IRS" means the Internal Revenue Service.
"Liabilities" means any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including,
without limitation, Taxes and those debts, liabilities and obligations
arising under any law (including without limitation Environmental Laws),
rule, regulation, Action, threatened Action, order or consent decree of any
court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising
under any contract, commitment or undertaking.
"Losses" and "Loss" mean any and all losses, charges, Liabilities,
claims, damages, fines and penalties, response costs under CERCLA and
natural resources damages under CERCLA and costs or expenses (including,
without limitation, reasonable attorney's fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending
against any Actions or threatened Actions).
"Merger" has the meaning set forth in the Recitals.
"Merry Land Common Stock" has the meaning set forth in the Recitals.
"Merry Land Disclosure Letter" has the meaning ascribed thereto in the
Merger Agreement.
"Merry Land Liabilities" means, collectively, all the Liabilities of
Merry Land and the Retained Subsidiaries, other than the Merry Land
Properties Liabilities.
"Merry Land Properties Common Stock" has the meaning set forth in the
Recitals.
"Merry Land Properties Liabilities" means, collectively, (i) all the
Liabilities of Merry Land Properties under this Agreement, (ii) all the
Liabilities arising out of or in connection with or otherwise relating to
(A) the Assumed Liabilities, or (B) the Liabilities of Merry Land
Properties and the Merry Land Properties Subsidiaries, incurred after the
Effective Time or relating to events occurring with respect to the
Transferred Assets after the Effective Time.
"Option Agreement" means, with respect to each Option Property, an
Option Agreement and Right of First/Last Offer Agreement in the form
attached hereto as Exhibit D.
"Option Property" has the meaning set forth in Section 3.1(d).
"Other Contracts" means all contracts, agreements, leases, and
licenses to which Merry Land is a party and which relate to the Properties,
with the exception of the Tenant Leases, the Equipment Leases, and the Clay
Contracts. Other Contracts specifically includes any agreements relating
to the development of any undeveloped portions of the Properties. The
Other Contracts are identified on Schedule 5.23A to the Merry Land
Disclosure Letter.
"Pre-Existing Environmental Conditions" means all environmental
conditions (including, but not limited to, Hazardous Materials, Underground
Storage Tanks, solid wastes or materials, toxic wastes or materials, oils
and wetlands) which are on or under any of the Properties on the date that
is one day prior to the Distribution Date.
"Preferred Stock" means the Redeemable Cumulative Preferred Stock of
Merry Land Properties having the terms, preferences, rights and limitations
set forth in Exhibit A to the Preferred Stock Agreement.
"Preferred Stock Agreement" means the Preferred Stock Agreement of
even date herewith between Merry Land and Merry Land Properties, which
shall be in the form attached hereto as Exhibit A.
"Pro Forma Balance Sheet" means the pro forma Agreed Value Balance
Sheet for Merry Land Properties set forth on Schedule 5.23A to the Merry
Land Disclosure Letter.
"Properties" means, collectively, all rights, title and interests of
Merry Land (whether now or hereafter existing) in and to the following
described property, each of which, to the extent relating to a single
Premises, is referred to individually as a "Property":
i. those certain tracts of real estate legally described on
Schedule 5.23(a) to the Merry Land Disclosure Letter, together with
all and singular easements, covenants, agreements, rights, privileges,
tenements, hereditaments and appurtenances thereunto now or hereafter
belonging or appertaining thereto (collectively, the "Land"); and
ii. any award hereafter made or to be made as a result or in lieu
of condemnation with respect to the Properties (all of the foregoing
being included within the term "Land"); and
iii. all of the buildings, structures, fixtures, facilities,
installations and other improvements of every kind and description now
or hereafter in, on, over or under the Land (collectively, the
"Improvements") (the Land and Improvements being collectively referred
to as the "Premises"). Schedule 5.23A to the Merry Land Disclosure
Letter (as said Schedule may have been amended pursuant to Section
5.23 of the Merger Agreement) identifies the Properties that are to be
transferred to Merry Land Properties pursuant to this Agreement by
type (e.g., apartment project, commercial building, clay land, or
apartment development site), sets forth the address of each of the
Properties, and the following additional information with respect to
each of the Properties: (i) the approximate acreage in the case of the
clay land and development sites; (ii) the approximate gross square
footage in the case of the Commercial Buildings; and (iii) the number
of units in the case of the apartment buildings.
iv. all furniture, furnishings, fixtures, equipment, machinery,
maintenance vehicles and equipment, tools, parts, recreational
equipment, carpeting, window treatments, stationery and other office
supplies, and other tangible personal property of every kind and
description situated in, on, over or under the Premises or used solely
in connection therewith, owned by Merry Land or in which Merry Land
otherwise has an interest and which is not owned by tenants under the
Tenant Leases (as such term is hereinafter defined), together with all
replacements and substitutions therefor (together with the intangible
personal property referred to below, the "Personal Property"); and
v. The Tenant Leases, Other Contracts, Clay Contracts, and the
other intangible personal property now or hereafter owned by Merry
Land or in which Merry Land otherwise has an interest in connection
with or arising from the business now or hereafter conducted on or
from the Properties, including, without limitation, permits, licenses,
approvals, claims, choses in action, lease and other contract rights
with respect to the Properties; and
vi. all of Merry Land's rights, title and interests with respect
to any leases of equipment or other personal property used in
connection with the Properties (collectively, the "Equipment Leases").
The Equipment Leases are identified on Schedule 5.23A to the Merry
Land Disclosure Letter.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
<section><section> 6901 ET SEQ.
"Registration Statement" means the registration statement on Form 10
(or other applicable form) to be filed with the Commission by Merry Land
Properties pursuant to the requirements of Section 12 of the Exchange Act,
and the rules and regulations thereunder, in order to register the Merry
Land Properties Common Stock under Section 12(b) of the Exchange Act.
"Representatives" has the meaning set forth in Section 4.3.
"Retained Subsidiaries" means all Subsidiaries of Merry Land other
than the Merry Land Properties Subsidiaries.
"S-4" means the registration statement on Form S-4 to be filed with
the Commission relating to shares issued in connection with the Merger.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt Documents" means, collectively, the documents in the form
attached hereto as Exhibit B.
"Subsidiary" means any entity at least 51% of the total outstanding
voting interests of which are owned, directly or indirectly, by another
entity.
"Subordinated Debt Documents" means, collectively, the documents in
the form attached hereto as Exhibit D.
"Taxes" means all taxes, charges and fees imposed by the United States
or any state, county, local or foreign government or subdivision or agency
thereof.
"Tenant Leases" means, collectively, the Apartment Leases and the
Commercial Leases.
"Transaction Costs Agreement" means that certain Transaction Costs
Agreement referred to in Section 5.4 of the Merger Agreement.
"Transfer" has the meaning set forth in Section 2.4.
"Transferred Asset" and "Transferred Assets" have the meaning set
forth in Section 2.1.
"Transition Period" means the period from the Effective Time until the
date that is six (6) months following the Effective Time.
"Underground Storage Tanks" has the meaning assigned to that term by
Section 9001 of RCRA and shall also include the following: (A) any farm or
residential tank of 1,100 gallons or less capacity used for storing motor
fuel for non-commercial purposes; (B) any tank used for storing heating oil
for consumptive use on the premises where stored; (C) any septic tank;
(D) any tank which would be considered an underground storage tank under
Section 9001 of RCRA but for the fact that it contains hazardous wastes;
and (E) any pipes connected to items (A) through (D).
References to a "Section" are, unless otherwise specified, to one of
the Sections of this Agreement.
ARTICLE 2
TRANSFER OF CERTAIN PROPERTIES AND ASSETS
TO MERRY LAND PROPERTIES
2.1 Subject to the terms and conditions of this Agreement, on the
date that is one day prior to the Distribution Date, Merry Land shall,
without any representations or warranties, express or implied, assign,
transfer, convey and deliver to Merry Land Properties all of Merry Land's
right, title and interest in and to the following properties and assets
(each a "Transferred Asset", and collectively, the "Transferred Assets"),
to the extent that said Transferred Assets are assignable:
(a) the Properties;
(b) furniture, fixtures, equipment and personalty located in the
office premises demised pursuant to the Headquarters Lease;
(c) certain mortgage note receivables, reflecting outstanding
indebtedness currently held by Merry Land, as identified on Schedule
5.23A of the Merry Land Disclosure Letter;
(d) the names "Merry Land", "Merritt," the ticker symbol "MRY",
and the plate used in connection with the engraving and printing of
the Merry Land share certificates (the "Intellectual Property
Rights"), subject to the rights reserved to Merry Land with respect
thereto during the Transition Period, pursuant to Section 5.1 hereof.
Such transfer shall be effected in such a manner that Merry Land and
the Retained Subsidiaries shall have no obligation to Merry Land Properties
with respect to the Transferred Assets after the Effective Time.
2.2 ASSUMPTION.
(a) Subject to the terms and conditions of this Agreement,
simultaneously with the transfer contemplated by Section 2.1, Merry
Land Properties shall (and hereby does) assume and undertake to pay
and discharge all Liabilities relating to events occurring with
respect to the Transferred Assets after the Effective Time, accruing
after the Effective Time in connection with the Transferred Assets or
incurred after the Effective Time in connection with the Transferred
Assets or arising after the Effective Time in connection with the
Transferred Assets (collectively, the "Assumed Liabilities").
(b) Notwithstanding anything contained in Section 2.2(a), Merry
Land hereby retains, and Merry Land Properties does not assume and
will have no liability with respect to, the Merry Land Liabilities.
2.3 AGREEMENTS AND DOCUMENTS TO BE DELIVERED IN CONNECTION WITH
CONTRIBUTION AND SALE. Merry Land and Merry Land Properties shall execute
and deliver, or cause to be executed and delivered, all agreements,
documents and instruments necessary or appropriate to effect the transfer
contemplated by Section 2.1 and the assumption contemplated by Section 2.2,
including, without limitation, those agreements, documents and instruments
described in this Section 2.3:
(a) Merry Land and Merry Land Properties shall execute and
deliver, or cause to be executed and delivered:
(i) an Assignment and Assumption Agreement with respect to
the Tenant Leases, the Clay Contracts, any Other Contracts, the
Equipment Leases, and any other general intangibles intended to
be transferred to Merry Land Properties pursuant to this
Agreement, and all Assumed Liabilities;
(ii) evidence of termination of the existing property
management agreement for each of the Transferred Properties.
(b) Merry Land shall execute and deliver or cause to be executed
and delivered the following documents:
A. Quitclaim deeds in favor of Merry Land Properties with
respect to the Properties;
B. A quitclaim bill of sale in favor of Merry Land
Properties with respect to the tangible Personal Property; and
C. A quitclaim bill of sale granting to Merry Land
Properties all right, title and interest of Merry Land to the
Intellectual Property Rights.
Under each of the documents described in this Section 2.3, the assignment,
conveyance or other transfer of the Assumed Liabilities and Merry Land's
rights, title, interests, obligations and Liabilities with respect to the
Transferred Assets shall be made without recourse, representation or
warranty of any kind by Merry Land with respect to the Transferred Assets,
the Assumed Liabilities, or any instruments or agreements giving rise
thereto.
2.4 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION; TRANSFER DEEMED
EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any assignment,
transfer, conveyance or delivery (each, a "Transfer") of any Transferred
Asset contemplated by this Article 2 shall not have been consummated on or
prior to the Distribution Date, the parties shall cooperate to effect such
Transfer as promptly following the Distribution Date as shall be
practicable. Nothing herein shall be deemed to require the Transfer of any
Transferred Assets which by their terms or operation of law cannot be
assigned, transferred, conveyed or delivered; PROVIDED, HOWEVER, that Merry
Land and Merry Land Properties shall use their best efforts to seek to
obtain any necessary consents or approvals for the Transfer of all
Transferred Assets contemplated to be transferred pursuant to this
Article 2. If, as and when any such Transferred Asset is able to be
assigned, transferred, conveyed or delivered, as the case may be, such
Transfer shall be effected forthwith. The parties agree that, as of the
Distribution Date, Merry Land Properties shall be deemed to have acquired
complete and sole beneficial ownership over all of the Transferred Assets,
together with all rights, powers and privileges incident thereto and all
duties, obligations and responsibilities incident thereto including,
without limitation, to the Assumed Liabilities.
2.5 AS-IS, WHERE-IS; RELEASE BY MERRY LAND PROPERTIES. Merry Land
Properties specifically acknowledges and agrees that Merry Land has made
and makes no representation, warranty or covenant of any kind with respect
to the Transferred Assets, any environmental conditions (including, without
limitation, any Pre-Existing Environmental Conditions) at, or with respect
to, the Transferred Properties , the operations, uses and businesses
conducted thereon or therefrom, or the site or physical conditions
applicable to, or with respect to, the Transferred Properties , the zoning
regulations or other governmental requirements applicable to, or with
respect to, the Transferred Properties , the Tenant Leases, the Land
Leases, the Clay Contracts, the Equipment Leases, or any other matter
affecting the use, occupancy, operation or condition of or with respect to
the Transferred Properties , the level of income or profits with respect to
the Transferred Properties or any matter whatsoever with respect to the
Transferred Assets or the Assumed Liabilities. Merry Land Properties is
familiar with and has inspected the Transferred Properties and the
operations, uses and businesses conducted thereon or therefrom. Merry Land
Properties shall accept the Transferred Properties and the operations,
uses and businesses conducted thereon or therefrom "AS IS," "WHERE IS" and
"WITH ALL FAULTS" (whether detectable or not) on the Distribution Date,
without any adjustment for any change in the physical or financial
condition occurring from and after the date of the Merger Agreement. Merry
Land Properties acknowledges and agrees that neither Merry Land nor its
officers, directors, shareholders, trustees, agents, employees and
representatives nor any of the successors or assigns of any of the
foregoing will have, or be subject to, any liability to Merry Land
Properties or any other person resulting from the distribution to Merry
Land Properties, or Merry Land Properties's use of, any information
pertaining to the Transferred Properties, the Assumed Liabilities or the
other Transferred Assets. With the exception of any right of contribution
that Merry Land Properties may have against Merry Land under CERCLA, RCRA
or other applicable Environmental Laws or common law principles by reason
of any Action instituted against Merry Land Properties, with respect to any
Pre-Existing Environmental Condition, by any Governmental Authority or by
any natural person or entity that is not an Affiliate of Merry Land
Properties, Merry Land Properties for and on behalf of itself, its
successors and assigns and its Affiliates, hereby waives, releases,
relinquishes and forever discharges Merry Land and its officers, directors,
shareholders, trustees, agents, employees and representatives, and the
successors and assigns of all of the foregoing from and against any and all
claims or causes of action that Merry Land Properties may have against
Merry Land or its officers, directors, shareholders, trustees, agents,
employees and representatives and the successors and assigns of all of the
foregoing for and with respect to all Pre-Existing Environmental Conditions
with respect to the Transferred Properties. To the fullest extent
permitted by applicable law, Merry Land Properties waives any requirements
for Merry Land to furnish to Merry Land Properties, or record against title
to the Transferred Properties , any environmental disclosure documents that
would otherwise be required to be furnished or recorded under applicable
law.
