AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ________ , 1999
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-11/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No.1)
Merry Land Properties, Inc.
Merry Land Capital Trust
(Exact Names Of Registrants as Specified in Governing Instruments)
624 ELLIS STREET
AUGUSTA, GEORGIA 30901
(706) 722-6756
(Address, Including Zip Code and Telephone Number, Including Area Code,
of Both Registrants' Principal Executive Offices)
DORRIE E. GREEN
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
MERRY LAND PROPERTIES, INC.
624 ELLIS STREET
AUGUSTA, GEORGIA 30901
(706) 722-6756
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service for Both Registrants)
COPIES TO:
MARK S. BURGREEN
HULL, TOWILL, NORMAN, BARRETT & SALLEY, P.C.
801 BROAD STREET, 7TH FLOOR
AUGUSTA, GEORGIA 30901
(706) 722-4481
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same
offering.
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same
offering.
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box.
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CALCULATION OF REGISTRATION FEE
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- ------------------------------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING MAXIMUM
REGISTRATION
SECURITIES TO BE BE PRICE PER AGGREGATE FEE
REGISTERED REGISTERED UNIT OFFERING
PRICE (1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[ ]% Convertible 867,100 $10 $8,671,000 $2,411
Trust Preferred
Securities of Merry
Land Capital Trust
[ ]% Convertible (2) - - (2)
Subordinated
Debentures of Merry
Land Properties, Inc.
Common Shares of Merry (3) - - (3)
Land Properties, Inc.
Guarantee of Merry Land (4) - - (4)
Properties, Inc. ___________ ____________ ____________ ___________
TOTAL 867,100 $10 $8,671,000 $2,411
</TABLE>
(1) Exclusive of accrued interest and distributions, if any.
(2) $8,671,000 in aggregate principal amount of [ ]% Convertible
Subordinated Debentures of Merry Land Properties, Inc. to be sold to Merry
Land Capital Trust in connection with the issuance by the trust of its
Convertible Trust Preferred Securities. Under certain circumstances, the
debentures may be distributed to the holders of the Convertible Trust
Preferred Securities for no additional consideration. No separate
registration fee is required pursuant to Rule 457(i).
(3) Such number of common shares of Merry Land Properties, Inc. as are issuable
upon conversion of the [ ]% Convertible Subordinated Debentures
(including, without limitation, as a result of anti-dilution adjustments).
No separate registration fee is required pursuant to Rule 457(i).
(4) Consists of the rights of the holders of the Convertible Trust Preferred
Securities under a Guarantee by Merry Land Properties, Inc. and certain
related obligations of Merry Land Properties, Inc., as described in the
Registration Statement. No additional consideration is being paid for the
Guarantee and these related rights. No separate registration fee is
required pursuant to Rule 457(n).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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CROSS REFERENCE SHEET
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FORM S-11 ITEM NO. AND HEADING LOCATION OR HEADING IN PROSPECTUS
------------------------------ ---------------------------------
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1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus...............................Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus......................Inside Front Cover Page
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges..................................Prospectus Summary; Risk Factors
4. Determination of Offering Price..........Not Applicable
5. Dilution.................................Not Applicable
6. Selling Security Holders.................Not Applicable
7. Plan of Distribution.....................Not Applicable
8. Use of Proceeds..........................Use of Proceeds
9. Selected Financial Data..................Selected Financial Data
10. Management's Discussion and Analysis Management's Discussion and
of Financial Condition and Results of Analysis of Financial Condition
Operations...............................and Results of Operation
11. General Information as to Registrant.....Prospectus Summary; Merry
Land's Business; The Trust
12. Policy With Respect to Certain Policies With Respect to
Activities...............................Certain Activities; Accounting
Treatment of Trust
13. Investment Policies of Registrant........Policies With Respect to
Certain Activities; Accounting
Treatment of Trust
14. Description of Real Estate...............Merry Land's Real Estate; Risk
Factors; Policies With Respect
to Certain Activities;
Management Discussion and
Analysis of Financial Condition
and Results of Operations
15. Operating Data...........................Merry Land's Business; Merry
Land's Real Estate
16. Tax Treatment of Registrant and Its United States Federal Income
Security Holders.........................Taxation
17. Market Price of and Dividends on the Risk Factors; Price Range of
Registrant's Common Equity and Related Common Shares and Distribution
Stockholder Matters......................History; Dividend Policy
18. Description of Registrant's Securities...Description of Preferred
Securities; Guarantee;
Description of the Junior
Subordinated Debentures;
Description of Capital Stock;
Management
19. Legal Proceedings........................Legal Proceeding
20. Security Ownership of Certain
Beneficial Owners and Management.........Principal Stockholders
21. Directors and Executive Officers.........Management
22. Executive Compensation...................Management
23. Certain Relationships and Related
Transactions.............................Not Applicable
24. Selection, Management and Custody of Merry Land's Business; Merry Land's
Registrant's Investments.................Real Estate; Policies with Respect
to Certain Activities; Management
25. Policies with Respect to Certain
Transactions.............................Management
26. Limitations of Liability.................Risk Factors; Management; The
Trust; Description of Preferred
Securities; Guarantee; Description
of Junior Subordinated Debentures
27. Financial Statements and Information.....Index to Financial Statements
28. Interests of Named Experts and Counsel...Not Applicable
29. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..............................Risk Factors; Management
30. Quantitive and Qualitive Disclosures
About Market Risk........................Management's Discussion and
Analysis of Financial Condition
and Results of Operations
</TABLE>
PROSPECTUS (Subject to Completion) [October ___ ] , 1999
MERRY LAND PROPERTIES, INC.
MERRY LAND CAPITAL TRUST
2,601,300 RIGHTS TO PURCHASE
867,100 [ ]% CONVERTIBLE TRUST PREFERRED SECURITIES
($10 LIQUIDATION AMOUNT PER PREFERRED SECURITY)
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN BY,
AND CONVERTIBLE INTO COMMON SHARES OF,
[MERRY LAND PROPERTIES, INC. LOGO]
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- ----------------------------------------------------------- EACH HOLDER OF OUR
CONSIDER CAREFULLY THE MATERIAL RISKS BEGINNING ON PAGE 10 COMMON
SHARES IS
OF THIS PROSPECTUS BEFORE DECIDING TO EXERCISE RIGHTS RECEIVING -
- ---------------------------------------------------------- one non-transferable
right for every
- ---------------------------------------------------------- common share held
Wachovia Securities, Inc. has informed us that they intend on _______, 1999.
to make a market in the Merry Land Capital Trust preferred
securities under the proposed symbol MRYPA. However, no THREE RIGHTS ALLOW
assurance can be given that an active and liquid trading THE HOLDER -
market will develop for the preferred securities. to subscribe to purchase
- ---------------------------------------------------------- one [ ]% Convertible
Trust Preferred Security
- ---------------------------------------------------------- of Merry Land Capital
The preferred securities are convertible into common shares Trust for $10.00. This
of Merry Land Properties. Our common shares are listed on right may be exercised
the Nasdaq SmallCap Market under the symbol "MRYP" and prior to 5:00 p.m. EST,
their last reported sale price on ________, 1999 was on ___, 1999 (or a later
$______. time and date that we select)
- ---------------------------------------------------------- at which time the right will
expire.
- ----------------------------------------------------------
Management Participation. Merry Land's 3 executive THE MINIMUM SUBSCRIPTION
officers and its directors have expressed their non-binding IS FOR 100 PREFERRED
SECURITIES,
intention to subscribe for preferred securities at least in OR A TOTAL INVESTMENT OF
amounts equal to their basic subscription rights, an $1,000.
aggregate of approximately $2.5 million.
- ----------------------------------------------------------- A HOLDER WHO
EXERCISES ALL OF
ITS RIGHTS -
may oversubscribe
for some or all
preferred securities
not purchased by others.
A holder of less than
300 rights must exercise
the oversubscription
right to subscribe
for at least 100 preferred
securities for a total
investment of $1,000.
MERRY LAND CAPITAL
TRUST -
is offering 867,100
[ ]% Convertible
Trust Preferred Securities
at $10 each, convertible into
[________] common shares at
$[ ] per common share for
an aggregate of $8,671,000.
will use the proceeds to
purchase $8,671,000 of our
junior subordinated debentures
with terms that correspond
to the preferred securities.
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PER PREFERRED SECURITY TOTAL
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Price to Investors $10.00 $8,671,000.00
Proceeds to Merry Land Capital Trust (1) $10.00 $8,671,000.00
</TABLE>
(1) Before deducting expenses estimated at approximately $200,000 payable by
Merry Land Properties. If not all preferred securities are sold,
the proceeds will be reduced accordingly.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
PAGE NO. PAGE NO.
-------- --------
Prospectus Summary.........1 Management..........................37
Risk Factors..............10 Principal Stockholders..............41
Merry Land's Business ....17 The Offering........................42
Merry Land's Real Estate..20 The Trust ..........................45
Accounting Treatment of Description of The Preferred
Trust.....................22 Securities..........................47
Price Range of Common Stock Guarantee...........................60
And Distribution History..23 Description of the Junior
Subordinated Debentures.............63
Dividend Policy...........24 Description of Merry Land's
Use of Proceeds...........24 Capital Stock.......................71
Capitalization............24 United States Federal Income
Management's Discussion and Taxation............................72
Analysis of Financial Engagement of Financial Advisor.....78
Condition and Results of Legal Matters.......................78
Operations................26 Experts.............................78
Legal Proceedings ........35 Available Information...............78
Policies with Respect to Index to Financial Information.....F-1
Certain Activities........35
You should rely only on the information contained or incorporated by
reference in this Prospectus. We have not authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted.
You should assume that the information appearing in this Prospectus is
accurate as of the date on the front cover of this Prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
FORWARD LOOKING STATEMENTS
In addition to historical information, the information included in this
Prospectus contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such as those pertaining to our capital resources, portfolio
performance and results of operations. Likewise, the pro forma financial
statements and other pro forma information included in this Prospectus also
contain forward-looking statements. In addition, all statements regarding
anticipated growth in our funds from operations and anticipated market
conditions, demographics and results of operations are forward-looking
statements. Forward-looking statements involve numerous risks and
uncertainties and should not be relied upon as predictions of future events,
and there can be no assurance that the events or circumstances reflected in
such forward-looking statements will be achieved or occur. Some forward-
looking statements can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "pro forma," "estimates," or
"anticipates" or comparable terminology, or by discussions of strategy, plans
or intentions. Forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and they may
be incapable of being realized. The following factors, among others, could
cause actual results and future events to differ materially from those set
forth or contemplated in the forward-looking statements: defaults or non-
renewal of leases, increased interest rates or operating costs, failure to
obtain necessary outside financing, difficulties in identifying properties to
acquire and in making acquisitions, failure to successfully integrate acquired
properties and operations, risks and uncertainties affecting property
management, development or construction (including construction delays, cost
overruns, inability to obtain necessary permits and public opposition to such
activities), environmental uncertainties, risks related to natural disasters,
financial market fluctuations, changes in real estate and zoning laws and
increases in real property tax rates. Our success depends upon economic trends
generally, including interest rates, income tax laws, governmental
regulations, legislation, population changes and those risk factors discussed
in the section entitled "Risk Factors." You are cautioned not to place undue
reliance on forward-looking statements, which reflect management's analysis
only. We assume no obligation to update forward-looking statements.
<PAGE>
PROSPECTUS SUMMARY
This summary may not contain all the information that may be important
to you. You should read the entire Prospectus including the financial data and
the related notes, before deciding to exercise your rights. In this
Prospectus:
"Merry Land" or "we" refers to Merry Land Properties, Inc. and its
subsidiaries.
"Capital Trust" refers to Merry Land Capital Trust, which will
issue its [ ]% convertible trust preferred securities. The Capital
Trust is a special purpose business trust formed by us to purchase our
[ ]% convertible subordinated debentures.
"Old Merry Land" refers to our predecessor, Merry Land & Investment
Company, Inc., which owned substantially all of our properties until
October 15, 1998. We were spun-off from Old Merry Land just prior to
its merger into Equity Residential Properties Trust in October 1998.
We are distributing to our stockholders rights to purchase the preferred
securities.
MERRY LAND'S BUSINESS
Merry Land is an integrated real estate company which operates primarily in
the apartment industry. At August 31, 1999, the company had a total book
capitalization of $105.1 million and market capitalization of $105.9 million.
We own eleven apartment communities located in Savannah and Augusta, Georgia,
and Charleston, South Carolina, approximately 4,000 acres of clay land which
produce mining royalties, a number of small commercial properties, and other
tracts of land suitable for sale or development. We also provide property
management and development consulting services to others.
OBJECTIVE
Our objective is to build shareholder value through active involvement in
the apartment business and other commercial real estate activities. This
includes the investment in and the development, rehabilitation and management
of properties for ourselves and for others. We operate in the Southeastern
United States, with emphasis on the coastal areas in that region where we and
our predecessor, Old Merry Land, have been active for over eighteen years. We
believe 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 should lead to higher job growth and stronger housing
demand, creating exceptional opportunities for well conceived and well managed
real estate projects.
ORGANIZATION
Merry Land maintains a functionally organized management structure,
conducting corporate level activities (including accounting, finance, general
property management and acquisitions and development) from offices in Augusta.
The company maintains satellite offices in Savannah and Atlanta which support
its property management and development activities.
Most of Merry Land'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 we extensively train in sales, management,
accounting, maintenance and other disciplines.
At August 31, 1999, Merry Land had a total of 117 employees. Of this
number, 96 worked at apartment communities and 21 were 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 stockholders through an Employee Stock
Ownership Plan. Corporate level employees participate in a restricted stock
grant plan, thus further aligning their interests with those of our
stockholders. Merry Land is a Georgia corporation formed on September 3,
1998. Its principal office is 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 Old Merry Land, were spun out as a dividend to Old Merry
Land's stockholders 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." Old Merry Land was one of the
nation's leading apartment companies, which owned and operated 135 communities
with 35,000 apartment units acquired or developed throughout the Southeast and
Texas. Its common shares, with a market value in excess of $1 billion, were
listed on the New York Stock Exchange. Its training, maintenance, accounting
and other operating systems were among the most progressive in the industry.
ACCOUNTING PREDECESSOR
Merry Land has operated only since October 15, 1998. Accordingly, only the
Consolidated Balance Sheets for December 31, 1998 and later periods and the
1999 Consolidated Statements of Income are actual financial statements
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.
APARTMENTS
COMMUNITIES. At August 31, 1999, Merry Land owned eleven apartment
communities containing 2,301units in Savannah and Augusta, 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
apartments are 32% one bedroom units, 59% two bedroom units and 9% three
bedroom units. The units average 950 square feet in area, 13 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. Each apartment community is owned by a single purpose
subsidiary company, whose non-recourse indebtedness is secured by a mortgage
on the property.
MARKETS. Ten of Merry Land's eleven apartment communities are located in
the southern coastal cities of Savannah, Georgia and Charleston, South
Carolina. We believe 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 our communities has been
high over the last five years, averaging 90% or more in each of those years.
This strong demand has produced a 3.0% average annual increase in rental rates
at the apartment communities during this period.
OTHER REAL ESTATE HOLDINGS
Merry Land also owns:
four land parcels, two in Savannah and two in Charleston, which may
be suitable for apartment development or single family lot sales;
an historical house in Charleston which we are converting into for-
sale condominium units;
five small commercial properties in the Augusta area;
six commercial land sites in Augusta, Jacksonville, Miami, Savannah
and Nashville containing 46 acres; and
approximately 4,800 acres of unimproved land generally in the
Augusta area, much of which is either wetlands or subject to long term
clay mining leases.
RECENT DEVELOPMENTS
On August 23, 1999, Merry Land acquired the investment interests held by
Equity Residential Properties Trust in six apartments communities containing
1,297 units located in Charleston, Savannah and Augusta. The communities had
been owned by Old Merry Land. Following the merger, we managed these
communities for, and held small capital interests in, the limited liability
companies that owned these communities. The purchase price for the interests
was $54.0 million and made us the sole owner of these properties. The
purchase was financed with $50.7 million in mortgage financing. The six
nonrecourse loans have 8 and 12 year terms and bear interest at 7.98% in the
aggregate.
<PAGE>
THE RIGHTS OFFERING
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RIGHTS..............Merry Land is distributing to each record holder of its
common shares as of the close of business on [ ],
1999, the record date, one non-transferable right for
every common share held. Merry Land will issue a total of
2,601,300 rights.
RECORD DATE.........[ ], 1999.
SUBSCRIPTION PRICE..$10.00 per preferred security.
BASIC SUBSCRIPTION..Each stockholder is entitled to purchase one preferred
security at the $10.00 subscription price for every three
rights held, subject to the minimum subscription.
MINIMUM
SUBSCRIPTION........The minimum subscription is for 100 preferred securities
for a total investment of $1,000, regardless of the number
of rights held. A holder of less than 300 rights is not
entitled to purchase the full minimum subscription of 100
preferred securities in the basic subscription, but may
exercise the basic subscription and the oversubscription
privilege to subscribe for at least 100 preferred
securities for a total investment of $1,000. The purpose
of the minimum subscription is to attempt to limit the
number of "odd lot" holders of less than 100 preferred
securities, for whom the annual expenses of maintaining
the accounts are disproportionately high. Nevertheless, a
holder of less than 300 rights may be allocated an odd lot
of preferred securities if there are not enough
unsubscribed preferred securities to fully satisfy the
oversubscriptions.
OVERSUBSCRIPTION
PRIVILEGE...........A rights holder who exercises in full its basic
subscription may also oversubscribe (at the same
subscription price) for additional preferred securities
which were not purchased by others through the exercise of
rights. A holder may exercise its oversubscription
privilege only concurrently with its basic subscription.
If there are not enough unsubscribed preferred securities
available to satisfy fully all exercises of the
oversubscription privilege, the available securities will
be allocated pro rata based on the number of rights
exercised by oversubscribers in the basic subscription.
See "The Offering -- Oversubscription Privilege."
NON-TRANSFERABILITY
OF RIGHTS...........Subscription rights will be evidenced by non-transferable
Rights Certificates that will be exercisable by the holder
until the expiration time, at which time unexercised
rights will become null and void.
RIGHTS/SUBSCRIPTION
AGENT...............First Union National Bank, 1525 West W.T. Harris
Boulevard, 3C3, Charlotte, North Carolina 28262.
PROCEDURE FOR
EXERCISE............A holder may exercise the basic subscription and
oversubscription privilege by properly completing and
executing the Rights Certificate evidencing the rights and
forwarding it, together with payment of the subscription
price to the subscription agent before the offering
expires. If a holder chooses to forward a Rights
Certificate by mail, we recommend using insured,
registered mail. Alternatively, a holder may use the
guaranteed delivery procedures described in "The Offering
-- Late Delivery of Payments and Rights Certificates." A
rights holder may not revoke any exercise of the basic
subscription or oversubscription privilege.
NO FRACTIONAL
PREFERRED
SECURITIES..........We will not issue any fractional preferred securities for
the exercise of any rights or the oversubscription
privilege.
PERSONS HOLDING
SHARES THROUGH
OTHERS..............Stockholders holding common shares and receiving rights
through a broker, dealer, commercial bank, trust company
or other nominee, as well as stockholders holding stock
certificates who would prefer to have those institutions
exercise rights and subscribe for preferred securities on
their behalf, should contact the appropriate nominee or
institution and request it to effect those transactions
for them. See "The Offering -- Method of Exercising Rights
and Oversubscription Privilege."
ISSUANCE OF
CERTIFICATES........Certificates for preferred securities purchased in this
offering will be delivered to subscribers as soon as
practicable after the offering expires. See "The Offering
-- Delivery Preferred Securities."
USE OF PROCEEDS.....The Capital Trust will use the proceeds to buy Merry
Land's junior subordinated debentures. If the offering is
fully subscribed, we will receive proceeds of
approximately $8.6 million. We expect to receive proceeds
of at least $2.5 million. Merry Land intends to use $1.5
million of the net proceeds of this offering to repay
amounts outstanding under its line of credit. If
additional net proceeds are available, Merry Land intends
to use such proceeds for general corporate purposes, which
may include in the following order of priority: (i) making
improvements to properties; (ii) the Calhoun Street
condominium conversion; (iii) the Waters Edge land
development; (iv) construction of the Merritt at James
Island Apartment Community; and (v) the acquisition of
additional apartment properties and the development and
construction of new apartment properties. See "Use of
Proceeds."
EXPIRATION
DATE/TIME...........[ ], 1999 at 5:00 p.m. EST, unless we select a
later date and time in our sole discretion. After that
time, rights will become null and void and have no value.
TAX TREATMENT
OF RIGHTS
DISTRIBUTION........Based upon discussions with our financial and tax
advisors, we do not believe the distribution of the rights
to purchase the preferred securities will be taxable to
our stockholders. For a discussion of the tax
consequences if the rights are determined by the Internal
Revenue Service to have value, see "United States Federal
Income Taxation -- Tax Treatment of Rights Distribution."
MANAGEMENT
PARTICIPATION.......Merry Land's three executive officers and its directors
have expressed their non-binding intention to subscribe
for preferred securities at least in amounts equal to
their basic subscription rights, which is an aggregate of
247,762 preferred securities or approximately $2.5
million.
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<PAGE>
THE CONVERTIBLE TRUST PREFERRED SECURITIES
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MERRY LAND
CAPITAL TRUST...........The trust is a statutory business trust created under the laws
of Delaware. The trust will:
issue and sell preferred securities, representing
beneficial interests in the trust, to Merry Land's
stockholders;
issue and sell common securities to Merry Land; and
use the proceeds from these sales to buy from Merry
Land junior subordinated debentures with terms that
correspond to the preferred securities.
The trust's executive offices are the same as Merry Land's.
THE TRUSTEES............Merry Land will appoint three trustees to conduct the trust's
business. The trustees for the trust will be:
First Union National Bank, as property trustee;
William J. Reif, as the Delaware trustee; and
three of Merry Land's officers or employees, as
individual administrative trustees.
MERRY LAND PROPERTIES,
INC.....................Merry Land will:
own the common securities of the trust;
sell to the trust its junior subordinated debentures,
which it:
- will pay principal and interest on, subject to
payment of its senior debt; and
- may choose to distribute pro rata to the holders of
the preferred securities and the common securities
if it dissolves the trust; and
guarantee payments on the preferred securities on a junior
subordinated basis, as described under "Guarantee" below.
SECURITIES OFFERED......867,100 [ ]% Convertible Trust Preferred Securities ($10
liquidation amount per security) issued by the trust.
OFFERING PRICE..........$10 per preferred security.
DISTRIBUTIONS...........Distributions on the preferred securities will be:
cumulative from the date of original issuance;
payable at the annual rate of [ ]% of the
liquidation preference of $10 per security;
made quarterly in arrears on March 31, June 30,
September 30 and December 31, commencing on December
31, 1999;
made only to the extent that funds of the trust are
available for distribution; and
deferrable as described below.
DEFERRAL OF
DISTRIBUTIONS...........We may defer payment of interest on the junior subordinated
debentures. If we do that, the trust will defer making
distributions on the preferred securities during the same
period. We may defer interest on the debentures for up to 20
consecutive quarters, but we may not defer interest beyond
[ ],[2029], the maturity date of the debentures. At the end of the
deferral period, we must pay all accrued and unpaid interest.
During any deferral, distributions will continue to accrue on
the preferred securities, but not on the deferred interest.
However, the rate of accrual on the liquidation amount will
increase incrementally to a rate that will yield the holders a
return equivalent to a [ ]% annual rate compounded quarterly.
See "Description of Preferred Securities-- Deferral of
Distributions." Upon payment of all deferred interest, the rate
of accrual will return to an annual rate of [ ]% of the
liquidation amount of $10 per security. If a holder of
preferred securities converts preferred securities into common
shares during a deferral period, the holder will not receive any
of the deferred distributions. Once we have paid all deferred
interest, we again can defer payment of interest on the
debentures for up to 20 consecutive quarters if no event of
default under the debentures exists.
During any deferral, we generally will not be permitted to:
pay a dividend or make any distributions on, or
repurchase, our capital shares; or
make any payment on any of our debt that ranks equal
to or junior to the debentures.
TAX CONSEQUENCES
OF DEFERRAL.............If we defer payments of interest on the junior subordinated
debentures, the holder of the preferred securities will be
required to recognize interest income and include the deferred
amounts in gross income for federal income tax purposes, even
though the holder will not have received any cash distributions
relating to that interest income. See "United States Federal
Income Taxation -- Interest Income and Original Issue Discount."
LIQUIDATION
PREFERENCE..............$10 per preferred security, plus all accrued and unpaid
distributions.
CONVERSION INTO
COMMON SHARES...........Each preferred security is convertible at the option of the
holder into Merry Land's common shares at the rate of [ ]
common shares for each preferred security. This equates to an
initial conversion price of $[ ] per common share. The
conversion ratio will be adjusted in certain circumstances.
Merry Land will pay cash in lieu of issuing any fractional
shares. A holder desiring to convert preferred securities into
common shares must surrender the securities, together with an
irrevocable conversion notice, to the property trustee, who will
serve as conversion agent. The conversion agent then will
exchange the preferred securities for a corresponding portion of
the junior subordinated debentures held by the trust. The
conversion agent then will convert those debentures into common
shares. For example, if you convert 100 preferred securities,
the conversion agent will exchange those securities for $1,000
principal amount of debentures. The conversion agent then will
convert the preferred securities into common shares, which the
agent will deliver to you. A holder will not recognize gain or
loss for United States federal income tax purposes upon the
exchange. See "United States Federal Income Taxation --
Conversion of Preferred Securities into Common Shares."
REDEMPTION..............The trust must redeem all of the preferred securities and common
securities when the junior subordinated debentures are paid at
maturity on [ ], [2029]. In addition, if Merry Land redeems
any junior subordinated debentures before maturity, the trust
will use the cash it receives to redeem, on a pro rata basis,
the same dollar amount of preferred securities and common
securities. Merry Land can redeem some or all of the junior
subordinated debentures in cash as follows:
- at any time on or after five years; and
- at any time if the closing price of our common shares
has exceeded 150% of the conversion price then in
effect for at least 20 trading days within a period of
30 consecutive trading days ending not more than five
trading days prior to the date of the mailing of a
notice of the redemption.
EXCHANGE OR REDEMPTION
DUE TO CHANGES IN
TAX LAW................If changes in the tax law occur that result in more than an
insubstantial risk that:
the trust would become subject to federal tax with
respect to income received on the junior subordinated
debentures; or
- interest payable by Merry Land on the debentures would
not be deductible by Merry Land; or
- the trust would be subject to other taxes, then
the trust can redeem the preferred securities or Merry Land can
pay additional amounts to the trust for distribution to the
holders of the preferred securities. If Merry Land does neither,
the preferred securities will be exchanged for junior
subordinated debentures. See "Description of the Preferred
Securities -- Tax Event Exchange or Redemption."
EXCHANGE DUE TO
INVESTMENT COMPANY
STATUS.................If a change in the law creates more than an insubstantial risk
that the trust would be considered an investment company
required to register under the Investment Company Act, the
preferred securities will be exchanged for junior subordinated
debentures. See "Description of the Preferred Securities --
Investment Company Event Exchange."
DISTRIBUTION OF
JUNIOR SUBORDINATED
DEBENTURES.............Merry Land may dissolve the trust at any time and require the
trust, after it satisfies its creditors, to distribute junior
subordinated debentures to the holders of the preferred
securities on a pro rata basis, in satisfaction of the
liquidation amount of $10 per preferred security plus
accumulated and unpaid distributions.
GUARANTEE..............Merry Land will guarantee the payment of:
- the distributions payable by the trust on the preferred
securities to the extent the trust has funds on hand
available to make the distributions;
- the redemption price, including all accumulated and
unpaid distributions, of the preferred securities to
the extent the trust has funds on hand available to
make the distributions; and
- amounts due on liquidation with respect to the
preferred securities, unless the debentures are
distributed to the holders of the preferred securities,
to the extent that there are assets of the trust
available for distribution to the holders of the
preferred securities.
The guarantee is unsecured and ranks subordinate and junior in
right of payment to all of Merry Land's liabilities. It ranks
equal in right of payment with Merry Land's most senior
preferred shares, if it issues any.