2.6 IMPUTATION OF KNOWLEDGE TO MERRY LAND PROPERTIES. Merry Land
Properties acknowledges and agrees that certain of the key executives of
Merry Land Properties (who have exercised responsibility for the formation
of Merry Land Properties, for the negotiation, execution and delivery of
this Agreement and for effecting the Contribution) were, immediately prior
to the consummation of the Contribution, key executives of Merry Land, that
it is fair and reasonable in the circumstances to impute to Merry Land
Properties as of the execution and delivery of this Agreement and as of the
consummation of the Contribution, all knowledge, if any, of Merry Land with
respect to the Transferred Properties and the Assumed Liabilities, and
that all such knowledge shall so be (and hereby is) imputed to Merry Land
Properties. Merry Land Properties's acknowledgments and agreements set
forth in this Section and in Section 2.5 shall survive the Contribution
indefinitely and shall govern in the event of any conflict, express or
implied, with any of the Contribution Documents. Merry Land Properties is
familiar with and has no reason to believe that there are any material
inaccuracies in the Exhibits to this Agreement or in Schedule 5.23A of the
Merry Land Disclosure Letter.
2.7 CONDEMNATION AND CASUALTY; PHYSICAL CHANGES. The transactions
contemplated under this Article 2 shall be consummated as provided in this
Agreement, without adjustment or delay of any kind, notwithstanding the
occurrence of any damage, destruction or other change in the physical
condition of one or more of the Properties or the initiation or completion
of any proceedings in eminent domain (or any deeds granted by Merry Land in
lieu thereof) with respect thereto; provided that Merry Land shall,
immediately prior to the Distribution Date, assign to Merry Land
Properties, without recourse, representation or warranty, all rights, title
and interest, if any, of Merry Land in and to any insurance proceeds or
condemnation awards or claims therefor related to said damage, destruction
or taking.
2.8 CLOSING PRORATIONS AND ADJUSTMENTS
(a) A rent roll (updated to within 15 days prior to the
Distribution Date) and a proposed statement of prorations and other
adjustments shall be prepared by Merry Land Properties in conformity
with the provisions of this Agreement not less than three (3) business
days prior to the Distribution Date. For purposes of prorations, the
Transfer shall be deemed to have occurred as of 12:01 a.m. on the
Distribution Date. The following items are to be prorated or
adjusted, as the case may require, as of the Distribution Date:
A. real estate and personal property taxes and assessments
(prorated on the basis of the amount of real estate tax liabilities
for the Transferred Properties that is reflected on Merry Land's
balance sheet as of the Distribution Date);
B. the rent payable by tenants under the Tenant Leases;
provided, however, that rent and all other sums which are due and
payable to Merry Land by any tenant but uncollected as of the
Distribution Date shall not be adjusted, but Merry Land Properties
shall use diligent efforts to collect said past-due rents and shall
cause the rent and other sums for the period prior to the Distribution
Date to be remitted to Merry Land if, as and when collected. On the
Distribution Date, Merry Land shall deliver to Merry Land Properties a
schedule (prepared by Merry Land as of the most recent date available)
of all such past due but uncollected rent and other sums owed by
tenants. Merry Land Properties shall promptly remit to Merry Land any
such rent or other sums paid by scheduled tenants, but only if a
deficiency in the then current rent is not thereby created. Merry
Land Properties shall bill tenants who owe rent for periods prior to
the Distribution Date on a monthly basis for six consecutive months
following the Distribution Date. For amounts due Merry Land not
collected within thirty (30) days after the Distribution Date, Merry
Land shall have the right to sue to collect same (and Merry Land shall
have the right to continue any eviction action in process as of said
Distribution Date), but in no event may Merry Land seek to evict any
tenant or terminate any Tenant Lease.;
C. the full amount of security deposits paid under the Tenant
Leases, to the extent unapplied, together with interest thereon if
required by law or otherwise; provided that (to the extent permitted
by applicable law) Merry Land shall have the right to apply security
deposits, if any, against delinquent rents and other obligations of
the tenants;
D. water, electric, telephone and all other utility charges, and
any assignable deposits with utility companies (said assignable
deposits being credited to Merry Land) (to the extent possible,
utility prorations will be handled by meter readings on the
Distribution Date);
E. amounts due and prepayments under the Other Contracts or
Equipment Leases;
F. assignable license and permit fees;
G. amounts payable in connection with the Clay Contracts;
H. other expenses of operation and similar items customarily
prorated in connection with real estate closings for similar
properties in the locality in question; and
I. Merry Land shall be responsible for paying all premiums, fees
and other costs associated with the maintenance or termination of any
insurance policies maintained by Merry Land prior to the Distribution
Date with respect to the Properties, and shall be entitled to any
refunds in connection with the termination of said policies.
The net amount of any prorations shall be paid in cash on the Distribution
Date to Merry Land or Merry Land Properties, as the case may be, by the
other party. Any proration (other than general real estate and personal
property taxes) which must be estimated on the Distribution Date shall be
re-prorated and finally adjusted as soon as practicable after the
Distribution Date; otherwise, all prorations shall be final.
2.9 REPRESENTATIONS AND WARRANTIES OF MERRY LAND PROPERTIES. Merry
Land Properties represents and warrants to Merry Land that, (i) as of the
date hereof, Merry Land Properties has no obligations with respect to any
indebtedness or other material Liabilities of a definite or ascertainable
amount other than the indebtedness evidenced by the Senior Debt Documents,
and the Subordinated Debt Documents, and (ii) upon the consummation of the
transactions contemplated by this Agreement, the Agreed Value Balance Sheet
(prepared in accordance with the definitions set forth in this Agreement)
shall be accurate and complete in all material respects.
2.10 TRANSITION SERVICES FEE. In connection with the Merger, Merry
Land hereby agrees to pay Merry Land Properties, for transition services to
be provided by Merry Land Properties in connection with the Merger, a fee
in the amount of $2,400,000 (the "Transition Services Fee"). The
Transition Services Fee shall be due and payable by Merry Land (or by EQR
as successor to Merry Land as a result of the Merger) upon and subject to
the consummation of the Merger.
ARTICLE 3
ISSUANCE OF MERRY LAND PROPERTIES PREFERRED STOCK TO
MERRY LAND; EXECUTION AND DELIVERY OF
FINANCING DOCUMENTS AND OTHER MATTERS
3.1 GENERAL. In consideration of the Contribution, as a condition
thereto, and simultaneously therewith:
(a) Merry Land and Merry Land Properties shall execute and
deliver the Preferred Stock Agreement and, in accordance therewith,
Merry Land Properties shall issue to Merry Land five thousand (5,000)
shares of Preferred Stock, and Merry Land Properties shall deliver to
Merry Land a certificate representing Merry Land's ownership of said
shares;
(b) Merry Land Properties shall execute and deliver to Merry Land
the Senior Debt Documents. By virtue of the consummation of the
Transfer, proceeds of the loan evidenced by the Senior Debt Documents
shall be deemed to have been disbursed to Merry Land Properties in the
amount of $18,317,429 (the "Agreed Senior Debt Initial Advance");
(c) Merry Land Properties shall execute and deliver to Merry Land
the Subordinated Debt Documents. By virtue of the consummation of the
Contribution, the loan evidenced by the Subordinated Debt Documents
shall be deemed to have been disbursed in the amount of twenty million
Dollars ($20,000,000) (the "Agreed Subordinated Debt Initial
Advance");
(d) Merry Land Properties and Merry Land shall execute, deliver
and record an Option Agreement with respect to each of the two (2)
Properties that are identified on Schedule 5.23(a) to the Merry Land
Disclosure Letter as being "Option Properties".
(e) Merry Land Properties shall issue the Merry Land Properties
Common Stock to Merry Land.
Notwithstanding anything to the contrary herein contained, to the
extent that the aggregate Agreed Value of the Apartment Projects is less
than $51,644,547, said difference (the "Value Differential") shall be
deducted from the Agreed Senior Debt Initial Advance and the Agreed
Subordinated Debt Initial Advance as follows:
(i) first, the Agreed Senior Debt Initial Advance shall be
reduced, but not below zero, by the amount of the Value
Differential; and
(ii) second, the Agreed Subordinated Debt Initial Advance
shall be reduced, but not below zero, by the amount, if any, of
the Value Differential that has not previously been applied
pursuant to clause (i) above.
ARTICLE 4
DISTRIBUTION AND RELATED TRANSACTIONS
4.1 ACTIONS PRIOR TO DISTRIBUTION.
(a) The Board of Directors of Merry Land shall, establish the
Distribution Record Date and the Distribution Date in accordance with this
Agreement and shall establish any procedures necessary or appropriate in
connection with the Distribution, but in no event shall the Distribution
occur prior to such time as the conditions set forth in this Agreement have
been satisfied or waived.
(b) Merry Land and Merry Land Properties shall prepare and mail,
prior to the Distribution Date, to the holders of Merry Land Common Shares,
such information concerning Merry Land Properties, its business, operations
and management, the Distribution and such other matters as Merry Land shall
reasonably determine to be necessary and as may be required by law. Merry
Land and Merry Land Properties will prepare, and Merry Land Properties
will, to the extent required under applicable law, file with the Commission
any such documentation which Merry Land determines are necessary or
desirable to effectuate the Distribution, and Merry Land and Merry Land
Properties shall each use its reasonable best efforts to obtain all
necessary approvals from the Commission with respect thereto as soon as
practicable.
(c) Merry Land and Merry Land Properties shall take all such action
as may be necessary or appropriate under the securities or blue sky laws of
the United States (and any comparable laws under any foreign jurisdiction)
in connection with the Distribution.
(d) Merry Land and Merry Land Properties shall take all reasonable
steps necessary and appropriate to cause the conditions set forth in
Section 6.1 to be satisfied and to effect the Distribution on the
Distribution Date.
(e) Merry Land Properties shall prepare and file, and shall use its
reasonable best efforts to have approved on or prior to the Distribution
Date, an application for the listing of the Merry Land Properties Common
Stock to be distributed in the Distribution on the New York Stock Exchange,
the American Stock Exchange or NASDAQ National Market System, subject to
official notice of issuance.
4.2 DISTRIBUTION. On or prior to the Distribution Date, subject to
the conditions and rights of termination set forth in this Agreement, Merry
Land shall (i) deliver to the Agent for the benefit of the Holders a
single stock certificate representing all the Merry Land Properties Common
Stock owned by Merry Land, endorsed by Merry Land in blank, and
(ii) deliver to the Agent written instructions to distribute on the
Distribution Date to the Holders all of the Merry Land Properties Common
Stock.
4.3 UNCLAIMED STOCK. Any Merry Land Properties Common Stock that
remain unclaimed by any Holder 180 days after the Distribution Date shall
be returned to Merry Land, and any such Holder shall look only to Merry
Land for the Merry Land Properties Common Stock, subject in each case to
applicable escheat or other abandoned property laws.
4.4 NO REPRESENTATIONS OR WARRANTIES. Each of the parties hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
making any representation or warranty whatsoever, including, without
limitation, as to title, value or legal sufficiency.
ARTICLE 5
COVENANTS
5.1 UNDERTAKING BY MERRY LAND. Promptly following the Merger, and in
any event prior to the completion of the Transition Period, Merry Land
shall remove all references to the name "Merry Land" from the names of the
Retained Subsidiaries and all of its stationery; provided that Merry Land
shall not be required to remove said references prior to the expiration of
the Transition Period. Notwithstanding the foregoing, Merry Land shall
have the right and license, in perpetuity, to maintain in existence and use
the names of Merry Land Down REIT I LP, Merry Land Apartment Communities,
Inc., ML Apartments Limited, ML Texas Apartments LP and Merry Land LLC.
5.2 CORPORATE RECORDS. Merry Land shall use its best efforts to
arrange, as soon as practicable following the Distribution Date, for the
transportation and delivery to Merry Land Properties of all original
agreements, documents, books, records and files relating to or affecting
Merry Land Properties, the Transferred Assets or the Assumed Liabilities,
to the extent such items are not already in the possession of Merry Land
Properties, provided that Merry Land may retain any tax returns, reports,
forms or work papers, and Merry Land Properties will be provided with
copies of such returns, reports, forms or work papers.
5.3 CONFIDENTIALITY. Each of Merry Land and Merry Land Properties
shall hold, and shall cause its respective trustees, directors, officers,
Affiliates, employees, agents, accountants, consultants and advisors
(collectively, "Representatives") to hold, in strict confidence all
information concerning the other relating to the Transferred Assets and the
Assumed Liabilities in its possession (except to the extent that such
information has been (a) in the public domain through no fault of such
party or any of its Representatives, including information contained in the
Registration Statement and the S-4 and other statements and reports filed
with the Commission, or (b) later lawfully acquired from other sources by
such party) to the extent such information (i) relates to the period up to
the Effective Time, (ii) relates to this Agreement or (iii) is obtained
from the other party pursuant to this Agreement ("Confidential
Information"). Each party shall not release or disclose, or permit to be
released or disclosed by any of its Representatives or otherwise, any
Confidential Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors
who need to know such information, unless compelled to disclose by judicial
or administrative process or, as advised by its counsel, by other
requirements of law. In the event that either party or its Representatives
(a "Disclosing Party") is compelled to release or disclose, or permit to be
released or disclosed, any Confidential Information as provided in the
immediately preceding sentence, such Disclosing Party shall (i) immediately
notify the other party (the "Providing Party") of the existence, terms and
circumstances surrounding such a requirement, (ii) consult with the
Providing Party on the advisability of taking legally available steps to
resist or narrow such requirement, and (iii) if disclosure of such
information is nevertheless required, furnish only that portion of the
Confidential Information which, in the opinion of such Disclosing Party's
counsel, such Disclosing Party is legally compelled to disclose and to
cooperate with any action by the Providing Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment
will be accorded the Confidential Information (it being agreed that the
Providing Party shall reimburse the Disclosing Party for all reasonable
out-of-pocket expenses incurred by the Disclosing Party in connection with
such cooperation).