MARKET FOR THE
PREFERRED SECURITIES..We anticipate the preferred securities will be traded under the
proposed symbol MRYPA. It is likely that an active and liquid
trading market will not develop or be maintained for the
preferred securities due to the relatively small size of the
offering. Investors should have a long-term investment intent.
Persons purchasing shares may not be able to sell their shares
when they desire or at a price equal to or about $10.00.
Wachovia Securities, Inc. has informed us that it has agreed to
make a market in the preferred securities. Wachovia Securities,
Inc. will, however, not be subject to any obligation with
respect to such efforts. In the event that the preferred
securities are converted, our common stock is currently traded
on the Nasdaq SmallCap Market system under the symbol "MRYP".
While we cannot guarantee that the common stock will continue to
be traded on the Nasdaq SmallCap Market system, we intend to use
our best efforts to maintain the necessary listing requirements.
</TABLE>
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following summary of financial data with respect to the company's
statements of income for the years ended December 31, 1998, 1997, 1996, and
1995 and with respect to the company's balance sheets as of December 31, 1998,
1997, and 1996 have been derived from the company's financial statements for
such years which have been audited by Arthur Andersen LLP. The following
summary of financial data with respect to the company's statements of income
for the year ended December 31, 1994 and the six months ended June 30, 1999
and with respect to the company's balance sheets as of December 31, 1995 and
1994 and June 30, 1999 have been derived from the company's unaudited
financial statements for such years. Merry Land has operated only since
October 15, 1998. Accordingly, financial data for prior periods are for an
"accounting predecessor" which has been constructed in accordance with the
rules of the Securities and Exchange Commission as described in the Notes to
the Financial Statements.
<TABLE>
<CAPTION>
Six Months
Ended
Years Ended December 31 June 30
-------------------------------------- ----
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Income from operations:
Rental income $8,121 $7,774 $7,523 $7,260 $6,981 $4,070
Royalty income 1,693 1,401 369 436 817 939
Management fees 149 - - - - 433
Development fees 515 - - - - 1,014
Rental expense, property
taxes and ins. 3,449 3,022 2,912 2,849 2,765 1,577
Depreciation of real
estate owned 1,291 1,284 1,213 1,191 1,103 572
------ ------ ------ ------ ------ ------
5,738 4,869 3,767 3,656 3,930 4,307
Other income:
Long term loss - - - - - (30)
Interest income 137 84 70 72 89 145
------ ------ ------ ------ ------ ------
137 84 70 72 89 115
Expenses:
Interest expense 694 - - - - 1,684
Depreciation-other 265 224 145 84 - 146
General & administrative 655 120 108 90 60 1,171
------ ------ ------ ------ ------ ------
1,614 344 253 174 60 3,001
Income from continuing
operations 4,261 4,609 3,584 3,554 3,959 1,421
Non recurring cost-
impairment charge 1,666 - - - - -
------ ------ ------ ------ ------ ------
Income before taxes and
extraordinary item 2,595 4,609 3,584 3,554 3,959 1,421
Income tax
benefit/(expense) 462 - - - - (386)
------ ------ ------ ------ ------ ------
Income before
extraordinary item 3,057 4,609 3,584 3,554 3,959 1,035
------ ------ ------ ------ ------ ------
Extraordinary gain-discount
on repayment of debt, net
of income tax provision - - - - - 722
------ ------ ------ ------ ------ ------
Net income 3,057 4,609 3,584 3,554 3,959 1,757
------ ------ ------ ------ ------ ------
Discount on redemption of
preferred stock - - - - - 1,163
------ ------ ------ ------ ------ ------
Net income-common $3,057 $4,609 $3,584 $3,554 $3,959 $2,920
====== ====== ====== ====== ====== ======
Weighted average common
shares 2,113 1,923 1,796 1,668 1,322 2,181
Weighted average diluted
common shares 2,129 1,946 1,834 1,704 1,349 2,246
Earnings per common share-
basic $1.45 $2.40 $2.00 $2.13 $2.99 $1.34
Earnings per common share-
diluted $1.44 $2.37 $1.95 $2.09 $2.93 $1.30
Common dividends paid $ - $ - $ - $ - $ - $ -
BALANCE SHEET DATA
Real estate and other
fixed assets $40,982 $42,596 $41,558 $42,508 $41,956 $41,809
Cash and short term
investments 3,995 - - - - 4,065
Other assets 9,766 1,412 726 751 783 8,215
------- ------- ------- ------- ------- -------
Total assets $54,743 $44,008 $42,284 $43,259 $42,739 $54,089
======= ======= ======= ======= ======= =======
Short-Term Debt $18,317 $ - $ - $ - $ - $ -
Long-Term Debt 20,000 - - - - -
Mortgage Debt - - - - - 41,241
Other liabilities 2,209 629 337 394 420 645
Preferred stock 5,000 - - - - -
Investment by Old
Merry Land - 43,379 41,947 42,865 42,319 -
Common stock and retained
earnings 9,217 - - - - 12,203
------- ------- ------- ------- ------- -------
Total liabilities and
stockholders' equity $54,743 $44,008 $42,284 $43,259 $42,739 $54,089
======= ======= ======= ======= ======= =======
OTHER DATA
Apartment units owned 1,004 1,004 1,004 1,004 1,004 1,004
Apartment units managed 2,712 - - - - 2,404
Ratio of earnings to fixed
charges 4.7 N/A N/A N/A N/A 1.8
</TABLE>
<PAGE>
RISK FACTORS
Your investment in the preferred securities will involve risks. You
should carefully consider the following discussion of risks and the other
information in this Prospectus before buying the preferred securities. In
addition, certain statements contained in this Prospectus constitute
"forward-looking statements" which involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements to be materially different from any future
results expressed or implied by such forward-looking statements, including
the risks, uncertainties and other factors described below.
NO PRIOR PUBLIC MARKET FOR PREFERRED SECURITIES
We anticipate the preferred securities will be traded under the proposed
symbol MRYPA. It is likely that an active and liquid trading market will
not develop or be maintained for the preferred securities due to the
relatively small size of the offering. Investors should have a long-term
investment intent. Persons purchasing shares may not be able to sell their
shares when they desire or at a price equal to or about $10.00. Wachovia
Securities, Inc. has informed us that it has agreed to make a market in the
preferred securities. However, Wachovia Securities, Inc. will not be
subject to any obligation to do so. In the event that the preferred
securities are converted, Merry Land's common stock is currently traded on
the Nasdaq SmallCap Market system under the symbol "MRYP". While we cannot
guarantee that the common stock will continue to be traded on the Nasdaq
SmallCap Market system, we intend to use our best efforts to maintain the
necessary listing requirements.
NO ASSURANCE OF VALUE OF THE PREFERRED SECURITIES OR MERRY LAND'S
COMMON SHARES
The market price of the preferred securities and Merry Land's common
shares may fluctuate substantially due to a variety of factors, including
quarterly fluctuations in results of operations, changes in earnings
estimates by securities analysts, changes in accounting principles, sales
of securities by existing holders, negative publicity, loss of key
personnel, lack of sustained volume of trading activity, and other factors.
In addition, broad market fluctuations and general economic and political
conditions may adversely affect the market price of the preferred
securities and our common shares regardless of our performance. There can
be no assurance as to the value of preferred securities and our common
shares in the secondary market.
LACK OF OPERATING HISTORY AS SEPARATE ENTITY; LIMITED RELEVANCE OF
HISTORICAL FINANCIAL INFORMATION
Merry Land has a limited operating history as a separate company, and
management has historically been able to rely on the earnings, assets and
cash flow of Old Merry Land in managing the properties. Merry Land's
historical and pro forma results may not be indicative of results for
future periods.
SUBSTANTIAL INDEBTEDNESS MAY AFFECT BUSINESS AND PAYMENTS ON THE
PREFERRED SECURITIES
Merry Land has substantial indebtedness and debt service obligations.
The company's indebtedness of approximately $93.4 million represents
approximately 89% of total book capitalization as of August 31, 1999. Most
of the indebtedness cannot be prepaid until 2003. Merry Land may incur
additional indebtedness from time to time. Merry Land's ability to make
required payments to holders of preferred securities or payments on
indebtedness will be dependent on its ability to generate sufficient cash
from operations or to obtain alternative funding sources. Merry Land's
future operating performance and ability to make planned expenditures will
be subject to future economic conditions and to other financial and
business factors, many of which are beyond its control. There can be no
assurance that Merry Land will be able to generate funds and to obtain
alternative funding sources in a manner sufficient to meet its debt
repayment obligations or required distributions to holders of preferred
securities.
The degree to which Merry Land is leveraged could have other important
consequences, including the following: (i) its ability to obtain additional
financing in the future for working capital, property acquisitions, capital
expenditures, debt service requirements, general corporate or other
purposes may be materially limited or impaired; (ii) a substantial portion
of our cash flow from operations is expected to be dedicated to the payment
of principal and interest on indebtedness, thereby reducing the funds
available for other purposes, including operations and future business
opportunities; (iii) the debt instruments impose significant financial and
operating restrictions which, if violated, could permit creditors to
accelerate payments under the debt; and (iv) Merry Land's flexibility to
adjust to changing market conditions and to withstand competitive pressures
could be limited by its leveraged position and the covenants contained in
its debt instruments, thus putting the company at a competitive
disadvantage.
LACK OF WORKING CAPITAL MAY INHIBIT ABILITY TO EXECUTE BUSINESS PLAN
Merry Land will be primarily dependent on cash flow from operations to
operate its business. In order to implement our business plan, we will be
required to make improvements to several of our properties and develop
apartments on certain sites. We do not anticipate that we will be able to
implement our business plan without obtaining additional financing. Our
debt instruments restrict our ability to incur additional indebtedness and
may prevent us from completing planned expenditures with respect to our
properties. There is no assurance that we will have working capital or
adequate financing in the foreseeable future to execute our business plan.
Our failure to obtain adequate working capital or other financing may have
a material adverse effect on our business, financial condition and results
of operations.
NO DISTRIBUTIONS TO STOCKHOLDERS IN THE FORESEEABLE FUTURE
Unlike Old Merry Land, we are organized as a C corporation and not as
a real estate investment trust ("REIT"). We do not anticipate paying
distributions to common stockholders for the foreseeable future. We
presently intend to retain all earnings, if any, in order to fund capital
expenditures in accordance with our business plan and generally to support
our ongoing business and make payments on our outstanding indebtedness.
Any determination in the future to pay distributions will be dependent upon
our results of operations, financial condition, contractual restrictions
and other factors deemed relevant at that time by our Board of Directors.
Our substantial indebtedness will further restrict our ability to make
distributions to our common stockholders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
POSSIBLE INABILITY TO IMPLEMENT BUSINESS STRATEGY
Merry Land's assets consist of several types of properties including
property held for future development, commercial properties, apartment
communities and clay lands. As part of the company's business plan, Merry
Land may dispose of its commercial properties, acquire apartment
communities, develop apartment communities on undeveloped land and
rehabilitate existing apartment buildings. In addition, the company intends
to manage and develop communities for others. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." This
business strategy entails numerous risks, including the risk that Merry
Land will be unable to obtain financing necessary to implement the
strategy, that development or rehabilitation costs will exceed estimates
and that lease up rates, rental rates and occupancy levels will not meet
expectations. The occurrence of any of the foregoing could have a material
adverse effect on the results of operations and financial condition. In
addition, there can be no assurance that Merry Land will be able to acquire
additional properties on terms and conditions that would be favorable to or
suitable to implement the company's business strategy or that Merry Land
will be able to obtain additional management agreements or renewals of
existing agreements on favorable terms.
SIGNIFICANT IMPACT OF REGIONAL TRENDS DUE TO LACK OF GEOGRAPHIC DIVERSITY
Merry Land's revenues and the value of its properties may be affected
by a number of factors, including the local economic climate (which may be
adversely impacted by business layoffs, industry slowdowns, changing
demographics and other factors) and local real estate conditions (such as
oversupply of or reduced demand for commercial and residential properties).
Our properties are all located in Georgia and South Carolina (except one
unimproved parcel in Nashville, Tennessee and two unimproved parcels in
Florida), and as a result, our operating results will be significantly
dependent on the economic conditions in Georgia, particularly in Augusta
and Savannah, and Charleston, South Carolina.
PLANS TO RAISE ADDITIONAL CAPITAL THROUGH EQUITY FINANCINGS MAY NOT BE
SUCCESSFUL
In order to obtain financing necessary to execute the company's
business plan, Merry Land may raise additional equity capital through the
public or private equity markets. Such financing may be obtained through
the sale of common or preferred equity. There can be no assurance that the
company will be successful in obtaining any such financing or that the
terms of such financing, including the price at which equity securities are
issued and any resulting dilution to existing investors, will be favorable.
The failure to obtain additional equity financing on favorable terms may
have a material adverse effect on the company's business, financial
condition and results of operations.
CONFLICTS OF INTEREST OF COMMON DIRECTORS
Boone A. Knox and Michael N. Thompson serve as trustees of Equity
Residential Properties Trust (EQR) and directors of Merry Land. Mr.
Thompson also serves as our President. Messrs. Knox and Thompson may face
certain conflicts of interest as a result of their position as trustees of
EQR and directors of Merry Land. In their positions as trustees of EQR,
Messrs. Knox and Thompson could be asked to approve or otherwise deal with
matters relating to EQR's relationship with Merry Land. Furthermore, in
their capacity as trustees of EQR, Messrs. Knox and Thompson could be asked
to consider and approve apartment acquisitions or development projects
which could be viewed as competitive with Merry Land and its properties.
Although not obligated to do so, Messrs. Knox and Thompson have indicated
that they intend to recuse themselves from the vote at Merry Land or EQR
with respect to any such matter as to which they may have a conflict of
interest.
INABILITY TO COMPLY WITH NASDAQ MAINTENANCE REQUIREMENTS
Merry Land's common stock is listed on the Nasdaq SmallCap Market.
Nasdaq requires that listed companies comply with certain maintenance
requirements. If Merry Land is unable to satisfy Nasdaq's maintenance
criteria in the future, including trading at or above $1.00 per share,
Merry Land's common stock would be subject to delisting. In such an event,
trading in our common stock would be conducted in the over-the-counter
market on a bulletin board established for securities that do not meet the
listing requirements for Nasdaq, or in what are commonly referred to as the
"pink sheets." As a result, a holder of Merry Land's common stock could
find it more difficult to dispose of, or to obtain accurate quotations of
the price of such common stock. Such a delisting could have an adverse
effect on the market price and overall marketability of our common stock
and the preferred securities. See "--Penny Stock Regulation."
PENNY STOCK REGULATIONS
If Merry Land's common stock is not listed on Nasdaq and has a market
price of less than $5.00 per share, it may be classified as a "penny
stock." Commission regulations define a "penny stock" to be any non-Nasdaq
equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a
penny stock, of a disclosure schedule prepared by the Securities and
Exchange Commission ("SEC") relating to the penny stock market. Disclosure
is also required to be made about commissions payable to both the
broker-dealer and the registered representative and to provide current
quotations for the securities. Finally, monthly statements are required to
be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to
Merry Land's common stock if such securities are quoted on Nasdaq and have
certain price and volume information provided on a current and continuing
basis or meet certain minimum net tangible assets or average revenue
criteria. There can be no assurance that Merry Land's common stock will
qualify for exemption from these restrictions. In any event, even if shares
of Merry Land's common stock were exempt from such restrictions, they would
remain subject to Section 15(b)(6) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which gives the SEC the authority to
prohibit any person that is engaged in unlawful conduct while participating
in a distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the SEC finds that
such a restriction would be in the public interest. If Merry Land's common
stock were subject to the rules on penny stocks, the market liquidity for
it common stock could be severely adversely affected.
PROPERTY PERFORMANCE MAY ADVERSELY AFFECT ABILITY TO MEET OBLIGATIONS
If Merry Land's properties do not generate revenue sufficient to meet
operating expenses, including debt service and repayment and capital
expenditures, the company's financial condition and results of operations
may be adversely affected. Specifically, the company may need to borrow
additional amounts to cover fixed costs and the company's cash flow and
ability to make distributions to the Capital Trust and to stockholders
would be adversely affected. The revenues generated by the company's
properties and the value of the properties may be adversely affected by a
number of factors, including the national and local economic environments,
local real estate conditions, the perceptions by prospective tenants of the
safety, convenience and attractiveness of our properties, the company's
ability to provide adequate management, maintenance and insurance, the
occurrence of energy and supply shortages, the ability to collect on a
timely basis all rent from tenants, the expense of periodically renovating,
repairing and reletting spaces, and increasing operating costs (including
real estate taxes, utilities and interest rates on outstanding debt).
Certain significant expenditures associated with investments in real estate
(such as real estate taxes, insurance and maintenance costs) are generally
not reduced when circumstances cause a reduction in rental revenues from
the investment. All of Merry Land's apartment communities are mortgaged to
secure the payment of indebtedness and if the company is unable to meet its
mortgage obligations, a loss could be sustained as a result of foreclosure
on the property or the exercise of other remedies by the mortgagee. In
addition, real estate values and income from properties are also affected
by such factors as compliance with laws, including tax laws, interest rate
levels and the availability of financing.
COMPETITION WITHIN OUR REAL ESTATE MARKETS
Numerous owners and developers of office properties, multi-family
residential properties and undeveloped real estate tracts compete with
Merry Land. Some of these competing parties own and/or operate newer,
better located properties or are better capitalized than Merry Land. Many
other real estate developers have access to greater financial resources.
The number of competitive commercial and residential properties in a
particular area could have a material adverse effect on Merry Land's
ability to lease space in its properties or at newly developed or acquired
properties and on the rents charged.
CONSTRUCTION AND DEVELOPMENT ACTIVITIES MAY BE UNSUCCESSFUL
Merry Land intends to continue development and construction of
residential properties. See "Merry Land's Real Estate -- Apartment
Development Sites." Risks associated with development and construction
activities may include: abandonment of development opportunities;
construction costs of a property exceeding original estimates, possibly
making the property uneconomical; occupancy rates and rents at a newly
completed property may not be sufficient to make the property profitable;
financing may not be available on favorable terms for development of a
property; and construction and lease up may not be completed on schedule,
resulting in increased debt service expense and construction costs. In
addition, new development activities, regardless of whether they are
successful, typically require a substantial portion of management's time
and attention. Development activities also are subject to the risks
relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy and other required governmental
permits and authorizations.
<PAGE>
STOCKHOLDERS' ABILITY TO CHANGE CONTROL OF MERRY LAND MAY BE LIMITED
STAGGERED BOARD. Merry Land's Board of Directors is divided into
three classes of directors. As the term of each class expires, directors
for that class will be elected for a three-year term and the directors in
the other two classes will continue in office. The staggered terms for
directors may impede the stockholders' ability to change control of Merry
Land even if a change in control were in the stockholders' interest. The
supermajority vote may imped the stockholders' ability to approve such a
transaction, even if such a transaction were in the stockholders' interest.
PREFERRED SHARES. Merry Land's articles of incorporation (the
"Articles") authorize the Board of Directors to issue up to 2,000,000
preferred shares and to establish the preferences and rights (including the
right to vote and the right to convert into common stock) of any preferred
shares. The power to issue preferred shares could have the effect of
delaying or preventing a change in control of Merry Land even if a change
in control were in the stockholders' interest.
SUPERMAJORITY VOTE TO APPROVE MERGER. The Articles provide that 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 votes cast are required
to approve a merger, consolidation, sale of substantially all of the
assets, liquidation, or "Business Combination" as defined in the Georgia
Business Corporation Code (the "GBCC"). The supermajority vote may impede
the stockholders' ability to approve such a transaction, even if such a
transaction were in the stockholders' interest.
GEORGIA BUSINESS COMBINATION LAW. Georgia law includes a business
combination statute which is designed to deter hostile takeovers by
protecting minority stockholders in the second stage of freeze-out mergers.
Under the GBCC, certain business combinations with "interested
stockholders" are prohibited for five years from the time that a person
becomes an interested shareholder unless (i) the combination is approved
before the person becomes an interested shareholder, (ii) the shareholder
becomes an interested shareholder in a transaction in which the person
becomes the beneficial owner of at least 90% of our voting stock, or
(iii) after becoming an interested shareholder, such shareholder acquires
additional shares resulting in the interested shareholder being the
beneficial owner of at least 90% of our voting stock. In addition, the
GBCC requires special procedures for approval by the board of directors of
a business combination unless, among other conditions, our common
stockholders receive a minimum price (as defined in the GBCC) for their
shares and the consideration is received in cash or in the same form as
previously paid by the interested shareholder for its shares. The effect
of this law may prevent or deter a business combination that would be in
the stockholders' best interests.
CERTAIN TYPES OF LOSSES UNINSURABLE
Merry Land generally carries comprehensive liability, fire and
extended coverage insurance with respect to all its properties, with
policy specifications, insured limits and deductibles customarily carried
for similar properties. There are, however, certain types of losses (such
as losses arising from acts of war or compliance with environmental laws
and regulations) that are not generally insured because they are either
uninsurable or because we consider the cost of the insurance to be
prohibitive in light of the coverage provided. Should an uninsured loss or
a loss in excess of insured limits occur, Merry Land could lose its capital
invested in a property, as well as the anticipated future revenue from such
property. Any such loss would adversely affect Merry Land's financial
condition and results of operations.
POTENTIAL ENVIRONMENTAL LIABILITY RELATED TO COMPANY'S PROPERTIES
GENERAL. Merry Land owns real estate. Under federal, state and local
environmental rules, a current or previous owner or operator of real estate
may be required to investigate and clean up hazardous or toxic substances
or petroleum product releases at such property and may be held liable for
property damage and for investigation and clean-up costs. These laws often
impose liability even if the owner or operator did not know of, or cause
the release of such hazardous or toxic substances. The liability as to any
property is generally not limited and could exceed the value of the
property or the aggregate assets of the owner. The presence of
environmentally hazardous substances may adversely affect the owner's
ability to sell or rent such property or to borrow using such property as
collateral. Merry Land's properties include two former landfills. There
can be no assurance that we will not have material liabilities with respect
to these sites.
LANDFILL SITES. Portions of Merry Land's land holdings in Richmond
County, Georgia were used by Richmond County for two municipal landfills
during the late 1960's and early 1970's. One site is comprised of 71 acres
and the other, the "New Savannah Road Landfill", 96 acres. Both landfills
were closed in the mid-1970's and have been held by Merry Land and its
predecessors as unimproved land since that time. Although the sites were
used primarily as municipal landfills, there have been some reports that
some industrial wastes may have been disposed of at the sites.
In 1992, a contractor for the U. S. Environmental Protection Agency
(the "EPA") sampled air, surface water, soil and groundwater on the New
Savannah Road Landfill in order to determine whether there was any
contamination on the site and whether the site should be placed on the
Federal National Priorities List (the "NPL"), for potential clean up. In
October 1992, the EPA issued its report which indicated that some
contamination was present in soil samples but that sufficient groundwater
samples had not been taken to permit a complete evaluation of the site.
Accordingly, the report recommended that further action be taken which we
believe would consist principally of additional testing of the site's
groundwater and surface water. Neither Merry Land nor Old Merry Land had
any further contact with the EPA or its agents since that time and the site
has not been included on the NPL.
Following the EPA's 1992 study, Old Merry Land retained an
environmental consultant to conduct similar studies of both sites. The
consultant reported that its study of the sites did not reveal the presence
on either site of contaminants in amounts likely to result in the EPA
listing either site on the NPL. After receiving the EPA's report, Old Merry
Land's consultant also reviewed the EPA contractor's test results and
confirmed its prior conclusion that the level of contamination discovered
on the New Savannah Road Landfill is not likely to result in the EPA
listing this site on the NPL. However, the studies were limited in nature
and did not represent an examination of all portions of the landfill sites.
There can be no assurance that a more complete investigation or further
testing would not reveal higher levels or different types of contamination
at the sites.
Should further investigation or remedial action be required for the
landfill sites, we believe there will likely be other entities which will
be responsible for a portion of the cost of the investigation or
remediation. These entities include Richmond County, which operated the
landfills, any identified company or municipality whose waste was placed in
the landfills, Old Merry Land and the company that owned the sites at the
time of the disposal of the waste. There can be no assurances that we will
not have material liability with respect to these landfill sites.
GOVERNMENT REGULATIONS
Many laws and governmental regulations are applicable to the
properties and changes in these laws and regulations, or their
interpretation by agencies and the courts, occur frequently and could
materially increase the company's expenses.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Under the Americans with Disabilities Act of 1990 (the "ADA"), all
places of public accommodation are required to meet certain federal
requirements related to access and use by disabled persons. Compliance with
the ADA might require removal of structural barriers to handicapped access
in certain public areas where removal is "readily achievable."
Noncompliance with the ADA could result in the imposition of fines or an
award of damages to private litigants. The impact of the ADA to the
properties, including the extent and timing of required renovations, is
uncertain. If required changes involve a greater amount of expenditures
than we currently anticipate or if the changes must be made on a more
accelerated schedule than we currently anticipate, the company's ability to
make payments of principal and interest to the Capital Trust could be
adversely affected.
OTHER REGULATIONS
The properties are also subject to various federal, state and local
regulatory requirements such as fire and life safety requirements. Failure
to comply with these requirements could result in the imposition of fines
by governmental authorities or awards of damages to private litigants. We
believe that the properties are currently in substantial compliance with
all such regulatory requirements. However, there can be no assurance that
these requirements will not be changed or that new requirements will not be
imposed which would require significant unanticipated expenditures, which
expenditures could have an adverse effect on the company's financial
condition and results of operations and the company's ability to make
payments of principal and interest to the Capital Trust.
<PAGE>
MERRY LAND'S BUSINESS
Merry Land is an integrated real estate company which operates
primarily in the apartment industry. At August 31, 1999, the company had a
total book capitalization of $105.1 million and market capitalization of
$105.9 million. We own eleven apartment communities located in Savannah
and Augusta, Georgia, and Charleston, South Carolina, approximately 4,000
acres of clay land which produce mining royalties, a number of small
commercial properties, and other tracts of land suitable for sale or
development. We also provide third party property management and
development consulting services to others.
OBJECTIVE
Our objective is to build shareholder value through active involvement
in the apartment business and other commercial real estate activities.
This includes the investment, development, rehabilitation and management of
properties for ourselves and for others. We operate in the Southeastern
United States, with emphasis on the coastal areas in that region where we
and our predecessor, Old Merry Land, have been active for over eighteen
years. We believe 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 should lead to higher job
growth and stronger housing demand, creating exceptional opportunities for
well conceived and well managed real estate projects.
ORGANIZATION
Merry Land maintains a functionally organized management structure,
conducting corporate level activities (including accounting, finance,
general property management and acquisitions and development) from offices
in Augusta. The company maintains satellite offices in Savannah and
Atlanta which support its property management and development activities.
Most of Merry Land'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 we extensively train
in sales, management, accounting, maintenance and other disciplines. The
communities are served by corporate level specialists in the fields of
training, marketing, maintenance and information technology. Operating
data is exchanged using a corporate intranet linking all communities to the
home office and to each other.
At August 31, 1999, Merry Land had a total of 117 employees. Of this
number, 96 worked at apartment communities, and 21 were 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 stockholders through an Employee
Stock Ownership Plan. Corporate level employees participate in a
restricted stock grant plan, thus further aligning their interests with
those of our stockholders. Merry Land is a Georgia corporation formed
September 3, 1998. Its principal office is 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 Old Merry Land, were spun out as a dividend to
Old Merry Land's stockholders 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." Old Merry Land
was one of the nation's leading apartment companies, which owned and
operated 135 communities with 35,000 apartment units 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.
ACCOUNTING PREDECESSOR
Merry Land has operated only since October 15, 1998. Accordingly, only
the Consolidated Balance Sheets for December 31, 1998 and later periods and
the 1999 Consolidated Statements of Income are actual financial statements
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.
APARTMENTS
COMMUNITIES. Merry Land owns eleven apartment communities containing
2,301units in Savannah and Augusta, 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 apartments are 32% one bedroom
units, 59% two bedroom units and 9% three bedroom units. The units average
950 square feet in area, 13 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. Each
apartment community is owned by a single purpose subsidiary company, whose
non-recourse indebtedness is secured by a mortgage on the property.