5.4 FURTHER ASSURANCES. Each of the parties hereto shall use their
best reasonable efforts, prior to, on and after the Distribution Date, to
take or cause to be taken, all actions, and to do, or cause to be done, all
things, necessary, proper or desirable under applicable laws and
regulations to carry out the purposes of this Agreement and to vest Merry
Land Properties with full title to all Transferred Assets. Without
limiting the foregoing, Merry Land and Merry Land Properties shall use
their reasonable best efforts to obtain all consents and approvals, to
enter into all amendatory agreements and to make all filings and
applications and take all other actions which may be required for the
consummation of the transactions contemplated by this Agreement, including,
without limitation, all applicable regulatory filings. Notwithstanding the
foregoing, Merry Land and Merry Land Properties acknowledge and agree that
certain of the Transferred Assets may be subject to rights of first refusal
or rights of first offer held by parties to the Clay Contracts or Other
Contracts. Merry Land agrees to consummate the Transfer as contemplated
herein, notwithstanding (but subject to) the rights of the holders of said
rights of first offer or rights of first refusal; provided that Merry Land
Properties hereby agrees (i) to hold Merry Land harmless from any claims by
the holders of said rights of first offer or rights of first refusal, and
(ii) to transfer the Properties in question to the holders of said rights
of first offer or rights of first refusal, if necessary in order to prevent
Merry Land from having any liability to said holders, it being understood
that Merry Land Properties shall retain all rights to any proceeds in
connection with any sale of said Properties by Merry Land Properties to
said holders.
ARTICLE 6
CONDITIONS TO THE TRANSFER AND THE DISTRIBUTIONS
6.1 CONDITIONS PRECEDENT TO THE DISTRIBUTIONS. The obligation of
Merry Land to cause the Transfer of the Transferred Assets pursuant to
Article 2 and to cause the consummation of the Distributions pursuant to
Article 4 shall be subject, at the option of Merry Land, to the fulfillment
or waiver, of each of the following conditions:
(a) EFFECTIVE DATE OF REGISTRATION STATEMENT. Each of the
Registration Statement and the S-4 shall have been declared effective
by order of the Commission and shall not be the subject of any stop
order or proceeding by the Commission seeking a stop order.
(b) NO PROHIBITIONS. Consummation of the transactions
contemplated hereby shall not be prohibited by applicable law and no
Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the
Distribution, the Merger or any transaction contemplated by this
Agreement or the Merger Agreement, it being understood that the
parties hereto hereby agree to use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be
vacated or lifted as promptly as possible.
(c) CONDITIONS PRECEDENT TO MERGER SATISFIED. Each condition to
the closing of the Merger set forth in Sections 6.1 and 6.3 of the
Merger Agreement shall have been satisfied or waived.
(d) CONDITIONS PRECEDENT TO ACQUISITION OF PREFERRED STOCK
SATISFIED. Each of the conditions to the acquisition of the Preferred
Stock, as set forth in Article 4 of the Preferred Stock Agreement, and
in the applicable sections of the Senior Debt Documents and the
Subordinated Debt Documents, shall have been satisfied or waived.
(e) TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Merry Land Properties pursuant to
Section 2.9 of this Agreement shall reasonably be expected to be true
and correct in all material respects after giving effect to the
transactions contemplated under Articles 2 and 3 hereof.
ARTICLE 7
MISCELLANEOUS
7.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the
Schedules, constitutes the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all previous
negotiations, commitments and writings with respect to such subject matter.
7.2 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement will survive the Distribution Date.
7.3 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Maryland, without regard to the
principles of conflicts of laws thereof.
7.4 NOTICES. All notices and other communications hereunder must be
in writing and must be delivered by hand, mailed by registered or certified
mail (return receipt requested) or sent by facsimile transmission to the
parties at the following addresses (or at such other addresses for a party
as may be specified by like notice) and will be deemed given on the date on
which such notice is received:
To Merry Land:
Before the Distribution Date, to:
Merry Land & Investment Company, Inc.
624 Ellis Street
Augusta, Georgia 30901
Attention: John Gibson
Fax No. (706) 722-4681
with a copy to:
Hull, Towill, Norman & Barrett, P.C.
801 Broad Street, 7{th} Floor
Trust Company Bank Building
Augusta, Georgia 30901
Attention: Mark S. Burgreen, Esq.
and:
Piper & Marbury L.L.P.
Charles Center South
Baltimore, Maryland 21201-3018
Attention: R.W. Smith, Jr., Esq.
After the Distribution Date, to:
Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Bruce C. Strohm
Fax No. (312) 454-8703
with a copy to:
Rudnick & Wolfe
203 N. LaSalle St., Suite 1800
Chicago, Illinois 60601
Attention: Errol R. Halperin, Esq.
Fax No. (312) 236-7516
To Merry Land Properties:
Merry Land Properties, Inc.
624 Ellis Street
Augusta, GA 30901
Attention: Michael N. Thompson
7.5 AMENDMENTS. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties.
7.6 SUCCESSORS AND ASSIGNS. Except in connection with the Merger,
this Agreement shall not be assignable, in whole or in part, directly or
indirectly, by either party hereto without the prior written consent of the
other, and any attempt to assign any rights or obligations arising under
this Agreement without such consent shall be void; PROVIDED, HOWEVER, that
the provisions of this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective
successors and permitted assigns; PROVIDED, FURTHER, that the rights and
obligations of Merry Land under this Agreement may be assigned after the
Merger to ERP Operating Partnership.
7.7 NO THIRD-PARTY BENEFICIARIES. Except for the provisions of
Article V relating to Indemnitees and as otherwise expressly provided
herein, the provisions of this Agreement are solely for the benefit of the
parties hereto and their respective successors and permitted assigns and
should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
7.8 TITLE AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
7.9 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise
available to any party hereto, each party hereto acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder are
specifically enforceable.
7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
7.11 PRODUCTION OF WITNESSES. From and after the Effective Time, each
party shall use reasonable efforts to make available to the other party,
upon written request, its officers, directors, trustees, employees and
agents as witnesses to the extent that any such person may reasonably be
required in connection with any legal, administrative or other proceedings
in which the requesting party may from time to time be involved.
7.12 NON-RECOURSE. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Merry Land by the undersigned in his capacity as a
director or officer of Merry Land, which has been formed as a Georgia
corporation, and not individually, and neither the directors, officers or
shareholders of Merry Land shall be personally bound or have any personal
liability hereunder. Merry Land Properties shall look solely to the assets
of Merry Land Properties for satisfaction of any liability of Merry Land
with respect of this Agreement and all documents, agreements,
understandings and arrangements relating to this Agreement and will not
seek recourse or commence any action against any of the trustees or
officers of Merry Land or any of their personal assets for the performance
or payment of any obligation of Merry Land hereunder or thereunder.
7.13 NON-RECOURSE. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Merry Land Properties by the undersigned in his
capacity as a director or officer of Merry Land Properties, which has been
formed as a Georgia corporation, and not individually, and neither the
directors, officers or shareholders of Merry Land Properties shall be
personally bound or have any personal liability hereunder. Merry Land
shall look solely to the assets of Merry Land Properties for satisfaction
of any liability of Merry Land Properties with respect of this Agreement
and all documents, agreements, understandings and arrangements relating to
this Agreement and will not seek recourse or commence any action against
any of the trustees or officers of Merry Land Properties or any of their
personal assets for the performance or payment of any obligation of Merry
Land Properties hereunder or thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
MERRY LAND & INVESTMENT COMPANY, INC., a
Georgia corporation
By:
Name:
Title:
MERRY LAND PROPERTIES, INC., a Georgia
corporation
By:
Name:
Title:
$5,000,000
PREFERRED STOCK AGREEMENT
Dated as of October 15, 1998
between
MERRY LAND & INVESTMENT COMPANY, INC.
and
MERRY LAND PROPERTIES, INC.,
as the Company
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
I. DEFINITIONS................................................1
Section 1.1 Defined Terms..................................1
Section 1.2 Accounting Terms and Determinations...........18
II. ISSUANCE OF PREFERRED STOCK TO MLIC.......................19
Section 2.1 Issuance......................................19
Section 2.2 Certificates..................................19
III. REPRESENTATIONS AND WARRANTIES............................19
Section 3.1 Existence and Power...........................19
Section 3.2 Power and Authority...........................19
Section 3.3 No Violation..................................19
Section 3.4 Financial Information.........................20
Section 3.5 Litigation....................................20
Section 3.6 Compliance with ERISA.........................21
Section 3.7 Environmental Matters.........................21
Section 3.8 Taxes.........................................21
Section 3.9 Full Disclosure...............................21
Section 3.10 Solvency.....................................22
Section 3.11 Governmental Approvals.......................22
Section 3.12 Investment Company Act; Public Utility
Holding Company Act.........................22
Section 3.13 Principal Offices............................22
Section 3.14 Patents, Trademarks, etc.....................22
Section 3.16 No Default...................................22
Section 3.17 Licenses, etc................................22
Section 3.18 Compliance With Law..........................23
Section 3.19 No Burdensome Restrictions...................23
Section 3.20 Brokers' Fees................................23
Section 3.21 Labor Matters................................23
Section 3.22 Insurance....................................23
Section 3.23 Organizational Documents.....................23
Section 3.24 Qualifying Unencumbered Properties...........23
Section 3.25 Investment Affiliates........................24
IV. CONDITIONS PRECEDENT......................................24
V. AFFIRMATIVE AND NEGATIVE COVENANTS........................25
Section 5.1 Information...................................25
Section 5.2 Payment of Obligations........................28
Section 5.3 Maintenance of Property; Insurance; Leases....28
Section 5.4 Conduct of Business and Maintenance of
Existence.....................................29
Section 5.5 Compliance with Laws..........................29
Section 5.6 Inspection of Property, Books and Records.....29
Section 5.7 Existence.....................................29
Section 5.8 Financial Covenants...........................30
Section 5.9 Restriction on Fundamental Changes............30
Section 5.10 Changes in Business..........................31
Section 5.11 Loans........................................31
Section 5.12 Investment Affiliates........................31
Section 5.13 Transactions with Affiliates.................31
Section 5.14 Payments to an Affiliate.....................31
Section 5.15 Materials of Environmental Concern...........31
Section 5.16 Issuance of Preferred Stock..................32
VI. EVENTS OF DEFAULT.........................................32
Section 6.1 Events of Default.............................32
VII. MISCELLANEOUS.............................................34
Section 7.1 Termination of the Agreement..................34
Section 7.2 Securities Law Matters........................34
Section 7.3 Binding Effect................................36
Section 7.4 Notices.......................................36
Section 7.5 No Waivers....................................37
Section 7.6 Expenses; Indemnification.....................37
Section 7.7 Amendments and Waivers........................38
Section 7.8 Assignment....................................38
Section 7.9 Governing Law; Submission to Jurisdiction.....38
Section 7.10 Counterparts; Integration; Effectiveness.....39
Section 7.11 WAIVER OF JURY TRIAL.........................39
Section 7.12 Survival.....................................39
Section 7.13 Limitation of Liability......................39
Section 7.14 Recourse Obligation..........................39
Section 7.15 Confidentiality..............................39
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Terms, Preferences, Rights and Limitations of Preferred
Stock
Exhibit B - Certificate of Incorporation and Bylaws of the Company
Exhibit C - Opinion of the Company's Counsel
Exhibit D - Securities Information
SCHEDULES
Schedule 1.1A -Appraised Values
Schedule 1.1B- Participating Assets
Schedule 3.6 - ERISA Plans
Schedule 3.15 - Real Property
Schedule 3.24 - Qualifying Unencumbered Property
<PAGE>
PREFERRED STOCK AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT dated as of October 15, 1998
(this "Agreement") is entered into between MERRY LAND INVESTMENT COMPANY,
INC., a Georgia corporation ("MLIC"), and MERRY LAND PROPERTIES, INC., a
Georgia corporation (the "Company").
Pursuant to the Asset Exchange Agreement of even date herewith between
MLIC and the Company, and in accordance with the terms and subject to the
conditions set forth in this Agreement, the Company has agreed to issue to
MLIC on the Closing Date five thousand (5,000) shares of Preferred Stock of
the Company.
ACCORDINGLY, the Company and MLIC agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.11827 DEFINED TERMS. As used in this Agreement, the
following terms shall have the meanings:
"ACCOMMODATION OBLIGATIONS" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of
which that Person is liable for any Indebtedness or other obligation
or liability of another Person, including without limitation and
without duplication (i) any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising
through any agreement to purchase, repurchase or otherwise acquire
such Indebtedness, obligation or liability or any security therefor,
or to provide funds for the payment or discharge thereof (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make payment other than for value received
and (ii) any obligation of such Person arising through such Person's
status as a general partner of a general or limited partnership with
respect to any Indebtedness, obligation or liability of such general
or limited partnership.
"ADJUSTED ASSET VALUE" means, with respect to any Person or
Property (exclusive of Participating Assets), (i) for any Property
(other than Unimproved Assets or Participating Assets) for which an
acquisition or disposition has not occurred in the Fiscal Quarter most
recently ended by the Company and its Consolidated Subsidiaries, the
product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to any such Property owned by the
Company or any such Consolidated Subsidiary minus (aa) with respect to
any apartment units contained in such Property, an amount equal to the
product of the average number of apartment units in such Property
during such period and the Capital Apartment Reserve for such period,
and minus (bb) with respect to any commercial property other than
apartments units contained in such Property, an amount equal to the
product of the average number of square feet of leased space in such
commercial property other than apartments units contained in such
Property and the Capital Commercial Reserve for such period, and the
denominator of which is the FMV Cap Rate, plus (ii) for any Property
(other than Unimproved Assets or Participating Assets) which has been
acquired by the Company and its Consolidated Subsidiaries in the
Fiscal Quarter most recently ended, the Net Price of the Property paid
by the Company or the Consolidated Subsidiary, plus (iii) for any
Unimproved Assets owned by the Company or its Consolidated
Subsidiaries on the Effective Date, the lesser of (yy) the appraised
value on the Effective Date of such Unimproved Assets owned by the
Company or any Consolidated Subsidiary, or (zz) the amount set forth
on Schedule 1.1A attached hereto with respect to such Unimproved
Assets, provided, however, that if the Company has commenced the
construction of improvements on any such Unimproved Asset and a loan
facility for such construction is in place, the value thereof shall be
equal to the amount reflected on the Company's balance sheet for
"construction in progress" with respect to such Unimproved Asset, plus
(iv) for any Unimproved Assets acquired by the Company and its
Consolidated Subsidiaries after the Effective Date, the Net Price of
the Unimproved Assets paid by the Company or the Consolidated
Subsidiary, provided, however, that if the Company has commenced the
construction of improvements on any such Unimproved Asset and a loan
facility for such construction is in place, the value thereof shall be
equal to the amount reflected on the Company's balance sheet for
"construction in progress" with respect to such Unimproved Asset.