RESIDENTS. Residents at Merry Land'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. We believe that demand for our
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 on prevailing interest rate levels for home mortgage
loans. There is a steady turnover of leases at the communities, allowing
rents to be adjusted upward as demand allows. Leases are generally for
terms of six to twelve months. About two-thirds of the units turn over each
year, a rate we believe is typical for higher end apartment communities.
MARKETS. Ten of Merry Land's eleven apartment communities are located
in the southern coastal cities of Savannah, Georgia and Charleston, South
Carolina. We believe 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 our communities has
been high over the last five years, averaging 90% or more in each of those
years. This strong demand has produced a 3.0% average annual increase in
rental rates at the apartment communities during this period.
OTHER REAL ESTATE HOLDINGS
Merry Land also owns:
- four land parcels, two in Savannah and two in Charleston,
which may be suitable for apartment development or single family
lot sales;
- an historical house in Charleston which we are converting into
for-sale condominium units;
- five small commercial properties in the Augusta area;
- six commercial land sites in Augusta, Jacksonville, Miami,
Savannah and Nashville containing 46 acres; and
- approximately 4,800 acres of unimproved land in the Augusta
area, much of which is either wetlands or subject to a long term
clay mining lease.
PROPERTY MANAGEMENT
We believe that property management is of critical importance to long-
term success in the apartment business. The emphasis of the property
management staff is on what we call "First Class Service", a customer-
focused, marketing oriented form of management. Our objective is to
produce consistently high levels of customer service and high levels of
financial performance at every Merry Land location. This is achieved
through an extensive program of recruiting and training, and a continual
emphasis on professional development and performance based compensation
programs.
Merry Land also provides apartment management and development services
to other owners of apartment communities. We believe we can use our system
of property management to generate additional income to Merry Land, while
providing First Class Service to other apartment communities. To date,
these services have been provided primarily under short term contracts to
Equity Residential Properties Trust. We intend to expand these services to
other property owners or developers as opportunities arise.
<PAGE>
MERRY LAND'S REAL ESTATE
Merry Land's eleven apartment communities are owned by eleven separate
subsidiary limited liability companies. Merry Land's Financial Statements
include these eleven limited liability companies. Each limited liability
company is a separate legal entity and its assets and liabilities are
neither available to pay the debts of Merry Land nor constitute obligations
of Merry Land. Each apartment community is encumbered by a separate non-
recourse mortgage, with limited guaranties by Merry Land. We believe the
apartment communities are adequately covered by customary levels of
insurance. The following table sets forth certain information regarding
the communities and the mortgage debt (dollars in thousands, except average
cost per unit):
<TABLE>
<CAPTION>
Average Average
Date Cost Per Unit Size 8/31/99 Interest Prepayment Maturity Bal. Due
Location Built Units Cost(1) Unit(1) (Sq. Ft.) Debt Balance Rate Amortization Provisions Date at Maturity
-------- ----- ----- ------- ------- --------- ------------ -------- ------------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Woodcrest(2)..Augusta 1982 248 $5,919 $23,869 875 $6,354 7.97% 30 yrs (4) 9/1/07 $5,866
--- ------ ------- --- ------ ------
Total Augusta...............248 5,919 23,869 875 6,354 5,866
Greentree....Savannah 1983 194 7,476 38,534 852 6,716 7.73 30 yrs (3) 7/1/09 5,982
Hammocks at
Long Point(2)Savannah 1997 308 20,420 66,300 1,049 18,787 7.99 30 yrs (4) 9/1/11 16,195
Huntington(2)Savannah 1986 147 5,701 38,783 812 5,084 7.97 30 yrs (4) 9/1/07 4,694
Magnolia
Villa(2).....Savannah 1986 144 4,960 34,444 1,119 4,739 7.97 30 yrs (4) 9/1/07 4,375
Marsh Cove...Savannah 1983 188 8,201 43,623 1,053 8,156 7.73 30 yrs (3) 7/1/09 7,265
West Wind....Savannah 1985 192 7,349 38,277 1,124 9,195 7.73 30 yrs (3) 7/1/09 8,191
----- ------ ------ ----- ------ ------
Total Savannah............1,173 54,107 46,130 1,008 52,677 46,702
Quarterdeck Charleston1986 230 9,709 42,093 810 9,959 7.73 30 yrs (3) 7/1/09 8,857
Summit
Place(2)...Charleston 1985 226 6,869 30,395 892 7,079 7.97 30 yrs (4) 9/1/07 6,536
Waters
Edge.......Charleston 1985 200 8,030 39,693 911 7,194 7.73 30 yrs (3) 7/1/09 6,409
Windsor
Place(2)...Charleston 1989 224 9,658 43,118 953 8,640 7.99 30 yrs (4) 9/1/11 7,448
----- ------ ------ ----- ------ ------
Total Charleston............880 34,266 38,940 890 32,872 29,250
TOTALS.....................2,301 $94,292 $40,979 949 $91,903 $81,818
</TABLE>
(1) Represents to total acquisition cost of the property plus the capitalized
cost of the improvements made subsequent to acquisition.
(2) Acquired on August 23, 1999 from Equity Residential Properties Trust
Limited Liability Companies.
(3) Prepayment locked until August 1, 2003, thereafter, prepayment allowed by
defeasing the remaining debt due.
(4) Prepayment locked until October 1, 2003, thereafter, prepayment allowed by
defeasing the remaining debt due.
The following table sets forth certain information with respect to
each of the apartment communities:
<TABLE>
<CAPTION>
Annual Realty
Occupancy Rate (1) Average Rent Per Unit (2) Taxes
----------------------------- ----------------------------- -------------
8/31 8/31
1999 1998 1997 1996 1995 1994 1999 1998 1997 1996 1995 1994 Amount Rate
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Greentree...97% 94% 92% 95% 98% 93% $609 $600 $594 $569 $544 $533 $117,658 1.94%
Hammocks
at Lg. Pt...95 92 77 N/A N/A N/A 833 816 776 N/A N/A N/A 250,349 1.43
Huntington..96 96 94 97 99 99 637 496 616 606 578 570 101,577 1.94
Marsh Cove..98 98 90 96 98 97 689 677 658 644 609 587 123,160 1.94
Magnolia
Villa.......94 93 94 96 98 98 636 545 621 603 572 548 90,509 1.94
Quarterdeck100 100 99 100 100 98 669 634 616 589 551 531 126,469 1.84
Summit
Place...... 97 97 93 87 89 88 524 620 480 460 459 459 89,484 1.66
Waters Edge.98 97 97 93 96 95 607 574 570 547 539 527 133,171 2.25
West Wind...95 98 96 99 99 99 720 708 684 660 628 594 98,512 1.43
Windsor
Place.......96 99 98 88 90 90 594 600 551 540 524 512 78,259 1.65
Woodcrest...95 88 78 75 83 88 526 677 525 519 502 494 50,865 1.12
Average 96% 95% 91% 92% 94% 94% $645 $631 $611 $568 $546 $531 $114,547 1.26%
</TABLE>
(1) Average physical occupancy at each month end for each year ended.
(2) Represents weighted average monthly rent charged for occupied units and
rents asked for unoccupied units.
The following table sets forth information regarding the federal tax
depreciation on the apartment communities:
<PAGE>
<TABLE>
<CAPTION>
Federal Income Tax Basis(1)
--------------------------------------
COMMUNITY UNITS TOTAL LAND BUILDING IMPROVEMENTS FFE ACCUM. DEPREC. (1)
- --------- ----- ----- ---- -------- ------------ --- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Woodcrest(2).....248 $5,919,437 $414,361 $3,688,401 $880,812 $935,863 $ -
--- ---------- ------- --------- --------- -------
Total Augusta...248 5,919,437 414,361 3,688,401 880,812 935,863 -
Quarterdeck......230 11,951,643 834,042 7,424,166 1,804,924 1,888,511 (205,364)
Summit Place(2)..226 6,869,363 480,855 4,280,300 1,022,161 1,086,046 -
Waters Edge......200 8,868,645 607,522 5,407,814 1,475,732 1,377,577 (149,612)
Windsor
Place (2)........224 9,658,403 676,088 6,018,151 1,437,170 1,526,994 -
--- ---------- ------- --------- --------- --------- --------
Total
Charleston......880 37,348,054 2,598,508 23,130,431 5,739,988 5,879,128 (354,976)
Greentree........194 7,874,480 547,037 4,869,410 1,206,772 1,251,261 (134,846)
Hammocks at Long
Point(2).........308 20,420,410 1,429,429 12,723,957 3,038,557 3,228,467 -
Huntington(2)... 147 5,701,110 399,078 3,552,362 848,325 901,345 -
Magnolia
Villa(2)........ 144 4,959,936 347,196 3,090,536 738,038 784,166 -
Marsh Cove.......188 9,972,942 695,365 6,189,746 1,503,745 1,584,086 (171,379)
West Wind
Landing..........192 11,333,030 789,241 7,025,369 1,729,995 1,788,425 (194,349)
----- ---------- --------- ---------- --------- --------- --------
Total Savannah.1,173 60,261,908 4,207,345 37,451,380 9,065,433 9,537,750 (500,573)
Total..........2,301$103,529,399$7,220,213$64,270,212 $15,686,232$16,352,741 $(855,550)
Depreciation Method: Land MACRS MACRS MACRS
Rate...................................n/a SL 150% 200%
Life...................................n/a 27.5 yrs. 15.0 yrs. 7.0 yrs.
</TABLE>
(1) As of December 31, 1998 except for properties acquired in August 1999.
For those properties, Federal Income Tax Basis represents the capitalized
cost at the time of purchase.
(2) Communities were acquired in August 1999. Reflects the federal tax basis
components, depreciation method, rate and lives as the company intends to
elect on its 1999 federal income tax return.
APARTMENT DEVELOPMENT SITES
Merry Land owns four land parcels containing a total of 84 acres with
a book value of $3.5 million, which are zoned to allow the development of
approximately 750 apartment units. We intend to commence construction in
1999 of a 230 unit luxury apartment community on one land parcel that is
adjacent to our Quarterdeck apartment community. This property is close to
Charleston's historic downtown. Anticipated costs of development are $17
million expected to be financed primarily through mortgage financing.
Another tract adjacent to Hammocks at Long Point in Savannah is suitable
for either the expansion of that community or development of a new
community. A site adjacent to our Waters Edge community lies along the
Ashley River in the Summerville area of Charleston. We are exploring the
possibility of offering this tract for sale as single family lots. A site
adjacent to Magnolia Villa in Savannah is suitable for development of 88
apartment units on 8 acres of land, but may also be offered for sale as
single family lots.
CALHOUN STREET FOR-SALE CONDOMINIUM PROPERTY
In May 1999 the company acquired for $825,000 an historic house in
downtown Charleston which contained ten apartment units. We expect to
begin in 1999 the renovation of the house into seven condominium units for
sale to the public. Estimated costs of renovation are $500,000 and will be
financed by cash on hand, cash flow or our line of credit.
COMMERCIAL PROPERTIES
Merry Land owns five commercial properties in the Augusta area,
primarily small office buildings, including our headquarters building.
Three buildings are located in the depressed downtown Augusta rental market
and are in varying stages of physical obsolescence. In contemplation of
the likely disposal of these assets, we 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.
Merry Land owns six commercial land sites in Augusta, Jacksonville,
Miami, Savannah and Nashville containing 46 acres with a book value of $2.6
million. We intend to either sell or develop these properties.
LAND
Merry Land owns approximately 4,800 acres of unimproved land in
Georgia and South Carolina with a book value of $1.3 million. Since 1980,
brick manufacturer Boral Bricks, Inc. has had a long term clay mining lease
on 2,522 acres of this land. The lease expires in 2026, with a rate per
ton of $0.75 until February 2000 and then $0.81 until February 2001,
followed by future adjustments up or down for lessee's plant price for
brick. In 1997, Boral Bricks leased an additional 195 acres for clay
mining for fixed monthly payments with Boral Bricks having the option to
purchase the property by March 1, 2000 for $93,000. Merry Land also leases
100 acres to another company for the mining of sand and gravel and leases
other tracts for agriculture and grows timber on much of the remaining
land. Approximately 3,000 acres of this land is the "Brickyard Tract" in
Augusta, Richmond County, Georgia. The bulk of this tract consists of
mined-out ponds, wetlands and flood plains where traditional development is
severely restricted or prohibited. We are investigating alternative uses,
such as wetlands mitigation banking, which could eventually produce
significant income. We expect that some of the unimproved land eventually
may be developed or sold for development by others.
ACCOUNTING TREATMENT OF TRUST
The trust will be treated as our subsidiary for accounting purposes,
and the accounts of the trust will be included in our consolidated
financial statements. Currently the Financial Accounting Standards Board
("FASB") is considering the proper classification of trust preferred
securities within the balance sheet. Pending clarification from the FASB,
the preferred securities will be presented as a separate line item on our
balance sheet labeled "Guaranteed Preferred Beneficial Interests in
Company's Debentures" and disclosures concerning the preferred securities,
the guarantee and the junior subordinated debentures will be included in
the notes to our consolidated financial statements. We will record
distributions paid on the preferred securities as "dividends on subsidiary
preferred securities" in our consolidated statements of income. The Trust
will not make annual reports to preferred security holders.
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
Merry Land's shares began trading on the Nasdaq SmallCap Market under
the symbol "MRYP" on October 16, 1998. Shown in the table below are high
and low sales prices of the company's common shares:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1999 4th Quarter (through ____________) $5.63 $5.63 $0.00
3rd Quarter $5.63 $4.50 $0.00
2nd Quarter $6.50 $4.75 $0.00
1st Quarter $7.00 $3.50 $0.00
1998 Period 10/16/98 through 12/31/98 $6.00 $3.44 $0.00
</TABLE>
ON AUGUST 31, 1999, THE CLOSING SALES PRICE FOR MERRY LAND'S COMMON
STOCK WAS $4.81 PER SHARE AND THERE WERE APPROXIMATELY 2,004 RECORD HOLDERS
OF THE COMMON STOCK. IN ADDITION, WE ESTIMATE THAT AN ADDITIONAL 8,941
STOCKHOLDERS HOLD THEIR SHARES IN "STREET NAME".
<PAGE>
Stock Price Performance Graph
The table below compares the cumulative total return to the
shareholders of Merry Land Properties, Inc. to the S&P 500 Index and a Peer
Group constructed by the Company and assumes the reinvestment of all
dividends at the market price on the day the dividend was paid for the
period beginning October 15, 1998 and ending August 31, 1999.
<TABLE>
<CAPTION>
Date Merry Land Properties S&P 500 Peer Group
---- --------------------- ------- ----------
<S> <C> <C> <C>
10/15/99 $100 $100 $100
12/31/98 $82 $116 $96
3/31/99 $132 $121 $94
6/30/99 $111 $129 $106
8/31/99 $108 $124 $102
</TABLE>
Assumes $100 invested on October 15, 1998 in Merry Land Properties, Inc.,
S&P 500 and the Peer Group.
The Peer Group comprises publicly traded companies which are engaged
principally or in significant part in the development, ownership, and
management of multi-family residential real estate in the Southern United
States. The peer group consists of Cornerstone Realty Income Trust,
Echelon International Corp., Gables Residential Trust, Mid America
Apartment Communities, Inc., Post Properties, Inc., Roberts Realty
Investors, Inc., Summit Properties Inc., and United Dominion Realty Trust
Inc. The returns of each company have been weighted according to their
respective stock market capitalization for purposes of arriving at a Peer
Group average.
<PAGE>
DIVIDEND POLICY
We do not plan to distribute dividends on common shares for the
foreseeable future. Earnings are expected to be used by us to finance
future acquisitions and investments. Our Board of Directors may determine,
in its sole discretion, to pay dividends on common shares in the future and
any such determination will be dependent on our results of operations,
financial condition, contractual restrictions and other factors deemed
relevant at the time by the directors.
USE OF PROCEEDS
The Capital Trust will use the proceeds to buy Merry Land's
convertible subordinated debentures. If the offering is fully subscribed,
we will receive proceeds of approximately $8.6 million. We expect to
receive proceeds of at least $2.5 million based upon management
participation. Merry Land intends to use $1.5 million of the net proceeds
of this offering to repay amounts outstanding under its line of credit,
which were incurred on August 23, 1999 to purchase apartment communities.
The line of credit bears interest at LIBOR plus 125 basis points and
matures on June 24, 2001. If additional net proceeds are available, Merry
Land intends to use such proceeds for general corporate purposes, which may
include in the following order of priority: (i) making improvements to
properties; (ii) the Calhoun Street condominium conversion; (iii) the
Waters Edge land development; (iv) construction of the Merritt at James
Island Apartment Community; and (v) the acquisition of additional apartment
properties and the development and construction of new apartment
properties.
CAPITALIZATION
The following table sets forth our capitalization on June 30, 1999 and
after making adjustments for (i) the properties acquired from the Equity
Residential Properties Trust Limited Liability Companies and (ii) the
issuance of the preferred securities discussed in this Prospectus. You
should refer to the "Management's Discussion and Analysis of Financial
Condition and Results of Operation" and our financial statements and
related notes. (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1999
---------------------------------------------
ACTUAL AS ADJUSTED (1) AS ADJUSTED (1)(2)
------ --------------- ------------------
<S> <C> <C> <C>
Debt:
Unsecured bank line (3).....................$ - $ 1,500 $ -
Mortgage Loans...............................41,241 91,924 91,924
------- -------- --------
Total Debt................................41,241 93,424 91,924
Guaranteed Preferred Beneficial Interests
Company's Debentures (4).................... - - 8,471(6)
Stockholders' Equity:
Common Stock, at $1 stated value (5)..........2,595 2,595 2,595
Capital surplus..............................10,277 10,277 10,277
Unamortized compensation.....................(1,777) (1,777) (1,777)
Cumulative undistributed net earnings.........1,108 1,108 1,108
------- -------- --------
Total stockholders' equity................12,203 12,203 12,203
Total capitalization....................$53,444 $105,627 $112,598(6)
</TABLE>
(1) Adjusted for the six properties acquired from the Equity
Residential Trust Limited Liability Companies.
(2) Adjusted for the Convertible Trust Preferred Securities in this
Prospectus, assuming all preferred securities are sold.
(3) Available under a $2.0 million line of credit which bears interest
at LIBOR plus 1.25%.
(4) As described herein, the assets of the Capital Trust will consist
of the [ ]% convertible subordinated debentures with a principal
amount of approximately $8.67 million and upon redemption of such
debt, the preferred securities will be mandatorily redeemable.
(5) Excludes the shares of common stock reserved for issuance upon
conversion of the convertible subordinated debentures.
(6) Assumes all preferred securities are sold. There can be no
assurance that all preferred securities will actually be sold. If,
for example, one-half of the preferred securities are sold, the
guaranteed preferred beneficial interests in the company's
debentures would be reduced to $4,135 and the total capitalization
would be reduced to $108,262.
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data with respect to the company's
statements of income for the years ended December 31, 1998, 1997, 1996, and
1995 and with respect to the company's balance sheets as of December 31, 1998,
1997, and 1996 have been derived from the company's financial statements for
such years which have been audited by Arthur Andersen LLP. The following
summary of financial data with respect to the company's statements of income
for the year ended December 31, 1994 and the six months ended June 30, 1999
and with respect to the company's balance sheets as of December 31, 1995 and
1994 and June 30, 1999 have been derived from the company's unaudited
financial statements for such years. Merry Land has operated only since
October 15, 1998. Accordingly, financial data for prior periods are for an
"accounting predecessor" which has been constructed in accordance with the
rules of the Securities and Exchange Commission as described in the Notes to
the Financial Statements.
<TABLE>
<CAPTION>
Six Months
Years Ended December 31 Ended June 30
------------------------------------- -------------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Income from operations:
Rental income 8,121 7,774 7,523 7,260 6,981 4,070
Royalty income 1,693 1,401 369 436 817 939
Management fees 149 - - - - 433
Development fees 515 - - - - 1,014
Rental expense, property
taxes and ins. 3,449 3,022 2,912 2,849 2,765 1,577
Depreciation of real
estate owned 1,291 1,284 1,213 1,191 1,103 572
------- ------- ------- ------- ------- -------
5,738 4,869 3,767 3,656 3,930 4,307
Other income:
Long term loss - - - - - (30)
Interest income 137 84 70 72 89 145
------- ------- ------- ------- ------- -------
137 84 70 72 89 115
Expenses:
Interest expense 694 - - - - 1,684
Depreciation-other 265 224 145 84 - 146
General & administrative 655 120 108 90 60 1,171
------- ------- ------- ------- ------- -------
1,614 344 253 174 60 3,001
Income from continuing
operations 4,261 4,609 3,584 3,554 3,959 1,421
Non recurring cost-
impairment charge 1,666 - - - - -
Income before taxes and
extraordinary item 2,595 4,609 3,584 3,554 3,959 1,421
Income tax
benefit/(expense) 462 - - - - (386)
------- ------- ------- ------- ------- -------
Income before
extraordinary item 3,057 4,609 3,584 3,554 3,959 1,035
------- ------- ------- ------- ------- -------
Extraordinary gain-discount
on repayment of debt, net
of income tax provision - - - - - 722
------- ------- ------- ------- ------- -------
Net income 3,057 4,609 3,584 3,554 3,959 1,757
------- ------- ------- ------- ------- -------
Discount on redemption of
preferred stock - - - - - 1,163
------- ------- ------- ------- ------- -------
Net income-common $ 3,057 $ 4,609 $ 3,584 $ 3,554 $ 3,959 $ 2,920
======= ======= ======= ======= ======= =======
Weighted average common
shares 2,113 1,923 1,796 1,668 1,322 2,181
Weighted average diluted
common shares 2,129 1,946 1,834 1,704 1,349 2,246
Earnings per common share-
basic $ 1.45 $ 2.40 $ 2.00 $ 2.13 $ 2.99 $ 1.34
Earnings per common share-
diluted $ 1.44 $ 2.37 $ 1.95 $ 2.09 $ 2.93 $ 1.30
Common dividends paid $ - $ - $ - $ - $ - $ -
BALANCE SHEET DATA
Real estate and other fixed
assets $40,982 $42,596 $41,558 $42,508 $41,956 $41,809
Cash and short term
investments 3,995 - - - - 4,065
Other assets 9,766 1,412 726 751 783 8,215
------- ------- ------- ------- ------- -------
Total assets $54,743 $44,008 $42,284 $43,259 $42,739 $54,089
======= ======= ======= ======= ======= =======
Short-Term Debt $18,317 $ - $ - $ - $ - $ -
Long-Term Debt 20,000 - - - - -
Mortgage Debt - - - - - 41,241
Other liabilities 2,209 629 337 394 420 645
Preferred stock 5,000 - - - - -
Investment by Old Merry
Land - 43,379 41,947 42,865 42,319 -
Common stock and retained
earnings 9,217 - - - - 12,203
------- ------- ------- ------- ------- -------
Total liabilities and
stockholders' equity $54,743 $44,008 $42,284 $43,259 $42,739 $54,089
======= ======= ======= ======= ======= =======
OTHER DATA
Apartment units owned 1,004 1,004 1,004 1,004 1,004 1,004
Apartment units managed 2,712 - - - - 2,404
Ratio of earnings to fixed
charges 4.7 N/A N/A N/A N/A 1.8
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Merry Land Properties was formed on September 3, 1998, as a corporate
subsidiary of Merry Land & Investment Company, Inc. (Old Merry Land), in
connection with a transaction in which Old Merry Land was merged into
Equity Residential Properties Trust on October 19, 1998. On October 15,
1998, prior to the merger, Old Merry Land contributed five apartment
communities, four apartment development sites, five commercial properties,
six commercial sites, approximately 4,800 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 stockholders of Old Merry
Land on the basis of one share of Merry Land Properties stock for every
twenty shares of Old Merry Land. When the merger transaction was completed
Merry Land 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.
Merry Land has operated only since October 15, 1998. Accordingly, only
the Consolidated Balance Sheets for December 31, 1998 and June 30, 1999 and
the Consolidated Statements of Income for the period ended June 30, 1999
are financial statements prepared for a real company. All other
Consolidated Balance Sheets and Consolidated Statements of Income are for
an "accounting predecessor" which has been constructed in accordance with
the rules of the Securities and Exchange Commission as described in the
Notes to the Financial Statements.
RECENT DEVELOPMENTS
On August 24, 1999, Merry Land acquired the investment interests held
by Equity Residential Properties Trust in six apartments communities
containing 1,297 units located in Charleston, Savannah and Augusta. See
"Financial Statements -- Pro Forma Financial Statements (Unaudited)" and
"Financial Statements--Properties Acquired From the Equity Residential
Properties Trust Limited Liability Companies." The communities had been
owned by Old Merry Land. Following the merger, we managed these
communities for, and held small capital interests in, the limited liability
companies that owned these communities. The purchase price for the
interests was $54.0 million and made us the sole owner of these properties.
The purchase was financed with $50.7 million in mortgage financing. The
six nonrecourse loans have 8 and 12 year terms and bear interest at 7.98%
in the aggregate. These communities are described above in "Merry Land's
Real Estate."
As a result of these acquisitions, Merry Land's income and expenses
from rental operations and interest expense in future periods will be
significantly higher than in previous periods. Further, Merry Land's
property management fees will no longer include income from these
communities.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
RENTAL OPERATIONS-APARTMENTS. At June 30, 1999, Merry Land owned five
apartment communities described in the following table:
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------------------------
Average Occupancy (1) Average Rental Rate (2)
--------------------- -----------------------
COMMUNITY UNITS 1999 1998 1999 1998
- --------- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Quarterdeck 230 99.7% 99.9% $655 $625
Waters Edge 200 98.6 95.7 598 569
--- ---- ---- --- ---
Total Charleston 430 99.2 97.9 628 599
Greentree 194 96.5 93.4 604 598
Marsh Cove 188 97.0 97.4 684 664
West Wind 192 95.3 98.3 708 694
--- ---- ---- --- ---
Total Savannah 574 96.3 96.3 665 652
Total 1,004 97.5% 97.0% $649 $629
</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 June 30.
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 Six Months Ended June 30
CHANGE 1998 TO 1999 1999 1998
------ ------------ ---- ----
<S> <C> <C> <C> <C>
Rental income 4.7% $177.5 $3,939.0 $3,761.5
Personnel 3.6 17.8 510.2 492.4
Utilities (6.7) (9.0) 125.9 134.9
Operating 3.3 4.5 140.5 136.0
Maintenance and grounds (3.3) (8.4) 244.5 252.9
Taxes and insurance 11.6 39.1 376.3 337.2
Depreciation and
amortization (6.9) (41.1) 552.9 594.0
---- ----- -------- --------
Subtotal 0.1 2.9 1,950.3 1,947.4
Operating income 9.6% $174.6 $1,988.7 $1,814.1
Average occupancy (1) 0.5% 97.5% 97.0%
Average monthly rent (2) 3.2% $20 $ 649 $ 629
Expense ratio (3) (0.5)% 35.5% 36.0%
</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 June 30.
(3) Represents total operating expenses (excluding depreciation and
amortization) divided by rental revenues.
For the six month period ended June 30, 1999, rental income rose by
$177.5 thousand, or 4.7%, for the five apartment communities because of
3.2% higher rents and 0.5% higher occupancy over the same period in 1998.
In the aggregate, the Charleston and Savannah rental markets were strong in
the first six months of 1999 and 1998 as demand for apartments exceeded
additions to supply. Charleston rents increased to $628, or 4.9% and
Savannah rents increased to $665, or 2.0%, during this period. We believe
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 $2.9 thousand, or 0.1%, for the six months
ended June 30, 1999 from the same period in 1998. Personnel expenses
increased $17.8 thousand or 3.6% due to higher wage rates. Taxes and
insurance increased $39.1 thousand, or 11.6%, because of projected
increases in assessed values millage rates and higher insurance premiums.
Operating expenses were up $4.6 thousand, or 3.3% due to an increase in
promotional material expense and uniform costs. These increases were offset
by decreases in utilities, depreciation and maintenance expense.
RENTAL OPERATIONS-COMMERCIAL. Merry Land owns five commercial
properties in the Augusta area containing a total of 169,915 square feet,
including the office building where 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% at June 30, 1999.