"AFFILIATE" shall mean with respect to any Person (i) each Person
that, directly or indirectly, owns or controls, whether beneficially,
or as a trustee, guardian or other fiduciary, 5% or more of the Stock
having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or
(iii) each of such Person's officers, directors, joint venturers and
partners. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Preferred Stock Agreement as the same
may from time to time hereafter be modified, supplemented or amended.
"APPLICABLE INTEREST RATE" shall mean (i) with respect to any
Fixed Rate Indebtedness, the fixed interest rate applicable to such
Fixed Rate Indebtedness at the time in question, and (ii) with respect
to any Floating Rate Indebtedness, either (x) the rate at which the
interest rate applicable to such Floating Rate Indebtedness is
actually capped (or fixed pursuant to an interest rate hedging
device), at the time of calculation, if the Company has entered into
an interest rate cap agreement or other interest rate hedging device
with respect thereto or (y) if the Company has not entered into an
interest rate cap agreement or other interest rate hedging device with
respect to such Floating Rate Indebtedness, the greater of (A) the
rate at which the interest rate applicable to such Floating Rate
Indebtedness could be fixed for the remaining term of such Floating
Rate Indebtedness, at the time of calculation, by the Company entering
into any unsecured interest rate hedging device either not requiring
an upfront payment or if requiring an upfront payment, such upfront
payment shall be amortized over the term of such device and included
in the calculation of the interest rate (or, if such rate is incapable
of being fixed by entering into an unsecured interest rate hedging
device at the time of calculation, a fixed rate equivalent reasonably
determined by MLIC) or (B) the floating rate applicable to such
Floating Rate Indebtedness at the time in question.
"APPROVED BANK" shall mean banks which have (i)(a) a minimum net
worth of $500,000,000 and/or (b) total assets of $10,000,000,000, and
(ii) a minimum long term debt rating of (a) BBB+ or higher by S&P, and
(b) Baa1 or higher by Moody's.
"ASSET EXCHANGE AGREEMENT" shall mean the Asset Exchange
Agreement, dated as of October 15, 1998, by and between MLIC and the
Company, including all amendments, modifications and supplements
thereto and any appendices, exhibits or schedules to any of the
foregoing, and shall refer to the Asset Exchange Agreement as the same
may be in effect at the time such reference becomes operative.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"BASE RATE" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 0.5%
plus the Federal Funds Rate for such day.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to
by any member of the ERISA Group.
"CAPITAL LEASES" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"CAPITAL APARTMENT RESERVE" shall mean, for any period, $62.50
for each Fiscal Quarter to occur during such period.
"CAPITAL COMMERCIAL RESERVE" shall mean, for any period, $1.00
for each Fiscal Quarter to occur during such period.
"CAPITAL EXPENDITURES" as applied to any Person, means all
payments, including, without limitation, payments under Capital
Leases, for any fixed assets or improvements, or replacements,
substitutions or additions thereto, that have a useful life of more
than one year and which are required to be capitalized under GAAP.
"CASH AND CASH EQUIVALENTS" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without
limitation, treasury bills, notes and bonds, (iii) interest bearing or
discounted obligations of Federal agencies and Government sponsored
entities or pools of such instruments offered by Approved Banks and
dealers, including without limitation, Federal Home Loan Mortgage
Corporation participation sale certificates, Government National
Mortgage Association modified pass through certificates, Federal
National Mortgage Association bonds and notes, and Federal Farm Credit
System securities, (iv) time deposits, domestic and eurodollar
certificates of deposit, bankers acceptances, commercial paper rated
at least A-1 by S&P and P-1 by Moody's and/or guaranteed by an Aa
rating by Moody's, a AA rating by S&P or better rated credit, floating
rate notes, other money market instruments and letters of credit each
issued by Approved Banks (provided that the same shall cease to be a
"Cash or Cash Equivalent" if at any time any such bank shall cease to
be an Approved Bank), (v) obligations of domestic corporations,
including, without limitation, commercial paper, bonds, debentures and
loan participations, each of which is rated at least AA by S&P and/or
Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA
rating by S&P or better rated credit, (vi) obligations issued by
states and local governments or their agencies, rated at least MIG-1
by Moody's and/or SP-1 by S&P and/or guaranteed by an irrevocable
letter of credit of an Approved Bank (provided that the same shall
cease to be a "Cash or Cash Equivalent" if at any time any such bank
shall cease to be an Approved Bank), (vii) repurchase agreements with
major banks and primary government security dealers fully secured by
the U.S. Government or agency collateral equal to or exceeding the
principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA
rating given by S&P or Aa2 rating given by Moody's or better rated
credit.
"CHANGE OF CONTROL" shall mean one or more of the following
events:
(a) less than a majority of the members of the Company's Board of
directors shall be persons who either (i) were serving as directors on
the Closing Date or (ii) were nominated as directors and approved by
the vote of the majority of the directors who are directors referred
to in clause (i) above or this clause (ii); or
(b) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the capital stock of the
Company as of the Closing Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing more than thirty percent (30%)
of the combined voting power of the outstanding voting securities for
the election of directors or shall have the right to elect a majority
of the Board of Directors of the Company.
"CLOSING DATE" means the date on or after the Effective Date on
which the conditions set forth in Article IV shall have been satisfied
to the satisfaction of MLIC.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
"COMPANY'S SHARE" means the Company's share of the liabilities or
assets, as the case may be, of a Consolidated Subsidiary based upon
the Company's percentage ownership of such Consolidated Subsidiary, as
the case may be.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity which is consolidated with the Company in accordance with
GAAP.
"CONTINGENT OBLIGATION" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to
be shown on such Person's balance sheet in accordance with GAAP, and
(ii) any obligation required to be disclosed in the footnotes to such
Person's financial statements, guaranteeing partially or in whole any
Non-Recourse Indebtedness, lease, dividend or other obligation,
exclusive of contractual indemnities (including, without limitation,
any indemnity or price-adjustment provision relating to the purchase
or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet
been called on or quantified, of such Person or of any other Person.
The amount of any Contingent Obligation described in clause (ii) shall
be deemed to be (a) with respect to a guaranty of interest or interest
and principal, or operating income guaranty, the Net Present Value of
the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to
the debt service for the note secured thereby), calculated at the
Applicable Interest Rate, through (i) in the case of an interest or
interest and principal guaranty, the stated date of maturity of the
obligation (and commencing on the date interest could first be payable
thereunder), or (ii) in the case of an operating income guaranty, the
date through which such guaranty will remain in effect, and (b) with
respect to all guarantees not covered by the preceding clause (a), an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made or, if not stated
or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder) as recorded on the balance sheet and on the footnotes to
the most recent financial statements of the Company required to be
delivered pursuant to Section 5.1 hereof. Notwithstanding anything
contained herein to the contrary, guarantees of completion shall not
be deemed to be Contingent Obligations unless and until a claim for
payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent
Obligation in an amount equal to any such claim. Subject to the
preceding sentence, (i) in the case of a joint and several guaranty
given by such Person and another Person (but only to the extent such
guaranty is recourse, directly or indirectly to the Company), the
amount of the guaranty shall be deemed to be 100% thereof unless and
only to the extent that such other Person has delivered Cash or Cash
Equivalents to secure all or any part of such Person's guaranteed
obligations and (ii) in the case of a guaranty (whether or not joint
and several) of an obligation otherwise constituting Indebtedness of
such Person, the amount of such guaranty shall be deemed to be only
that amount in excess of the amount of the obligation constituting
Indebtedness of such Person. Notwithstanding anything contained
herein to the contrary, "Contingent Obligations" shall be deemed not
to include guarantees of Unused Commitments or of construction loans
to the extent the same have not been drawn. All matters constituting
"Contingent Obligations" shall be calculated without duplication.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, lease, contract, undertaking, document or
instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is
subject (including without limitation any restrictive covenant
affecting such Person or any of its properties).
"CONVERTIBLE SECURITIES" means evidences of shares of stock,
limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible
into or exchangeable for, with or without payment of additional
consideration, shares of common stock of the Company, either
immediately or upon the arrival of a specified date or the happening
of a specified event.
"DEBT RESTRUCTURING" means a restatement of, or material change
in, the amortization or other financial terms of any Indebtedness of
the Company or any Consolidated Subsidiary.
"DEBT SERVICE" means, for any period, Interest Expense for such
period PLUS scheduled principal amortization (excluding any individual
scheduled principal payment which exceeds 25% of the original
principal amount of an issuance of Indebtedness) for such period on
all Indebtedness of the Company, on a consolidated basis.
"DEFAULT" means any condition or event which with the giving of
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized
by law to close.
"EBITDA" means, for any period (i) Net Income for such period,
PLUS (ii) depreciation and amortization expense and other non-cash
items deducted in the calculation of Net Income for such period, PLUS
(iii) Interest Expense deducted in the calculation of Net Income for
such period, PLUS, (iv) Taxes deducted in the calculation of Net
Income for such period, MINUS (v) the gains (and PLUS the losses) from
extraordinary items or asset sales or write-ups or forgiveness of
indebtedness included in the calculation of Net Income, for such
period, MINUS (vi) earnings of Subsidiaries for such period
distributed to third parties, all of the foregoing without
duplication. In calculating EBITDA, the effect of the Participating
Assets and the Participating Loans shall be excluded.
"EFFECTIVE DATE" means the date this Agreement becomes effective
in accordance with Section 7.10.
"ENVIRONMENTAL AFFILIATE" means any partnership, joint venture,
trust or corporation in which an equity interest is owned by the
Company, either directly or indirectly, and, as a result of the
ownership of such equity interest, the Company may have recourse
liability for Environmental Claims against such partnership, joint
venture or corporation (or the property thereof).
"ENVIRONMENTAL APPROVALS" means any permit, license, approval,
ruling, variance, exemption or other authorization required under
applicable Environmental Laws.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by
any other Person alleging potential liability of such Person for
investigatory costs, cleanup costs, governmental response costs,
natural resources damage, property damages, personal injuries, fines
or penalties arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such
Person or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law, in each case (with
respect to both (i) and (ii) above) as to which there is a reasonable
possibility of an adverse determination with respect thereto and
which, if adversely determined, would have a Material Adverse Effect
on the Company.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on human
health or to emissions, discharges or releases of Materials of
Environmental Concern into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern or the clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA GROUP" means the Company, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together
with the Company or any Subsidiary, are treated as a single employer
under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Domestic Business Day next succeeding such
day, PROVIDED that (i) if such day is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business
Day, the Federal Funds Rate for such day shall be the average rate
quoted to MLIC on such day on such transactions as determined by MLIC.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"FISCAL QUARTER" means a fiscal quarter of a Fiscal Year.
"FISCAL YEAR" means the fiscal year of the Company which shall be
the twelve (12) month period ending on the last day of December in
each year.
"FIXED CHARGES" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, (ii) the product of the average
number of apartment units owned (directly or beneficially) by the
Company or any Subsidiary of the Company during such period and the
Capital Apartment Reserve for such Period, (iii) the product of the
average number of square feet of commercial property other than
apartment units owned (directly or beneficially) by the Company or any
Subsidiary of the Company during such period and the Capital
Commercial Reserve for such Period, and (iv) dividends on preferred
shares in the Company payable by the Company for such period.
"FIXED RATE INDEBTEDNESS" means all Indebtedness which accrues
interest at a fixed rate.
"FLOATING RATE INDEBTEDNESS" means all Indebtedness which is not
Fixed Rate Indebtedness and which is not a Contingent Obligation or an
Unused Commitment.
"FUNDS AVAILABLE FOR DISTRIBUTION" as applied to any Person (and
without duplication) means (i) Net Income, MINUS (ii) Capital
Expenditures, PLUS (iii) depreciation and amortization, but only to
the extent deducted in the calculation of Net Income.
"FMV CAP RATE" means 9.5%.
"GAAP" means generally accepted accounting principles recognized
as such in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
"GROSS ASSET VALUE" means, with respect to any Person or
Property, Adjusted Asset Value plus, in the case of any Person, the
value of any Cash or Cash Equivalent owned by such Person and not
subject to any Lien.
"INDEBTEDNESS" as applied to any Person (without duplication and
excluding, in any event, the principal amount of any currently
outstanding Participating Loans), means (a) all indebtedness,
obligations or other liabilities of such Person for borrowed money,
(b) all indebtedness, obligations or other liabilities of such Person
evidenced by Securities or other similar instruments, (c) all
Contingent Obligations of such Person, (d) all reimbursement
obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's
account or other similar instruments for which a contingent liability
exists, (e) all obligations of such Person to pay the deferred
purchase price of Property or services, (f) all obligations in respect
of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others
secured by a Lien on any asset of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by, or are a
personal liability of such Person, (h) all indebtedness, obligations
or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange
agreements (other than Interest Rate Contracts purchased to hedge
Indebtedness), (i) ERISA obligations currently due and payable and
(j) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such
Person.
"INDEMNITEE" has the meaning set forth in Section 7.6(b).
"INTEREST EXPENSE" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized
(including the interest component of Capital Leases but excluding
interest expense covered by an interest reserve established under a
loan facility and any interest expense with respect to a currently
outstanding Participating Loan) of the Company, on a consolidated
basis, including without limitation all commissions, discounts and
other fees and charges owed with respect to drawn letters of credit,
amortized costs of Interest Rate Contracts incurred on or after the
Closing Date, calculated for all Fixed Rate Indebtedness, at the
actual interest rate in effect with respect to all Indebtedness
outstanding as of the last day of such Fiscal Quarter and in the case
of all Floating Rate Indebtedness, the greater of (i) (A) the Treasury
Rate plus 1.50% for taxable Indebtedness and (B) 6.0% for tax-exempt
Indebtedness, (ii) the actual rate of interest in effect with respect
to such Floating Rate Indebtedness outstanding for which no Interest
Rate Contract is in effect as of the last day of such quarter and
(iii) if an Interest Rate Contract is in effect with respect to such
Floating Rate Indebtedness, the strike rate payable under such
Interest Rate Contract, all determined on an annualized basis.