In the six months ended June 30, 1999, operating income decreased by
$101.5 thousand to an operating deficit of $205.5 thousand. Rental income
decreased by $123.4 thousand, or 59.2%, for commercial properties because
of decreased occupancy. Total expenses were down $21.9 thousand, or 7.0%,
in the second quarter of 1999 from the same period in 1998 primarily due to
lower occupancy.
<PAGE>
LAND. Merry Land 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 Six Months
CHANGE 1998 TO 1999 ----------------
------ ------------ 1999 1998
---- ----
<S> <C> <C> <C> <C>
Clay royalties 7.5% $57.9 $830.7 $772.8
Sand royalties 23.2 20.3 108.1 87.8
Rental income 27.5 10.0 46.4 36.4
---- ----- ------ ------
Subtotal 9.8% $88.2 $985.2 $897.0
Depletion - 1.4 1.4 -
Operating expenses 15.6 1.9 13.9 12.0
Taxes and insurance 39.7 11.4 40.3 28.9
---- ----- ------ ------
Subtotal 36.0% $14.7 $55.6 $40.9
Operating income 8.6% $73.5 $929.6 $856.1
</TABLE>
Clay royalties increased $57.9 thousand, or 7.5%, for the six month
period ended June 30, 1999 compared to the same period in 1998 due
primarily to an increase in royalties per ton. Because royalty income under
one of the royalty agreements ended in August, 1999, we expect royalties in
future periods to be significantly lower. In the first six months of 1999,
$573,210 in royalties were received under that agreement.
MORTGAGE INTEREST INCOME. Interest income from mortgage notes
receivable totaled $28.9 thousand in the six month period ended June 30,
1999, down from $56.1 thousand in the same period of 1998. The decrease
was due to the repayment of a mortgage note receivable in February, 1999.
PROPERTY MANAGEMENT AND DEVELOPMENT FEES. In the six months ended
June 30, 1999 management fee income was $432.6 thousand and development fee
income was $1.0 million. These fees were earned primarily under agreements
with Equity Residential Properties Trust whereby Merry Land provided either
property management or development consulting services for twelve apartment
communities. At June 30, 1999, approximately $1.2 million remains to be
earned under the development agreements. We have no expectations of a
continuing relationship with Equity Residential Properties Trust that would
produce further fees. We intend 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.
Other Income. Merry Land recorded no income other than that
described above. In future periods, the company may engage in various
activities which may produce other income, including the purchase and sale
of real estate, land subdivision and lot sales, conversion of apartments to
condominiums, the sale or lease of various interests in real property and
other real estate activities.
INTEREST EXPENSE. The assets contributed to the company by Old Merry
Land were not encumbered by mortgage debt at any time during 1998 prior to
the spin off. 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 $1.6 million for the six months ended June 30,
1999 and included $193.3 thousand of dividends accrued on the company's
preferred stock. During this period, the average rate on the senior debt
was 7.41% and the rate on the subordinated debt and preferred stock was
8.0%; a combined average rate of 7.75%. Interest expense related to the
$41.2 million mortgage loans closed in June, 1999 totaled $62.0 thousand
for the six months ended June 30, 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses totaled $1.17 million for the six months ended June 30, 1999. For
periods prior to October 15, 1998, management estimated common and
corporate level expenses which might have been incurred on behalf of the
accounting predecessor to Merry Land Properties by Old Merry Land in
accordance with the rules and regulations of the Securities and Exchange
Commission applicable for subsidiaries which have been spun off. Management
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.
INCOME BEFORE TAXES AND EXTRAORDINARY ITEMS. Income before taxes and
extraordinary items decreased to $1.4 million for the six months ended June
30, 1999 from $2.6 million for the same period in 1998. As discussed in
Note 2 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. Decrease in income before taxes for the six months ended
June 30, 1999 was primarily related to the higher general and
administrative expense of $1.1 million and higher interest expense of $1.7
million. These increases in expenses were somewhat offset by increases in
mineral royalties and fee income from third party property management and
development consulting.
INCOME TAXES. As a REIT, the accounting predecessor to Merry Land
would not have been subject to income taxes. The net income tax expense for
the six month period ended June 30, 1999 totaled $386.2 thousand, and
consisted of $432.2 thousand in current income tax benefit and $818.4
thousand in deferred income tax expense.
DISCOUNT ON REPAYMENT OF DEBT AND ON REDEMPTION OF PREFERRED
STOCK.
The extraordinary gain from the discount on repayment of subordinated debt,
net of income taxes of $0.4 million, totaled $0.7 million. The discount on
redemption of the preferred stock was $1.2 million.
FUNDS FROM OPERATIONS. For the six month period ended June 30, 1999,
funds from operations were $1.7 million. The following is a reconciliation
of net income to funds from operation (data in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net income available for common 2,920.1
Add depreciation of real estate owned 571.0
Add long term capital loss 29.5
Add permanent deferred tax benefit 104.2
Less extraordinary gain (722.0)
Less discount on redemption of preferred stock (1,163.7)
--------
Funds from operations available to common shares 1,739.1
Weighted average common shares outstanding-
Basic 2,181.0
Diluted 2,246.0
</TABLE>
We believe that funds from operations are an important measure of our
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 performance, or as a measure of the
company's liquidity. Merry Land 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 and the tax benefit
related to the step-up in basis of the company's assets for tax purposes.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
The results of operations for 1998 include the results of Merry Land,
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 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.
RENTAL OPERATIONS - APARTMENTS. At December 31, 1998, Merry Land
owned the five apartment communities described in the following table:
<TABLE>
<CAPTION>
Occupancy Average(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 (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 $3,430.3 $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 ration (3) - 2.9% 56.3% 53.4% 52.8%
</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.
(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. Merry Land owns five commercial
properties in the Augusta area containing a total of 169,915 square feet
and including the office building where 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>
<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) 321.7 331.6 242.4
----- ----- ------ ------ ------
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. Merry Land 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
CHANGE 1997 TO 1998 Twelve Months
------ ------------ --------------------
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 expenses 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 the agreement
ended 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, 1998.
These fees were earned under agreements with Equity Residential whereby
Merry Land provides either property management or development consulting
services for twelve apartment communities. At December 31, 1998,
approximately $2.0 million remained to be earned under the development
agreements. We have no expectations of a continuing relationship with
Equity Residential that would produce further fees. We intend 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 Old Merry
Land 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 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 Old Merry Land in accordance with the rules and regulations of the
Securities and Exchange Commission applicable for 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 Merry Land'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 2 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 income 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.
<PAGE>
FUNDS FROM OPERATIONS. For the period that Merry Land 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):
<TABLE>
<CAPTION>
Oct 15, 1998 to
Dec 31, 1998
---------------
<S> <C>
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
</TABLE>
We believe that funds from operations are an important measure of our
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 performance, or as a measure of the
company's liquidity. We define 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. Before the spinoff, none of Old Merry Land's debt
was attributed to the predecessor. At June 30, 1999, total debt equaled 77%
of total capitalization at cost and 76% of total capitalization with equity
valued at market (2,595,300 shares outstanding at the June 30, 1999 closing
price of $4.94 per share). At that date, the company's financial structure
was as follows (dollars in thousands):
<TABLE>
<CAPTION>
Equity at
BOOK % of Total Market Value % of Total
---- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Line of Credit $ - - $ - -
Mortgage loans 41,241 77% 41,241 76%
Total debt 41,241 77% 41,241 76%
Common stock 12,203 23% 12,821 24%
Total capitalization $53,444 100% $54,062 100%
</TABLE>
Our eleven apartment communities are owned by eleven separate limited
liability companies. Each limited liability company is a separate legal
entity and its assets and liabilities are neither available to pay the
debts of the company nor constitute obligations of the company.
On June 24, 1999, we closed $41.2 million in mortgage financing in
five nonrecourse loans secured by five apartment communities in Charleston
and Savannah. The proceeds were used to repay the senior debt, subordinated
debt and preferred stock that were issued in connection with the merger and
spin off. The five non-recourse loans have 10 year terms, bearing interest
at 7.73% and are secured by five of the company's apartment communities.
See "Merry Land's Real Estate." In addition, the company obtained at the
time of the mortgage refinancing a $2 million unsecured line of credit that
will bear interest at LIBOR plus 125 basis points.
On August 24, 1999 we borrowed $50.7 in additional mortgage financing
and $1.5 million against our line of credit to purchase the member
interests held by Equity Residential Property Trust in the six limited
liability companies that owned the company's other six apartment
communities. These six recourse loans have eight and twelve year terms and
bear interest at 7.97% (for the eight year term loans) and 7.99% (for the
twelve year term loans). See "Merry Land's Real Estate." At that time, the
company's total debt increased to approximately 89% of total capitalization
at cost and 88% of total capitalization with equity valued at market.
LIQUIDITY. We expect to meet our short-term liquidity requirements
with working capital, cash provided by operating activities, construction
loans and the line of credit. Our primary short-term needs are operating
expenses, capital improvements, the proposed developments and the principal
and interest payments on the mortgage debt and line of credit.
We expect to meet our 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. Our long-term liquidity needs include maturity of the mortgage
debt and the financing of acquisitions and development.
Our current mortgage financing restricts any of the limited liability
companies from making loans to the company. Distributions from each
limited liability company may be restricted because of loan requirements to
maintain adequate capitalization.
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 spin off.
There was no material change in cash for the six month period ending
June 30, 1999. The $1.7 million in net cash provided by operating
activities was offset by the $0.8 million purchase of the 214 Calhoun
Street Condominiums and the $0.7 million spent on new development,
replacements and improvements and other capitalized costs. The $41.2
million in proceeds from the mortgage debt was used to repay the senior
debt, subordinated debt and preferred stock that were issued in connection
with the merger and 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.
QUANTITIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
Merry Land has variable rate debt and thus is exposed to the impact of
interest rate change. At August 31, 1999, Merry Land's exposure to
interest rate change was limited to its $2.0 million line of credit. At
that time, the outstanding balance under the line was $1.5 million. The
line matures in 2001 and bears interest, payable quarterly, at LIBOR plus
125 basis points.
The company does not enter into 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 Merry Land's
risk associated with notes payable and notes receivable as of August 31,
1999. The table includes principal payments and the related weighted
average interest rates by expected year of maturity. The variable rate
represents the floating interest rate calculated at August 31, 1999.
<TABLE>
<CAPTION>
FAIR
(In thousands) 1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT:
Fixed rate $214.8 $683.2 $760.8 $823.6 $891.6 $88,530.6 $91,904.6 $91,904.6
Avg. interest
rate 7.8% 7.8% 7.8% 7.8% 7.8% 7.9% 7.9%
Variable rate $ - $ - $1,500.0 $ - $ - $ - $ 1,500.0 $ 1,500.0
Avg. interest
rate - - 6.6% - - - 6.6%
NOTES
RECEIVABLE:
Fixed rate $ 15.2 $ 51.1 $ 54.9 $ 43.9 $ 42.2 $ 38.7 $ 594.3 $ 594.3
Avg. interest
rate 7.2% 7.3% 7.3% 6.5% 6.1% 6.1% 6.4%
</TABLE>
LEGAL PROCEEDINGS
Merry Land is a defendant in a lawsuit in which ERP Operating Limited
Partnership ("ERP") is suing Polar-BEK Company, arising from Polar-BEK's
development of two apartment communities for ERP. The lawsuit was filed
May 24, 1999 in the Superior Court of Gwinnett County, Georgia. ERP is a
subsidiary of Equity Residential Properties Trust and is the successor in
interest of Old Merry Land. The new Merry Land is an independent
contractor for ERP assisting in the development of the projects. Polar-BEK
removed the case to the United States District Court for the Northern
District of Georgia in Atlanta, Georgia and on August 19, 1999, filed a
counterclaim against ERP and named Merry Land as a defendant. Polar-BEK
claims that Merry Land wrongfully interfered with Polar-BEK's business
relationship with ERP, conspired with ERP to defraud Polar-BEK, breached
covenants of good faith and fair dealing and breached the contract between
Polar-BEK and Old Merry Land. Polar-BEK claims damages in a yet-determined
amount (but in excess of $2 million) and requests $10 million in
compensatory damages, plus punitive damages, attorneys' fees and costs.
Merry Land has reached an oral, non-binding agreement to settle the
lawsuit at no cost to Merry Land. However, there can be no assurance that
the agreement will become final and binding or that Merry Land will not be
found liable to Polar-BEK, or otherwise incur significant expenses in the
defense of these claims.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of our investment policies, financing
policies and policies with respect to certain other activities. These
policies have been determined by our directors and may be amended or
revised from time to time at the discretion of the directors without a vote
of the stockholders.
INVESTMENT POLICIES
INVESTMENT IN REAL ESTATE OR INTERESTS IN REAL ESTATE. We will buy
apartments and other income producing real estate which offer satisfactory
levels of cash flow and the prospects for growth in cash flow and value.
We will focus primarily in the Southeast, particularly the coastal areas,
but may consider attractive opportunities in other regions. We will
actively manage and operate all of our income producing real estate. We
may enter into joint ventures and other arrangements with third parties who
may provide equity or expertise in a variety of real estate ventures. We
will rehabilitate real estate when the expected returns justify the
incremental costs of rehabilitation. We will build apartments and other
income producing real estate when the expected returns are in excess of
those available in acquisitions and justify the increased risk. Our real
estate investments will generally be primarily for income. Properties that
we develop or rehabilitate may be held for the production of income or may
be sold. We do not have a policy limiting the amount or percentage of
assets which will be invested in any specific property.
INVESTMENT IN REAL ESTATE MORTGAGES. While we will emphasize equity
real estate investments and have no current plans to invest in mortgages,
we may invest in real estate mortgages in the future.
SECURITIES OF OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE
ACTIVITIES. We have no current plans, but may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities.
INVESTMENTS IN OTHER SECURITIES. While we will emphasize equity real
estate investments and have no current plans, we may consider bonds,
preferred stocks, common stocks or other types of securities in entities
which invest in real estate. In particular, we may enter into joint
ventures and other arrangements with third parties who may provide equity
or expertise in a variety of real estate ventures.
FINANCING POLICIES
We will seek to finance our investments through both public and
private secured and unsecured debt financings, as well as public and
private placements of our equity securities. The equity securities may
include both common and preferred equity issuances. There are currently no
restrictions on the amount of debt that we may incur.