"INTEREST RATE CONTRACTS" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate
protection.
"INVESTMENT AFFILIATE" means any Person in whom the Company holds
an equity interest, directly or indirectly, whose financial results
are not consolidated under GAAP with the financial results of the
Company on the consolidated financial statements of the Company.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any
other type of preferential arrangement, in each case that has the
effect of creating a security interest, in respect of such asset. For
the purposes of this Agreement, the Company or any Subsidiary of the
Company shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"MARGIN STOCK" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means an effect resulting from any
circumstance or event or series of circumstances or events, of
whatever nature (but excluding general economic conditions), which
does or could reasonably be expected to, materially and adversely
(i) affect the business, operations, properties, assets or financial
condition of the Company and its Consolidated Subsidiaries taken as a
whole, (ii) impair the ability of the Company and its Consolidated
Subsidiaries, taken as a whole, to perform their respective
obligations under this Agreement, or (iii) cause a Default under
Sections 5.8, 5.9 or 5.13. Circumstances or events with respect to
the Participating Assets and Participating Loans (other than
liabilities incurred with respect to the Participating Assets which in
the aggregate exceed the Adjusted Asset Value thereof and for which
the Company or any of its Subsidiaries would be legally responsible)
shall not be taken into consideration in the determination of a
Material Adverse Effect.
"MATERIAL PLAN" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $250,000.
"MATERIALS OF ENVIRONMENTAL CONCERN" means and includes
pollutants, contaminants, hazardous wastes, toxic and hazardous
substances, asbestos, lead, petroleum and petroleum by-products.
"MERGER AGREEMENT" shall mean that certain Agreement and Plan of
Merger by and between Equity Residential Properties Trust and Merry
Land & Investment Company, Inc., dated as of July 8, 1998, as amended
by First Amendment to Agreement and Plan of Merger dated as of
September 4, 1998.
"MOODY'S" means Moody's Investors Services, Inc. or any successor
thereto.
"MULTIEMPLOYER PLAN" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such five year
period.
"NET INCOME" means, for any period, the net earnings (or loss)
after Taxes of the Company, on a consolidated basis, for such period
calculated in conformity with GAAP, but excluding, in any event, the
effect of any Participating Assets or Participating Loans.
"NET OPERATING INCOME" means, for any period with respect to any
Property owned (directly or beneficially) by the Company or its
wholly-owned Subsidiaries, the net operating income of such Property
(attributed to such Property in a manner reasonably acceptable to
MLIC) for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past
practices of the Company, and (iii) inclusive of an allocation of
reasonable management fees and administrative costs to each Property
consistent with the past practices of the Company, except that, for
purposes of determining Net Operating Income, income shall not
(a) include security or other deposits or (b) be reduced by
depreciation or amortization.
"NET PRICE" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, PLUS (ii) the principal
amount of any note received or other deferred payment to be made in
connection with such purchase or sale (except as described in
clause (iv) below), PLUS (iii) the value of any other considerations
delivered in connection with such purchase or sale (including, without
limitation, shares of common stock or preferred stock in the Company)
(as reasonably determined by MLIC), MINUS (only in the case of a sale)
(iv) the value of any consideration deposited into escrow or subject
to disbursement or claim upon the occurrence of any event, MINUS (only
in the case of a sale) (v) the value of any consideration required to
be paid to any Person other than the Company and its Subsidiaries
owning a beneficial interest in such Property, MINUS (vi) reasonable
costs of sale and taxes paid or payable in connection with such
purchase or sale.
"NET PRESENT VALUE" shall mean, as to a specified or
ascertainable dollar amount, the present value, as of the date of
calculation of any such amount using a discount rate equal to the Base
Rate in effect as of the date of such calculation.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness with respect to
which recourse for payment is limited to (i) specific assets related
to a particular Property or group of Properties encumbered by a Lien
securing such Indebtedness or (ii) any Subsidiary (provided that if a
Subsidiary is a partnership, there is no recourse to the Company as a
general partner of such partnership); provided, however, that personal
recourse of the Company for any such Indebtedness for fraud,
misrepresentation, misapplication of cash, waste, environmental claims
and liabilities and other circumstances customarily excluded by
institutional lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financing of real
estate shall not, by itself, prevent such Indebtedness from being
characterized as Non-Recourse Indebtedness.
"OBLIGATIONS" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Company from time
to time owing to MLIC, under or in connection with the Senior
Subordinated Term Loan Agreement or any other Loan Document (as
therein defined).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PARTICIPATING ASSETS" means those assets more fully described on
Schedule 1.1B hereto, but only for so long as such assets are subject
to Participating Loans.
"PARTICIPATING LOANS" means certain Non-Recourse Indebtedness
held by MLIC which are currently in effect with respect to and are
secured by the Participating Assets.
"PERMITTED LIENS" means:
(a) Liens for Taxes, assessments or other governmental
charges not yet due and payable or which are being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with the terms hereof;
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not more
than sixty (60) days delinquent or which are being contested in
good faith in accordance with the terms hereof;
(c) deposits made in the ordinary course of business to
secure liabilities to insurance carriers;
(d) Liens for purchase money obligations for equipment;
PROVIDED that (i) the Indebtedness secured by any such Lien does
not exceed the purchase price of such equipment, (ii) any such
Lien encumbers only the asset so purchased and the proceeds upon
sale, disposition, loss or destruction thereof, and (iii) such
Lien, after giving effect to the Indebtedness secured thereby,
does not give rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on
Schedule B to the owner's title insurance policies, except in
connection with any Indebtedness, for any of the Real Property
Assets, so long as the foregoing do not interfere in any material
respect with the use or ordinary conduct of the business of the
owner and do not diminish in any material respect the value of
the Property to which it is attached or for which it is listed;
(f) Liens and judgments which have been or will be bonded or
released of record within thirty (30) days after the date such
Lien or judgment is entered or filed against the Company, or any
Subsidiary;
(g) Liens, including Liens on Participating Assets to secure
Participating Loans, on Property of the Company or its
Subsidiaries (other than Qualifying Unencumbered Property)
securing Indebtedness which may be incurred or remain outstanding
without resulting in an Event of Default hereunder; and
(h) Liens in favor of the Company against any asset of any
wholly-owned Subsidiary of the Company.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code
and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has
at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the
ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"PREFERRED STOCK" means the Redeemable Cumulative Preferred Stock
of the Company having the terms and preferences, rights and
limitations set forth in EXHIBIT A hereto.
"PREFERRED STOCK OBLIGATIONS" means, as of the date of
determination and without duplication, the liquidation value of the
outstanding Preferred Stock and all accumulated and unpaid dividends
thereon, together with any accrued and unpaid interest thereon.
"PRIME RATE" means the rate of interest publicly announced by the
Morgan Guaranty Trust Company of New York in New York City from time
to time as its Prime Rate.
"PROPERTY" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit,
or other asset owned by such Person.
"QUALIFYING UNENCUMBERED PROPERTY" means any Real Property Asset
from time to time which (i) is wholly-owned (directly or beneficially)
by the Company, (ii) is not subject (nor are any equity interests in
such Property subject) to a Lien which secures Indebtedness of any
Person other than Permitted Liens, and (iii) is not subject (nor are
any equity interests in such Property subject) to any covenant,
condition, or other restriction which prohibits or limits the creation
or assumption of any Lien upon such Property (it being understood that
covenants similar to those set forth in Section 5.8 hereof shall not
be deemed to constitute any such prohibition or limitation). In
addition, in the case of any Property that is owned by a Subsidiary of
the Company, if such Subsidiary shall commence any proceeding under
any bankruptcy, insolvency or similar law, or any such involuntary
case shall be commenced against it and shall remain undismissed and
unstayed for a period of 60 days, then, simultaneously with the
occurrence of such conditions, such Property shall no longer
constitute a Qualifying Unencumbered Property.
"REAL PROPERTY ASSETS" means as of any time, the real property
assets (including interests in participating mortgages in which the
Company's interest therein is characterized as equity according to
GAAP) owned directly or indirectly by the Company and its Consolidated
Subsidiaries.
"RELEASE" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape,
injection, deposit, discharge, dispersal, dumping, leaching or
migration of Materials of Environmental Concern in the indoor or
outdoor environment, including the movement of Materials of
Environmental Concern through or in the air, soil, surface water,
ground water or property.
"RECOURSE DEBT" shall mean Indebtedness that is not Non-Recourse
Indebtedness.
"REGULATION U" means Regulation U of the Federal Reserve Board,
as in effect from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"SECURED DEBT" means Indebtedness of the Company, on a
consolidated basis, the payment of which is secured by a Lien on any
Property owned or leased by the Company, or any Subsidiary of the
Company, but excluding in any event, any Participating Loans.
"SECURITIES" means any stock, partnership interests (other than
Multifamily Residential Property Partnership Interests), shares,
shares of beneficial interest, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities," or any certificates of
interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the obligations.
"SENIOR INDEBTEDNESS" means (i) the principal amount of all
indebtedness arising under the Senior Term Loan Agreement, together
with any interest (including any interest accruing after the
commencement of any bankruptcy proceeding, and any interest which
would have accrued but for the commencement of such proceeding,
whether or not such interest is allowed as an enforceable claim in
such bankruptcy proceeding), premium, if any, and any other amount
(including any fee or expense) due in connection with such
indebtedness under the Senior Term Loan Documents, and (ii) any other
indebtedness for borrowed money of the Company or any of its
Subsidiaries which by the documents evidencing such indebtedness is
designated as "Senior Indebtedness" by specific reference to the
Senior Subordinated Term Loan Agreement and notice of which has been
given to, and acknowledged by, MLIC pursuant to Section 7.10 of the
Senior Subordinated Term Loan Agreement.
"SENIOR SUBORDINATED TERM LOAN AGREEMENT" means the Senior
Subordinated Term Loan Agreement, dated as of October 15, 1998, by and
between the Company and Merry Land & Investment Company, Inc.
"SENIOR TERM LOAN AGREEMENT" means the Senior Term Loan
Agreement, dated as of October 15, 1998, by and between the Company
and Merry Land & Investment Company, Inc.
"SENIOR TERM LOAN DOCUMENTS" means (i) the Senior Term Loan
Agreement, together with all exhibits thereto, all other documents,
agreements and instruments executed in connection therewith and all
amendments and supplements thereto, and (ii) the loan documents
evidencing any other Senior Indebtedness.
"SOLVENT" means, with respect to any Person, that the fair
saleable value of such Person's assets exceeds the Indebtedness of
such Person.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Company.
"TAXES" means all federal, state, local and foreign income and
gross receipts taxes, but excluding any of the foregoing which arise
as a result of the Participating Assets or Participating Loans.
"TERMINATION EVENT" shall mean (i) a "reportable event", as such
term is described in Section 4043 of ERISA (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC), or
an event described in Section 4062(e) of ERISA, (ii) the withdrawal by
any member of the ERISA Group from a Multiemployer Plan during a plan
year in which it is a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), or the incurrence of liability by any
member of the ERISA Group under Section 4064 of ERISA upon the
termination of a Multiemployer Plan, (iii) the filing of a notice of
intent to terminate any Plan under Section 4041 of ERISA, other than
in a standard termination within the meaning of Section 4041 of ERISA,
or the treatment of a Plan amendment as a distress termination under
Section 4041 of ERISA, (iv) the institution by the PBGC of proceedings
to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or cause a trustee to be
appointed to administer, any Plan or (v) any other event or condition
that might reasonably constitute grounds for the termination of, or
the appointment of a trustee to administer, any Plan or the imposition
of any liability or encumbrance or Lien on the Real Property Assets or
any member of the ERISA Group under ERISA.
"TOTAL LIABILITIES" means, as of the date of determination and
without duplication, all Indebtedness of the Company, on a
consolidated basis, PLUS accounts payable incurred in the ordinary
course of business.
"TRANSACTION COSTS AGREEMENT" has the meaning set forth in
Article IV.
"TRANSFER" shall have the meaning given such term in the Asset
Exchange Agreement.
"TREASURY RATE" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a
ten year maturity, as such yield is reported in Federal Reserve
Statistical Release H.15 -- Selected Interest Rates, published most
recently prior to the date the applicable Treasury Rate is being
determined. Such yield shall be determined by straight line linear
interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, MLIC
shall select, in its reasonable discretion, an alternate basis for the
determination of Treasury yield for U.S. Treasury Constant Maturity
Series with ten year maturities.
"UNENCUMBERED APARTMENT ASSET VALUE" means (i) a fraction, the
numerator of which is the product of four (4) and the aggregate
Unencumbered Net Operating Income for the most recently ended Fiscal
Quarter which is attributable (in a manner reasonably acceptable to
MLIC) to Qualifying Unencumbered Properties which are primarily multi-
family residential properties, wholly-owned (directly or beneficially)
by the Company for the entire Fiscal Quarter, and the denominator of
which is the FMV Cap Rate, PLUS (ii) for all Qualifying Unencumbered
Properties which are primarily multi-family residential properties,
wholly-owned (directly or beneficially) by the Company which have been
acquired (directly or indirectly) by the Company during the Fiscal
Quarter most recently ended, the aggregate Net Price paid by the
Company or its affiliates for such Qualifying Unencumbered Properties.
"UNENCUMBERED NET OPERATING INCOME" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by
the Company and/or any wholly-owned Subsidiary of the Company during
the applicable period, Net Operating Income from each such Qualifying
Unencumbered Property minus (i) with respect to any apartment units
contained in such Qualifying Unencumbered Property, an amount equal to
the product of the number of apartment units in such Qualifying
Unencumbered Property during such period and the Capital Apartment
Reserve for such period, and minus (ii) with respect to any commercial
property other than apartments units contained in such Qualifying
Unencumbered Property, an amount equal to the product of the number of
square feet of leased space in such commercial property other than
apartments units contained in such Qualifying Unencumbered Property
and the Capital Commercial Reserve for such period.
"UNIMPROVED ASSETS" means Real Property Assets upon which no
material improvements have been completed which completion is
evidenced by a certificate of occupancy or its equivalent.
"UNITED STATES" means the United States of America, including the
fifty states and the District of Columbia.
"UNSECURED DEBT" means Indebtedness of the Company and any
Subsidiary of the Company, which is not Secured Debt.
"UNSECURED INTEREST EXPENSE" means Interest Expense, other than
Interest Expense payable in respect of Secured Debt and other than
Interest Expense payable in respect of the Indebtedness of any Person
other than the Company or any Subsidiary of the Company.
"UNUSED COMMITMENTS" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction
loan) which any third party is obligated to advance to the Company or
another Person or otherwise pursuant to any loan document, written
instrument or otherwise.
Section 2.h ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants) with the most
recent audited consolidated financial statements of the Company and its
Consolidated Subsidiaries delivered to MLIC; PROVIDED that, if the Company
notifies MLIC that the Company wishes to amend any covenant in Article V to
eliminate the effect of any change in GAAP on the operation of such
covenant (or if MLIC notifies the Company that MLIC wishes to amend
Article V for such purpose), then the Company's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such
notice is withdrawn or such covenant is amended in a manner reasonably
satisfactory to the Company and MLIC.
ARTICLE II.
ISSUANCE OF PREFERRED STOCK TO MLIC
Section 1.h ISSUANCE. Subject to the terms and conditions set forth
in this Agreement, MLIC hereby agrees to acquire from the Company on the
Closing Date five thousand (5,000) shares of Preferred Stock. Said shares
shall be issued by the Company to MLIC as partial consideration for MLIC's
contribution of the Contributed Assets to the Company pursuant to the Asset
Exchange Agreement. MLIC shall not be required to furnish any other
consideration to the Company for the issuance of the Preferred Stock to
MLIC.
Section 2.h CERTIFICATES. The Company shall deliver to MLIC on the
Closing Date a certificate representing the five thousand (5,000) shares of
Preferred Stock being acquired by MLIC on the Closing Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to MLIC on the Closing Date and at
all times that MLIC or its successors own 20% or more of the shares of
Preferred Stock acquired by MLIC on the Closing Date:
Section 1.h EXISTENCE AND POWER. The Company is a corporation, duly
formed and validly existing and in good standing under the laws of the
State of [Delaware] and has all powers and all material governmental
licenses, authorizations, consents and approvals required to own its
property and assets and carry on its business as now conducted or as it
presently proposes to conduct and has been duly qualified and is in good
standing in every jurisdiction in which the failure to be so qualified
and/or in good standing is likely to have a Material Adverse Effect.
Section 2.h POWER AND AUTHORITY. The Company has the corporate power
and authority to execute, deliver and carry out the terms and provisions of
this Agreement and has taken all necessary corporate action, if any, to
authorize the execution and delivery on behalf of the Company and the
performance by the Company of this Agreement. The Company has duly
executed and delivered this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by
applicable insolvency, bankruptcy or other laws affecting creditors rights
generally, or general principles of equity, whether such enforceability is
considered in a proceeding in equity or at law.
Section 3.h NO VIOLATION. Neither the execution, delivery or
performance by or on behalf of the Company of this Agreement, nor
compliance by the Company with the terms and provisions thereof nor the
consummation of the transactions contemplated by this Agreement, (i) will
materially contravene any applicable provision of any law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will materially conflict with or result in any breach
of, any of the terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets
of the Company or any of its Consolidated Subsidiaries pursuant to the
terms of any indenture, mortgage, deed of trust, or other agreement or
other instrument to which the Company (or of any partnership of which the
Company is a partner) or any of its Consolidated Subsidiaries is a party or
by which it or any of its property or assets is bound or to which it is
subject, or (iii) will cause a material default by the Company under any
organizational document of the Company or any Person in which the Company
has an interest, the consequences of which conflict, breach or default
would have a Material Adverse Effect, or result in or require the creation
or imposition of any Lien whatsoever upon any Property (except as
contemplated herein).
Section 4.h FINANCIAL INFORMATION.
(a) The historical combined consolidated balance sheet of the
Company's predecessor as of December 31, 1997, and the related
historical combined statements of the financial position of the
Company's predecessor as of December 31, 1997, reported on by Arthur
Andersen LLP, a copy of which is in the Form 10 delivered to MLIC,
fairly present, in conformity with GAAP, the consolidated financial
position of the Company's predecessor as of such date and the
combined results of operations and cash flows for the fiscal year then
ended, except as may be otherwise stated therein. The historical
combined consolidated balance sheet of the Company's predecessor as
of June 30, 1998, and the related historical combined financial
statements of the Company's predecessor for the period from January 1,
1998 to June 30, 1998, reported on by Arthur Andersen LLP, a copy of
which is in the Form 10 delivered to MLIC, fairly present, in
conformity with GAAP, the consolidated financial position of the
Company's predecessor as of such date and the combined results of
operations and cash flows for such period, except as may be otherwise
stated therein and subject in all cases to year end adjustments.
(b) Since June 30, 1998, (i) except as may have been disclosed in
writing to MLIC, nothing has occurred having a Material Adverse
Effect, and(ii) except as may have been disclosed in the Form 10 the
Company has not incurred any material indebtedness or guaranty on or
before the Closing Date.
Section 5.b LITIGATION. Except as previously disclosed by the Company
in writing to MLIC, there is no action, suit or proceeding pending against,
or to the knowledge of the Company threatened against or affecting, (i) the
Company or any of its Consolidated Subsidiaries, (ii) this Agreement or any
of the transactions contemplated by this Agreement or (iii) any of their
assets, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision
which could, individually, or in the aggregate have a Material Adverse
Effect or which in any manner draws into question the validity of this
Agreement or the other Loan Documents.
Section 6.b COMPLIANCE WITH ERISA.
(a) Except as set forth on SCHEDULE 3.6 attached hereto, the
Company is not a member of any Plan or Multiemployer Plan or, as of
the Closing Date, any other Benefit Arrangement. After the Closing
Date, the Company may establish or assume any Benefit Arrangement, so
long as any such event would not result in a Material Adverse Effect.
(b) The transactions contemplated by this Agreement will not
constitute a nonexempt prohibited transaction (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA) that could
subject MLIC to any tax or penalty or prohibited transactions imposed
under Section 4975 of the Code or Section 502(i) of ERISA.
Section 7.b ENVIRONMENTAL MATTERS. After the Closing Date, the
Company will conduct reviews of the effect of Environmental Laws on the
business, operations and properties of the Company and Consolidated
Subsidiaries of either or both when necessary in the course of which it
identifies and evaluates associated liabilities and costs (including,
without limitation, any capital or operating expenditures required for
clean-up or closure of properties presently owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities, and
any actual or potential liabilities to third parties, including employees,
and any related costs and expenses). On the basis of this review, the
Company will ascertain the likelihood of such associated liabilities and
costs, including the costs of compliance with Environmental Laws, having a
Material Adverse Effect on the Company and its Consolidated Subsidiaries.
Section 8.b TAXES. After the Closing Date, the Company and its
Consolidated Subsidiaries will file all United States Federal income tax
returns and all other material tax returns which are required to be filed
by them and will pay all taxes due pursuant to such returns or pursuant to
any assessment received by the Company or any Consolidated Subsidiary,
except such taxes, if any, as are reserved against in accordance with GAAP,
such taxes as may be contested in good faith by appropriate proceedings or
such taxes, the failure to make payment of which when due and payable will
not have, in the aggregate, a Material Adverse Effect.
Section 9.b FULL DISCLOSURE. All information heretofore furnished by
the Company to MLIC for purposes of or in connection with this Agreement or
any transaction contemplated hereby or thereby is true and accurate in all
material respects on the date as of which such information is stated or
certified. The Company has disclosed to MLIC, in writing any and all
facts which have or may have (to the extent the Company can now reasonably
foresee) a Material Adverse Effect.
Section 10.b SOLVENCY. On the Closing Date and after giving effect to
the transactions contemplated by this Agreement occurring on the Closing
Date, the Company will be Solvent.
Section 11.b GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of any of the transactions contemplated
thereby other than those that have already been duly made or obtained and
remain in full force and effect or those which, if not made or obtained,
would not have a Material Adverse Effect;
Section 12.b INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Company nor any Consolidated Subsidiary is (x) an
"INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY",
within the meaning of the Investment the Company Act of 1940, as amended,
(y) a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY" of a "HOLDING COMPANY" or
an "AFFILIATE" of either a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY"
within the meaning of the Public Utility Holding the Company Act of 1935,
as amended, or (z) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.
Section 13.b PRINCIPAL OFFICES. As of the Closing Date, the principal
office, chief executive office and principal place of business of the
Company is 624 Ellis Street, Augusta, Georgia 30901.
Section 14.b PATENTS, TRADEMARKS, ETC. The Company has obtained and
holds in full force and effect all patents, trademarks, servicemarks, trade
names, copyrights and other such rights, free from burdensome restrictions,
which are necessary for the operation of its business as presently
conducted, the impairment of which is likely to have a Material Adverse
Effect.
Section 15.b OWNERSHIP OF PROPERTY. Schedule 3.15 attached hereto and
made a part hereof sets forth all the real property owned or ground leased
by the Company and Persons in which the Company, directly or indirectly,
owns an interest as of the Closing Date.
Section 16.b NO DEFAULT. No Event of Default or, to the best of the
Company's knowledge, Default exists under or with respect to this Agreement
and the Company is not in default in any material respect beyond any
applicable grace period under or with respect to any other material
agreement, instrument or undertaking to which it is a party or by which it
or any of its property is bound in any respect, the existence of which
default is likely to result in a Material Adverse Effect.
Section 17.b LICENSES, ETC. The Company has obtained and does hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other consents and approvals which are necessary for the operation of its
businesses as presently conducted, the absence of which is likely to have a
Material Adverse Effect.
Section 18.b COMPLIANCE WITH LAW. To the Company's knowledge, the
Company and each of the Real Property Assets are in compliance with all
laws, rules, regulations, orders, judgments, writs and decrees, including,
without limitation, all building and zoning ordinances and codes, the
failure to comply with which is likely to have a Material Adverse Effect.
Section 19.b NO BURDENSOME RESTRICTIONS. Except as may have been
disclosed by the Company in writing to MLIC, the Company is not a party to
any agreement or instrument or subject to any other obligation or any
charter or corporate or partnership restriction, as the case may be, which,
individually or in the aggregate, is likely to have a Material Adverse
Effect.
Section 20.b BROKERS' FEES. The Company has not dealt with any
broker or finder with respect to the transactions contemplated by this
Agreement or otherwise in connection with this Agreement, and the Company
has not done any act, had any negotiations or conversation, or made any
agreements or promises which will in any way create or give rise to any
obligation or liability for the payment by the Company of any brokerage
fee, charge, commission or other compensation to any party with respect to
the transactions contemplated by this Agreement.
Section 21.b LABOR MATTERS. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Company and
the Company has not suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
Section 22.b INSURANCE. The Company currently maintains insurance at
100% replacement cost insurance coverage (subject to customary deductibles)
in respect of each of the Real Property Assets, as well as commercial
general liability insurance (including "builders' risk" where applicable)
against claims for personal, and bodily injury and/or death, to one or more
persons, or property damage, as well as workers' compensation insurance, in
each case with respect to liability and casualty insurance with insurers
having an A.M. Best policyholders' rating of not less than A-VII in amounts
that prudent owner of assets such as the Real Property Assets would
maintain.
Section 23.b ORGANIZATIONAL DOCUMENTS. The documents delivered
pursuant to Article IV constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifications
thereof) of the Company. The Company represents that it has delivered to
MLIC true, correct and complete copies of each of the documents set forth
in this Section 3.23.
Section 24.b QUALIFYING UNENCUMBERED PROPERTIES. As of the date
hereof, each Property listed on Schedule 3.24 as a Qualifying Unencumbered
Property (i) is a Real Estate Asset wholly-owned (directly or beneficially)
by the Company or a wholly-owned Subsidiary of the Company, (ii) is not
subject (nor are any equity interests in such Property subject) to a Lien
which secures Indebtedness of any Person, other than Permitted Liens, and
(iii) is not subject (nor are any equity interests in such Property
subject) to any covenant, condition, or other restriction which prohibits
or limits the creation or assumption of any Lien upon such Property. All
of the information set forth on Schedule 3.24 is true and correct in all
material respects.
Section 25.b INVESTMENT AFFILIATES. As of the date hereof, the
Company has no Investment Affiliates.
ARTICLE IV.
CONDITIONS PRECEDENT
The obligation of MLIC to acquire the Preferred Stock is subject to
the satisfaction of all of the following conditions, which the Company
agrees to cause to be satisfied on and as of the Closing Date:
(a) the Asset Exchange Agreement shall have been duly executed
and delivered by and to the respective parties, all conditions
precedent to the closing and/or effectiveness of said agreement shall
have been fully satisfied or waived, and the Transfer shall have been
fully consummated.
(b) the Company and MLIC shall have executed and delivered to the
Company and MLIC a duly executed original of this Agreement;
(c) MLIC shall have received an opinion of counsel for the
Company, acceptable to MLIC and its counsel from a law firm acceptable
to MLIC and its counsel;
(d) MLIC shall have received all documents MLIC may reasonably
request relating to the existence of the Company, the authority for
and the validity of this Agreement, the authority and incumbency of
the officers executing this Agreement and any other matters relevant
hereto, all in form and substance satisfactory to MLIC. Such
documentation shall include, without limitation, the certificate of
incorporation of the Company, as amended, modified or supplemented to
the Closing Date, certified to be true, correct and complete by the
Secretary of State of Delaware as of a date not more than ten (10)
days prior to the Closing Date, together with a certificate of good
standing as to the Company from the Secretaries of State of Delaware
and Georgia, to be dated not more than ten (10) days prior to the
Closing Date, as well as the by-laws of the Company, as amended,
modified or supplemented to the Closing Date, certified to be true,
correct and complete by a senior officer of the Company as of a date
not more than ten (10) days prior to the Closing Date;
(e) MLIC shall have received all certificates, agreements and
other documents and papers referred to in this Article IV;
(f) the Company shall have taken all actions required to
authorize the execution and delivery of this Agreement and the
performance thereof by the Company;
(g) MLIC shall be satisfied that neither the Company nor any
Consolidated Subsidiary is subject to any present or contingent
environmental liability which could have a Material Adverse Effect;
(h) MLIC shall have received the fees and expenses accrued
through the Closing Date as more fully provided in the Transaction
Costs Agreement of even date (the "Transaction Costs Agreement") among
Equity Residential Properties Trust, MLIC and the Company;
(i) MLIC shall have received copies of all consents, licenses and
approvals, if any, required in connection with the execution, delivery
and performance by the Company and the applicable Consolidated
Subsidiaries, and the validity and enforceability, of this Agreement,
or in connection with any of the transactions contemplated thereby,
and such consents, licenses and approvals shall be in full force and
effect;
(j) MLIC shall have received a certificate based upon the pro-
forma financial information contained in Borrower's Form 10 (including
the assumptions with respect to such pro forma financial information
contained therein) showing compliance with the requirements of
Section 5.8 as of the Closing Date; and
(k) no Default or Event of Default shall have occurred.
ARTICLE V.
AFFIRMATIVE AND NEGATIVE COVENANTS
The Company covenants and agrees with MLIC that so long as MLIC or
its successors own 20% or more of the shares of Preferred Stock acquired by
MLIC on the Closing Date:
Section 1.k INFORMATION. The Company will deliver to MLIC:
(a) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 125
days after the end of each fiscal year of the Company) a consolidated
balance sheet of the Company and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
the Company's operations and consolidated statements of the Company's
cash flow for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission on the Company's Form 10K and reported on by Arthur
Andersen, LLP or other independent public accountants of nationally
recognized standing;
(b) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 80 days
after the end of each of the first three quarters of each fiscal year
of the Company), (i) a consolidated balance sheet of the Company and
its Consolidated Subsidiaries as of the end of such quarter and the
related consolidated statements of the Company's operations and
consolidated statements of the Company's cash flow for such quarter
and for the portion of the Company's fiscal year ended at the end of
such quarter, all reported on in the form provided to the Securities
and Exchange Commission on the Company's Form 10Q, and (ii) and such
other information reasonably requested by MLIC;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Company (i) setting forth in reasonable detail the calculations
required to establish whether the Company was in compliance with the
requirements of Section 5.8 on the date of such financial statements;
(ii) certifying (x) that such financial statements fairly present the
financial condition and the results of operations of the Company on
the dates and for the periods indicated, on the basis of GAAP, with
respect to the Company subject, in the case of interim financial
statements, to normally recurring year-end adjustments, and (y) that
such officer has reviewed the terms of this Agreement and has made, or
caused to be made under his or her supervision, a review in reasonable
detail of the business and condition of the Company during the period
beginning on the date through which the last such review was made
pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant to this Section 5.1(c), the Closing Date) and
ending on a date not more than ten (10) Domestic Business Days prior
to the date of such delivery and that (1) on the basis of such
financial statements and such review of this Agreement, no Event of
Default existed under Section 6.1(b) with respect to Sections 5.8 and
5.9 at or as of the date of said financial statements, and (2) on the
basis of such review of this Agreement and the business and condition
of the Company, to the best knowledge of such officer, as of the last
day of the period covered by such certificate no Default or Event of
Default under any other provision of Section 6.1 occurred and is
continuing or, if any such Default or Event of Default has occurred
and is continuing, specifying the nature and extent thereof and, the
action the Company proposes to take in respect thereof. Such
certificate shall set forth the calculations required to establish the
matters described in clauses (1) and (2) above;
(d) (i) within five (5) Domestic Business Days after any officer
of the Company obtains knowledge of any Default, if such Default is
then continuing, a certificate of the chief financial officer, the
chief accounting officer, controller, or other executive officer of
the Company setting forth the details thereof and the action which the
Company is taking or proposes to take with respect thereto; and
(ii) promptly and in any event within five (5) Domestic Business Days
after the Company obtains knowledge thereof, notice of (y) any
litigation or governmental proceeding pending or threatened against
the Company or the Real Property Assets as to which there is a
reasonable possibility of an adverse determination and which, if
adversely determined, is likely to individually or in the aggregate,
result in a Material Adverse Effect, and (z) any other event, act or
condition which is likely to result in a Material Adverse Effect;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) (other than the exhibits thereto,
which exhibits will be provided upon request therefor by MLIC) which
the Company shall have filed with the Securities and Exchange
Commission;
(g) promptly and in any event within thirty (30) days, if and
when any member of the ERISA Group (i) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Code, a copy
of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes
any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or
other security, and in the case of clauses (i) through (vii) above,
which event could result in a Material Adverse Effect, a certificate
of the chief financial officer or the chief accounting officer of the
Company setting forth details as to such occurrence and action, if
any, which the Company or applicable member of the ERISA Group is
required or proposes to take;
(h) promptly and in any event within ten (10) days after the
Company obtains actual knowledge of any of the following events, a
certificate of the Company, executed by an officer of the Company,
specifying the nature of such condition, and the Company's or, if the
Company has actual knowledge thereof, the Environmental Affiliate's
proposed initial response thereto: (i) the receipt by the Company,
or, if the Company has actual knowledge thereof, any of the
Environmental Affiliates of any communication (written or oral),
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Company, or, if the Company has
actual knowledge thereof, any of the Environmental Affiliates, is not
in compliance with applicable Environmental Laws, and such
noncompliance is likely to have a Material Adverse Effect, (ii) the
Company shall obtain actual knowledge that there exists any
Environmental Claim pending against the Company or any Environmental
Affiliate and such Environmental Claim is likely to have a Material
Adverse Effect or (iii) the Company obtains actual knowledge of any
release, emission, discharge or disposal of any Material of
Environmental Concern that is likely to form the basis of any
Environmental Claim against the Company or any Environmental Affiliate
which in any such event is likely to have a Material Adverse Effect;
(i) promptly and in any event within five (5) Domestic Business
Days after receipt of any material notices or correspondence from any
company or agent for any company providing insurance coverage to the
Company relating to any loss which is likely to result in a Material
Adverse Effect, copies of such notices and correspondence; and
(j) from time to time such additional information regarding the
financial position or business of the Company and its Subsidiaries as
MLIC may reasonably request in writing.
Section 2.j PAYMENT OF OBLIGATIONS. The Company and each Subsidiary
will pay and discharge, at or before maturity, all its respective material
obligations and liabilities including, without limitation, any obligation
pursuant to any agreement by which it or any of its properties is bound, in
each case where the failure to so pay or discharge such obligations or
liabilities is likely to result in a Material Adverse Effect, and will
maintain in accordance with GAAP, appropriate reserves for the accrual of
any of the same.
Section 3.j MAINTENANCE OF PROPERTY; INSURANCE; LEASES.
(a) The Company will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business, including
without limitation the Real Property Assets (for so long as it
constitutes Real Property Assets), in good repair, working order and
condition, ordinary wear and tear excepted, in each case where the
failure to so maintain and repair will have a Material Adverse Effect.
(b) The Company shall maintain, or cause to be maintained,
insurance comparable to that described in Section 3.23 hereof with
insurers meeting the qualifications described therein, which insurance
shall in any event not provide for less coverage than insurance
customarily carried by owners of properties similar to, and in the
same locations as, the Real Property Assets. The Company will
deliver to MLIC upon the reasonable request of MLIC from time to time
(i) full information as to the insurance carried, (ii) within five (5)
days of receipt of notice from any insurer a copy of any notice of
cancellation or material change in coverage from that existing on the
date of this Agreement and (iii) forthwith, notice of any cancellation
or nonrenewal of coverage by the Company.
Section 4.b CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Company will continue to engage in business of the same general type as now
conducted by the Company, and each will preserve, renew and keep in full
force and effect, its partnership and trust existence and its respective
rights, privileges and franchises necessary for the normal conduct of
business unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect.
Section 5.b COMPLIANCE WITH LAWS. The Company will and will cause
its Subsidiaries to comply in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, and all
zoning and building codes with respect to the Real Property Assets and
ERISA and the rules and regulations thereunder and all federal securities
laws) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings or where the failure to do so will
not have a Material Adverse Effect or expose MLIC to any material liability
therefor.
Section 6.b INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
each will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation
to its business and activities in conformity with GAAP, modified as
required by this Agreement and applicable law; and will permit
representatives of MLIC at such MLIC's expense to visit and inspect any of
its properties, including without limitation the Real Property Assets, to
examine and make abstracts from any of its books and records and to discuss
its affairs, finances and accounts with its officers and independent public
accountants, all at such reasonable times during normal business hours,
upon reasonable prior notice and as often as may reasonably be desired.
Section 7.b EXISTENCE. The Company shall do or cause to be done, all
things necessary to preserve and keep in full force and effect its, and its
Subsidiaries', existence and its patents, trademarks, servicemarks,
tradenames, copyrights, franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals the nonexistence of which is likely to
have a Material Adverse Effect.
Section 8.b FINANCIAL COVENANTS.
(a) TOTAL LIABILITIES TO GROSS ASSET VALUE. The Company shall
not permit the ratio of (x) the sum of Total Liabilities plus the
Preferred Stock Obligations, to (y) Gross Asset Value, each determined
on a consolidated basis for the Company and its Consolidated
Subsidiaries, to exceed 0.80:1 at any time.
(b) UNENCUMBERED POOL. The Company shall not permit the ratio of
(x) the remainder of Unencumbered Apartment Asset Value minus
outstanding Senior Indebtedness to (y) the sum of the outstanding
Obligations plus the Preferred Stock Obligations, each determined on a
consolidated basis for the Company and its Consolidated Subsidiaries,
to be 0.30:1 or less at any time.
(c) EBITDA TO FIXED CHARGES RATIO. the Company shall not permit
the ratio of EBITDA for then most recently completed Fiscal Quarter to
Fixed Charges for the then most recently completed Fiscal Quarter,
each determined on a consolidated basis for the Company and its
Consolidated Subsidiaries, to be less than 1.15:1.
(d) DIVIDENDS. The Company shall not, as determined on an
aggregate annual basis, pay any dividends in excess of 90% of the
Company's Funds Available for Distribution for such Fiscal Year.
Section 9.d RESTRICTION ON FUNDAMENTAL CHANGES.
(a) The Company shall not enter into any merger or
consolidation, unless (i) the Company is the surviving entity,
(ii) the entity which is merged into the Company is predominantly in
the commercial real estate business, (iii) the creditworthiness of the
surviving entity's long term unsecured debt or implied senior debt, as
applicable, is not lower than the Company's creditworthiness two
months immediately preceding such merger as determined by MLIC in its
reasonable discretion , and (iv) in the case of any merger where the
then fair market value of the assets of the entity which is merged
into the Company is twenty-five percent (25%) or more of the Company's
then Gross Asset Value following such merger, MLIC consents thereto in
writing, which consent shall not be unreasonably withheld, conditioned
or delayed. The Company shall not liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution), discontinue its business or
convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of its
business or property, whether now or hereafter acquired. Nothing in
this Section shall be deemed to prohibit the sale or leasing of
portions of the Real Property Assets in the ordinary course of
business.
(b) The Company shall not amend organizational documents in any
manner that would have a Material Adverse Effect without MLIC's
consent, which shall not be unreasonably withheld.
(c) The Company shall deliver to MLIC copies of all amendments
to its organizational documents no less than ten (10) days after the
effective date of any such amendment.
Section 10.c CHANGES IN BUSINESS. The Company shall not enter into
any business which is substantially different from that conducted by the
Company on the Closing Date after giving effect to the transactions
contemplated by this Agreement. The Company shall carry on its business
operations through the Company and its Subsidiaries.
Section 11.c LOANS. The Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, make any loans or advances
to any Person.
Section 12.c INVESTMENT AFFILIATES. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, acquire or
create any Investment Affiliate.
Section 13.c TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not and shall not permit any Subsidiary of
the Company to enter into or be a party to any transaction with any
Affiliate of the Company or such Subsidiary, except as otherwise
provided herein or in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms that are fully disclosed to MLIC
and are no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's length transaction with a Person not an
Affiliate of the Company or such Subsidiary.
(b) The Company shall not and shall not permit any Subsidiary of
the Company to enter into any agreement or transaction to pay to any
Person any management or similar fee based on or related to the
Company's or any of its Subsidiaries' operating performance or income
or any percentage thereof, nor pay any management or similar fee to an
Affiliate.
Section 14.b PAYMENTS TO AN AFFILIATE. The Company shall not make, or
permit any Subsidiary to make any payment to any Affiliate if a Default or
Event of Default has occurred and is continuing or if a Default or Event of
Default would occur as a result of such payment.
Section 15.b MATERIALS OF ENVIRONMENTAL CONCERN. The Company shall
not and shall not permit any Subsidiary to cause or permit a Release of any
Material of Environmental Concern on, at, in, under, above, to, from or
about any of the Real Estate Assets where such Release would (a) violate in
any respect, or form the basis for any Environmental Claim under, any
Environmental Laws or (b) otherwise adversely impact the value or
marketability of any of the Real Estate Assets, other than such violations
or Environmental Claims which could not reasonably be expected to have a
Material Adverse Effect.
Section 16.b ISSUANCE OF PREFERRED STOCK. The Company shall issue the
Preferred Stock solely to MLIC pursuant to this Agreement and not to any
other Person.
ARTICLE VI.
EVENTS OF DEFAULT
Section 1.b EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the dividends on the Preferred Stock remain unpaid for two or
more Dividend Periods, which need not be consecutive, or a redemption
payment in connection with a required redemption under the terms of
the Preferred Stock has not been paid;
(b) the Company shall fail to observe or perform any covenant
contained in Section 5.8, Section 5.9(a) or (b), or Section 5.10;
(c) the Company shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by
clause (a), (b), (e), (f), (g), (h), (i), (m) or (n) of this
Section 6.1) for 30 days after written notice thereof has been given
to the Company by MLIC, or if such default is of such a nature that it
cannot with reasonable effort be completely remedied within said
period of thirty (30) days such additional period of time as may be
reasonably necessary to cure same, provided the Company commences such
cure within said thirty (30) day period and diligently prosecutes same
until completion, but in no event shall such extended period exceed
ninety (90) days;
(d) any representation, warranty, certification or statement made
by the Company in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or
deemed made) and the defect causing such representation or warranty to
be incorrect when made (or deemed made) is not removed within thirty
(30) days after written notice thereof from MLIC to the Company;
(e) the Company, or any Subsidiary shall default in the payment
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of
any Recourse Debt which the aggregate outstanding principal amount
exceeds $250,000 and such default shall continue beyond the giving of
any required notice and the expiration of any applicable grace period
and such default has not been waived, in writing, by the holder of any
such Debt; or the Company, or any Subsidiary shall default in the
performance or observance of any obligation or condition with respect
to any such Recourse Debt or any other event shall occur or condition
exist beyond the giving of any required notice and the expiration of
any applicable grace period, if the effect of such default, event or
condition is to accelerate the maturity of any such indebtedness or to
permit (without any further requirement of notice or lapse of time)
the holder or holders thereof, or any trustee or agent for such
holders, to accelerate the maturity of any such indebtedness. Under
no circumstances will defaults with respect to Participating Loans
constitute an Event of Default under this subsection (e);
(f) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any action to authorize any of the
foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days; or an order for relief shall be
entered against the Company under the federal bankruptcy laws as now
or hereafter in effect;
(h) one or more final, non-appealable judgments or decrees in an
aggregate amount of $250,000 or more shall be entered by a court or
courts of competent jurisdiction against the Company or its
Consolidated Subsidiaries (other than any judgment as to which, and
only to the extent, a reputable insurance company has acknowledged
coverage of such claim in writing) and (i) any such judgments or
decrees shall not be stayed, discharged, paid, bonded or vacated
within thirty (30) days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgments or decrees;
(i) a Change of Control;
(j) the Company shall cease at any time to qualify to be a
publicly traded, registered reporting company under the Securities
Exchange Act of 1934;
(k) if any Termination Event with respect to a Plan shall occur
as a result of which Termination Event or Events any member of the
ERISA Group has incurred or may incur any liability to the PBGC or any
other Person and the sum (determined as of the date of occurrence of
such Termination Event) of the insufficiency of such Plan and the
insufficiency of any and all other Plans with respect to which such a
Termination Event shall occur and be continuing (or, in the case of a
Multiple Employer Plan with respect to which a Termination Event
described in clause (ii) of the definition of Termination Event shall
occur and be continuing, the liability of the Company) is equal to or
greater than $250,000 and which MLIC reasonably determines will have a
Material Adverse Effect;
(l) if, any member of the ERISA Group shall commit a failure
described in Section 402(f)(1) of ERISA or Section 412(n)(1) of the
Code and the amount of the lien determined under Section 402(f)(3) of
ERISA or Section 412(n)(3) of the Code that could reasonably be
expected to be imposed on any member of the ERISA Group or their
assets in respect of such failure shall be equal to or greater than
$250,000 and which MLIC reasonably determines will have a Material
Adverse Effect;
(m) at any time, for any reason the Company seeks to repudiate
its obligations under this Agreement;
(n) An event of default shall occur pursuant to the terms of the
Senior Term Loan Agreement, or the Senior Subordinated Term Loan
Agreement, each dated October 15, 1998, and between the Company and
Merry Land & Investment Company, Inc.
ARTICLE VII.
MISCELLANEOUS
Section 1.n TERMINATION OF THE AGREEMENT. Unless otherwise agreed by
each of the parties to this Agreement, if the Merger Agreement shall have
been terminated, all obligations of MLIC under this Agreement shall
automatically terminate at such time without notice to the Company.
Section 2.n SECURITIES LAW MATTERS. MLIC acknowledges and understands
that:
(a) MLIC has been furnished with and has carefully reviewed the
documents and information set forth on EXHIBIT D attached hereto (the
"Information").
(b) MLIC has been afforded full and complete access to all
information and other materials relating to the Company and its
affiliates, and the properties and financial condition of the
foregoing, and any other matters relating to the Preferred Stock of
the Company which MLIC has requested, or deems necessary in evaluating
the merits and risks of acquiring the Preferred Stock, and has been
afforded the opportunity to obtain any additional information
necessary to verify the accuracy of any representations or information
set forth in the Information.
(c) MLIC has had the opportunity to have answered any questions
concerning the financial condition or business or other information
with respect to the Company and its affiliates and the business,
properties and financial condition of the foregoing or with respect to
the merits and risks of an acquisition of the Preferred Stock, and
MLIC has received complete and satisfactory answers to all such
questions.
(d) MLIC has not relied upon any information or representation
not contained in the Information. Neither the Company nor any of its
agents nor anyone purporting to act on their behalf have made any
representation to the undersigned with respect to any tax or economic
benefits to be derived from an investment in the Preferred Stock. MLIC
is relying solely upon its own knowledge and upon the advice of its
advisors with respect to the tax, economic and other aspects of an
investment in the Preferred Stock.
(e) MLIC has carefully reviewed and understands the risks of, and
other considerations relating to, the acquisition of the Preferred
Stock and an investment in the Company.
(f) An owner of Preferred Stock must bear the economic risk of
ownership thereof for an indefinite period of time since purchase of
Preferred Stock involves the purchase of securities that have not been
registered under the Securities Act of 1933, as amended, and therefore
cannot be transferred (as defined below) except as provided below.
(g) No federal or state agency has passed upon the Preferred
Stock or made any finding or determination as to the fairness of an
investment in the Preferred Stock.
(h) MLIC hereby covenants and agrees that the Preferred Stock may
not be pledged, encumbered, sold, transferred or otherwise disposed of
(each a "transfer") except (a) pursuant to an effective registration
statement under the Securities Act of 1993, as amended (the "Act") or
(b) pursuant to an exemption from such registration pursuant to the
Act and in compliance with state securities and blue sky laws and an
opinion of counsel provided to the Company to the effect of this
subparagraph (b), which opinion shall be in form and substance
reasonably satisfactory to the Company. MLIC agrees that any transfer
of the Preferred Stock in violation of this Agreement will be null and
void and the certificates representing the Preferred Stock will bear
an appropriate restrictive legend.
(i) MLIC represents and warrants to the Company that:
(i) It is able to bear the economic risk of the acquisition
of the Preferred Stock.
(ii) It is an "accredited investor" as defined in Regulation
D promulgated under the Act.
(iii) The representatives of MLIC have been furnished with
and have carefully reviewed the Information. Such representatives
have such knowledge and experience in financial, business,
securities and real estate matters that they are capable of
evaluating the merits and risks of the acquisition of the
Preferred Stock and of making an informed investment decision.
(iv) MLIC hereby advises the Company that MLIC has entered
into a Preferred Stock Purchase Agreement, of even date with the
Merger Agreement, with ERP Operating Limited Partnership, an
Illinois limited partnership, pursuant to which MLIC has agreed
to sell the Preferred Stock to ERP Operating Limited Partnership.
In connection therewith, MLIC has obtained from ERP Operating
Limited Partnership representations and warranties similar to
those set forth in clauses (i), (ii) and (iii) above, a
representation that ERP Operating Limited Partnership will be
acquiring the Preferred Stock for its own account, as principal,
and not with a view to a transfer thereof, and a covenant similar
to that set forth in subparagraph (h) above.
(j) MLIC acknowledges and agrees that certain of the key
executives of MLIC were, immediately prior to the consummation of the
Transfer, key executives of MLIC, that it is fair and reasonable in
the circumstances to impute to MLIC as of the execution and delivery
of this Agreement and as of the consummation of the Transfer, all
knowledge, if any, of MLIC with respect to the Transferred Properties
and the Assumed Liabilities (as such terms are defined in the Asset
Exchange Agreement), and that all such knowledge shall so be (and
hereby is) imputed to MLIC. MLIC's acknowledgments and agreements set
forth in this clause (j) shall survive the Transfer indefinitely.
Section 3.j BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Company and MLIC.
Section 4.j NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission followed by telephonic confirmation or similar
writing) and shall be given to such party: (x) in the case of the Company,
or MLIC, at its address, telex number or facsimile number set forth on the
signature pages hereof with a duplicate copy thereof, in the case of MLIC,
to MLIC, at 624 Ellis Street, Augusta, Georgia 30901 (y) in the case of the
Company, to 624 Ellis Street, Augusta, Georgia 30901, or (z) in the case of
any party, such other address, telex number or facsimile number as such
party may hereafter specify for the purpose by notice to the other party.
Each such notice, request or other communication shall be effective (i) if
given by telex or facsimile transmission, when such telex or facsimile is
transmitted to the telex number or facsimile number specified in this
Section and the appropriate answerback or facsimile confirmation is
received, (ii) if given by certified registered mail, return receipt
requested, with first class postage prepaid, addressed as aforesaid, upon
receipt or refusal to accept delivery, (iii) if given by a nationally
recognized overnight carrier, 24 hours after such communication is
deposited with such carrier with postage prepaid for next day delivery, or
(iv) if given by any other means, when delivered at the address specified
in this Section 7.4.
Section 5.j NO WAIVERS. No failure or delay by MLIC in exercising any
right, power or privilege hereunder or under the Note shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 6.j EXPENSES; INDEMNIFICATION.
(a) Subject to the terms of the Transaction Costs Agreement, the
Company shall pay within thirty (30) days after written notice from
MLIC, (i) all reasonable out-of-pocket costs and expenses of MLIC
(including reasonable fees and disbursements of its counsel) in
connection with the preparation of this Agreement, this Agreement and
the documents and instruments referred to therein, and any waiver or
consent hereunder or any amendment hereof or any Default or alleged
Default hereunder, (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by MLIC, including fees and
disbursements of counsel for MLIC, in connection with the enforcement
of this Agreement and the instruments referred to therein and such
Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom;
(b) The Company agrees to indemnify MLIC, their respective
affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which
may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding that may at any
time (including, without limitation, at any time following the payment
of the Obligations) be asserted against any Indemnitee, as a result
of, or arising out of, or in any way related to or by reason of,
(i) any of the transactions contemplated by this Agreement or the
execution, delivery or performance of this Agreement, (ii) any
violation by the Company or the Environmental Affiliates of any
applicable Environmental Law, (iii) any Environmental Claim arising
out of the management, use, control, ownership or operation of
property or assets by the Company or any of the Environmental
Affiliates, including, without limitation, all on-site and off-site
activities of the Company or any Environmental Affiliate involving
Materials of Environmental Concern, (iv) the breach of any
environmental representation or warranty set forth herein, but
excluding those liabilities, losses, damages, costs and expenses
(a) for which such Indemnitee has been compensated pursuant to the
terms of this Agreement, (b) incurred solely by reason of the gross
negligence, willful misconduct bad faith or fraud of any Indemnitee as
finally determined by a court of competent jurisdiction,
(c) violations of Environmental Laws relating to a Property which are
caused by the act or omission of such Indemnitee after such Indemnitee
takes possession of such Property or (d) any liability of such
Indemnitee to any third party based upon contractual obligations of
such Indemnitee owing to such third party which are not expressly set
forth in this Agreement. In addition, the indemnification set forth
in this Section 7.6(b) in favor of any director, officer, agent or
employee of MLIC shall be solely in their respective capacities as
such director, officer, agent or employee. The Company's obligations
under this Section shall survive the termination of this Agreement.
Section 7.b AMENDMENTS AND WAIVERS. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Company and MLIC.
Section 8.b ASSIGNMENT. Neither the Company nor MLIC shall have the
right to assign its rights hereunder or any interest herein; PROVIDED,
HOWEVER, the foregoing provision shall not limit the right of MLIC, or
MLIC's successors or assigns, to sell, transfer or assign any shares of
Preferred Stock owned by it subject to the provisions of applicable
securities laws, and in connection with any such sale, transfer or
assignment, to assign its rights hereunder, whereupon the representations,
warranties and covenants contained herein shall run in favor of, and inure
to the benefit of, the purchaser, transferee or assignee of such shares of
Preferred Stock.
Section 9.b GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this Agreement
and any action for enforcement of any judgment in respect thereof may
be brought in the courts of the State of Illinois or of the United
States of America for the Northern District of Illinois, and, by
execution and delivery of this Agreement, the Company hereby accepts
for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid
courts and appellate courts from any thereof. The Company
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the hand
delivery, or mailing of copies thereof by registered or certified
mail, postage prepaid, to the Company at its address set forth below.
The Company hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the
right of MLIC to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction.
Section 10.b COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof. This Agreement shall become effective upon receipt by MLIC
and the Company of counterparts hereof signed by each of the parties
hereto.
Section 11.b WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND MLIC
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 12.b SURVIVAL. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the issuance of the
Preferred Stock.
Section 13.b LIMITATION OF LIABILITY. No claim may be made by the
Company or any other Person acting by or through the Company against MLIC
or the affiliates, directors, officers, employees, attorneys, agent,
successors or assigns of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions contemplated by
this Agreement, or any act, omission or event occurring in connection
therewith; and the Company hereby waives, releases and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
Section 14.b RECOURSE OBLIGATION. This Agreement and the obligations
hereunder are fully recourse to the Company. Notwithstanding the foregoing,
no recourse under or upon any obligation, covenant, or agreement contained
in this Agreement shall be had against any officer, director, shareholder
or employee of the Company, except in the event of fraud or
misappropriation of funds on the part of such officer, director,
shareholder or employee.
Section 15.b CONFIDENTIALITY. MLIC shall use reasonable efforts to
assure that information about the Company and its Subsidiaries and
Investment Affiliates, and the Properties thereof and their operations,
affairs and financial condition, not generally disclosed to the public,
which is furnished to MLIC pursuant to the provisions hereof is used only
for the purposes of this Agreement and shall not be divulged to any Person
other than MLIC, and their affiliates and respective officers, directors,
employees and agents who are actively and directly participating in the
evaluation , except: (a) to their attorneys and accountants, (b) in
connection with the enforcement of the rights and exercise of any remedies
of MLIC hereunder, (c) in connection with any transfer of the Preferred
Stock to a Person who has agreed in writing to be bound by a
confidentiality agreement substantially equivalent to the terms of this
Section 7.15, and (d) as may otherwise be required or requested by any
regulatory authority having jurisdiction over MLIC or by any applicable
law, rule, regulation or judicial process.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company and MLIC have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
MERRY LAND & INVESTMENT COMPANY, INC.
By:
Name:
Title:
Facsimile Number: (706) 722-4681
Address:624 Ellis Street
Augusta, Georgia 30901
MERRY LAND PROPERTIES, INC.
By:
Name:
Title:
Facsimile Number: (706) 722-4681
Address:624 Ellis Street
Augusta, Georgia 30901
SUBSIDIARIES OF THE REGISTRANT
1. Merry Land Property Management, Inc., a Georgia corporation
2. ML South Augusta, Inc., a Georgia corporation
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<CGS> 5,005,502
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<INTEREST-EXPENSE> 694,462
<INCOME-PRETAX> 2,594,848
<INCOME-TAX> (462,597)
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<EPS-PRIMARY> 1.45
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</TABLE>