We do not have a policy limiting the number or amount of mortgages
that may be placed on any particular property, but mortgage financing
instruments, including those currently encumbering our properties, usually
limit additional indebtedness on such properties. We may also use bond
financing from local governmental authorities and where appropriate, from
affordable housing programs.
LENDING POLICIES
We may consider offering purchase money financing in connection with
the sale of multi-family properties where the provision of such financing
will increase the value received by us for the property sold.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
We do not intend to qualify as a REIT, but we may from time to time,
invest in REITs, sell properties or entities to REITs for cash and/or
securities. Further, we may spin-off to our common stockholders, shares of
our subsidiaries or shares of other entities we have acquired through the
sale of our properties, investments or otherwise. These spin-offs may be
taxable or non-taxable, depending upon the facts and circumstances.
Merry Land may, but does not presently intend to, make investments
other than as previously described. Merry Land has authority to offer its
shares of common or preferred stock in exchange for property and to
repurchase or otherwise reacquire its shares of common or preferred stock
and may engage in such activities in the future. Specifically, the company
is considering an odd lot program to repurchase common stock from holders
of fewer than 100 shares. Merry Land does not intend to engage in trading,
underwriting or the agency distribution or sale of securities of other
issuers.
Our policies with respect to these activities may be reviewed and
modified from time to time by our directors without notice to or vote of
its stockholders.
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Merry Land's directors are divided into three classes with staggered
terms. Approximately, one-third of the directors are elected each year.
Merry Land's Bylaws provide for a Board of Directors consisting of not less
than five nor more than nine members. The number of directors is fixed at
five for the current year. All executive officers are elected annually for
terms of one year and hold office until their successors are elected and
qualify.
The table below provides information about our directors and executive
officers.
<TABLE>
<CAPTION>
NAME, POSITION YEAR
BUSINESS EXPERIENCE WITH DIRECTOR'S DIRECTOR OR COMMON STOCK BENEFICIALLY OWNED (1)
AND COMMITTEES AGE COMPANY TERM EXPIRES OFFICER SINCE -----------------------------------
- ------------------- --- ------- ------------ ------------- AMOUNT PERCENTAGE (2)
------ ----------
<S> <C> <C> <C> <C> <C> <C>
David W. Cobb 50 Director 2001 1998 7,000 (3) 0.27%
Audit and Compensation Committee. President of Provident Capital Funding,
a division of The Provident Bank. Previously, Chairman, President and
Chief Executive Officer of National Capital Holdings, Inc. from January,
1997 to December, 1998. President, mortgage finance subsidiaries of Furman
Selz LLC from October, 1995 through January, 1997. President of Raymond
James Mortgage Capital from January, 1993 through October, 1995.
Dorrie E. Green 41 Vice President, N/A 1998 66,690(4)(5) 2.56%
Chief Financial
Officer, Treasurer,
Secretary
Chief Financial Officer of Old Merry Land (footnote 9) from January, 1998
to October, 1998. Vice President of Old Merry Land from January, 1995 to
October, 1998. Employee of Old Merry Land since 1994. Chief Financial
Officer of JG Financial Management Services from September, 1992 to
October, 1994.
W. Tennent Houston 48 Chairman of the 2002 1998 466,565(4)(6) 17.93%
Board, Chief
Executive Officer
Executive Committee. Chief Executive Officer of Old Merry Land (footnote
9) from December, 1996 to October, 1998. President of Old Merry Land from
1985 to October, 1998. Chief Operating Officer of Old Merry Land from
1985 to December, 1996. Chief Financial Officer of Old Merry Land from
1982 until 1997.
Boone A. Knox 62 Director 2000 1998 131,743(3)(7) 5.06%
Executive Committee, Audit and Compensation Committee. Chairman of the
Board of Regions Bank, Central Georgia since 1997. Chairman of the Board
of Old Merry Land (footnote 9) from December, 1996 to October, 1998.
Previously, Chairman of the Board and Chief Executive Officer of Allied
Bankshares, Inc. from 1984 to 1997. Director of Cousins Properties
Incorporated and Intercept Group, Inc., and a trustee of Equity Residential
Properties Trust.
Stewart R. Speed 35 Director 2001 1998 3,300(3) 0.13%
Audit and Compensation Committee. Vice President of EastGroup Properties,
Inc. since February, 1997. Previously, employee of Old Merry Land from
April, 1993 to February, 1997.
Michael N. Thompson 50 Director, 2000 1998 216,058(4)(8) 8.31%
President,
Chief Operating
Officer
Executive Committee. Executive Vice President of Old Merry Land(footnote
9) from January, 1997 to October, 1998. Chief Operating Officer of Old
Merry Land from December, 1996 to October, 1998. Vice President of Old
Merry Land from August, 1992 to January, 1997. Trustee of Equity
Residential Properties Trust.
</TABLE>
(1) The shares shown were owned directly by the named person as of August
31, 1999, unless otherwise indicated.
(2) Assumes 2,601,300 shares outstanding as of August 31, 1999.
(3) On June 3, 1999, Messrs. Cobb, Knox and Speed each received a grant of
2,000 unrestricted common shares.
(4) On October 19, 1998, Messrs. Houston and Thompson each received a
grant of 107,527 restricted common shares, and Mr. Green received a
grant of 53,764 restricted common shares. One-fifteenth of each
Executive Officer's restricted common shares vest on each anniversary
date beginning on the date granted provided that they are still
employed by Merry Land (otherwise, in the event the employee
terminates service prior to vesting in the shares, the restricted
common shares will be forfeitable). Messrs. Houston, Thompson, and
Green will be entitled to vote and to receive any dividends declared
with respect to both vested and unvested shares.
(5) Includes 77 shares held in Mr. Green's account in Merry Land's
Employee Stock Ownership Plan (`ESOP") and 50,180 grant shares which
are not yet vested.
(6) Includes 1,007 shares held in Mr. Houston's account in our ESOP,
155,071 shares in the ESOP which have not been allocated to the
account of any company employee and for which Mr. Houston holds voting
power as sole trustee of the ESOP, and 100,359 grant shares which are
not yet vested.
(7) Includes 110,750 shares owned by Knox Limited, a limited partnership,
3133 Washington Road, Thomson, Georgia, 30824, of which Boone A. Knox
is managing general partner, 11,046 shares owned by the Knox
Foundation, a charitable trust, of which Boone A. Knox is trustee, 299
shares held by BT Investments, of which Boone A. Knox is general
partner, 293 shares held in his wife's name and 40 shares held by his
niece and nephew.
(8) Includes 286 shares owned by Mr. Thompson's wife and children, 260
shares held in Mr. Thompson's account in our ESOP, 100,359 restricted
common shares which are not vested.
(9) Merry Land was formed on September 3, 1998 as a corporate subsidiary
of Merry Land & Investment Company, Inc. (Old Merry Land) in
connection with a transaction in which Old Merry Land was merged into
Equity Residential Properties Trust on October 19, 1998. On October
15, 1998, the common stock of Merry Land Properties was spun off to
the common stockholders of Old Merry Land. When the merger was
completed, Merry Land Properties began operating as an independent
public company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has regularly scheduled meetings each quarter. The Board
maintains an Executive Committee and an Audit and Compensation Committee
but no nominating committee. The Executive Committee is empowered to
conduct the business of Merry Land between Board meetings. The Audit and
Compensation Committee supervises Merry Land's independent public
accounting firm and determines the compensation for Merry Land's Chief
Executive Officer.
COMPENSATION OF THE BOARD OF DIRECTORS
Directors, with the exception of Messrs. Houston and Thompson, receive
fees of $1,000 for each Board meeting and Audit and Compensation Committee
meeting attended, and $250 for each Executive Committee Meeting attended.
In addition, the Board has approved a Directors Stock Compensation Plan and
awarded 2,000 shares of company common stock in 1999 to the Directors, with
the exception of Messrs. Houston and Thompson. Messrs. Houston and
Thompson, who are company employees, receive no compensation for their
service on the Board or its committees.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued for
services by Merry Land's three executive officers for the period from
October 15, 1998 (the date Merry Land began operating as an independent
company) to August 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
NAME AND PRINCIPAL YEAR Annual Compensation(1) RESTRICTED STOCK ALL OTHER
POSITION ---- Salary Bonus AWARDS(2) COMPENSATION(3)
- -------- ---------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
W. Tennent Houston 1999 --- --- --- $2,400
Chairman of the Board 1998 --- --- $477,420 $ 716
and Chief Executive
Officer
Michael N. Thompson 1999 --- --- --- $2,400
President and Chief 1998 --- --- $477,420 $ 716
Operating Officer
Dorrie E. Green 1999 $76,059 --- --- $2,400
Vice President and Chief 1998 $16,923 $4,000 $238,710 $2,408(4)
Financial Officer
</TABLE>
(1) Messrs. Houston and Thompson did not receive any base pay or cash bonus
from Merry Land Properties in 1998 or 1999, but may receive such
payments in 2000. Includes amounts paid for the period from October
15, 1998 to August 31, 1999. On October 15, 1998, the shares of Merry
Land Properties, a newly created subsidiary of Merry Land & Investment
Company, Inc. were spun out as a dividend to Old Merry Land
stockholders in conjunction with old Merry Land's merger into Equity
Residential Properties Trust.
(2) See footnote 4 on page 39. Based upon the average of the high and low
prices on the date of the grant of $4.44 per common share, the
restricted common shares vested to each of Messrs. Houston and Thompson
had a market value of $31,827, and the restricted common shares vested
to Mr. Green had a market value of $15,914. The value of vested shares
of each such grant, based on the closing price of $4.8125 per share of
our common shares on August 31, 1999, was $34,498.26 for Messrs. Houston
and Thompson, and $17,249.30 for Mr. Green. Based upon the average of
the high and low prices on the date of the grant of $4.44 per common
share, the market value of the vested and unvested shares to Messrs.
Houston,Thompson and Green was $477,420, $477,420, and $238,710.
(3) Messrs. Houston, Thompson, and Green each receive $300 per month for an
auto allowance, as do all employees of the company who frequently use
their car on company business.
(4) Merry Land contributed $1,692 to Mr. Green's ESOP account in 1998.
OPTION GRANTS IN LAST FISCAL YEAR
None.
INCENTIVE AND RETIREMENT PLANS
In 1998, Merry Land established a Management Incentive Plan which
authorized a total of 500,000 grants of stock options, stock loans,
restricted stock grants or dividend rights. Awards for 466,318 shares were
granted in 1998. Awards to the executive officers are described in the
preceding tables. See "Directors and Executive Officers" and "Executive
Compensation".
Merry Land also maintains an Employee Stock Ownership Plan (ESOP) for
the benefit of its employees. All employees are entitled to participate
after an initial waiting period. Plan participants share in contributions
to this retirement plan in proportion to their compensation. We expect to
make contributions to each participants' account of up to 10% of his or her
compensation.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
The company's Audit and Compensation Committee acts on compensation
matters for the Chairman and President as well as for Directors. The Board
of Directors acts as a whole on compensation matters for the other
executive officers and the administration of stock grants.
The Board's goal in setting executive compensation is to link pay to
company performance by making stock based compensation a significant
component of executive pay and by paying discretionary cash bonuses on the
basis of company as well as individual performance. In determining all
forms of compensation the Board evaluates competitors' levels of base
salary, cash bonuses and stock based plans, the level of compensation
necessary to attract and retain executive talent and the executive
officer's contribution toward the achievement of the company's goals of
increasing shareholder value. Company performance is measured by several
indicators, including stock price performance and growth in funds from
operations. The Board does not establish specific performance criteria but
instead subjectively considers the company's performance and each executive
officer's contribution toward the achievement of the company goals.
In order to lessen the company's overhead burden for its first-year of
operation, neither the Chairman of the Board and Chief Executive Officer
nor the President and Chief Operating Officer will receive any base pay in
1999. The company intends to pay base salaries to its Chief Executive
Officer and Chief Operating Officer in 2000.
In October, 1998, the shareholders of the company approved the1998
Management Incentive Plan under which the stock grants described above were
made to its executives and other employees. The Board's objectives in
administering the stock grants are to link a substantial portion of
employee compensation to the value of the company's common stock, thereby
aligning the interests of its employees and executive officers with those
of its shareholders, and also to retain its employees through long-term
vesting of the grants. Benefits from these stock grants are derived
through vesting in fifteen annual installments and through increases in
stock price and the payment of cash dividends, if any. In October,1998,
fifteen employees, including the company's three executive officers,
received restricted stock grants for a total of 466,318 shares of the
company's common stock.
The Omnibus Budget Reconciliation Act of 1993 provides that
compensation in excess of $1 million per year paid to the chief executive
officer of a company as well as the other named executive officers listed
in the company's proxy statement will not be deductible unless the
compensation is "performance-based" and the related compensation plans are
approved by shareholders. The company does not anticipate its executive
compensation will come within the reach of this legislation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Although the Audit and Compensation Committee has not established any
policy that would maintain the overall executive compensation level within
any particular range of industry norms, the intent of the Board is that
compensation of the Chief Executive Officer should be no more than is
typical for chief executives of similar companies of similar size. The
Committee believes that its stock grant program is a key element in
motivating the Chief Executive Officer to achieve the company's financial
and operational objectives. Under this program a substantial portion of
compensation is tied to continued employment by the company and to
increases in the price of the company's common stock and the payment of
cash dividends, if any.
Mr. Houston did not receive any base pay or cash bonus in 1998 or
1999, but he received grants for 107,527 shares of restricted stock. These
shares had a value of $4.44 per share, based on the average of the high and
low prices of the common stock, on October 19, 1998, the date of the grant.
If he is still employed by the company, one fifteenth of the restricted
common stock granted becomes vested on each anniversary date of the award
beginning on the date granted. At the market price of $5.63 per share on
October 14, 1999, the value of the shares vested in 1999 would be
approximately $40,000, and the value of the total award once vested using
the value at the time of the grant of $4.44 per share would be $477,420.
Mr. Houston is entitled to vote and to receive any dividends declared with
respect to both vested and unvested shares. He will also be entitled to
further compensation and awards as may be approved in the future by the
Board.
David W. Cobb
W. Tennent Houston
Boone A. Knox
Stewart R. Speed
Michael N. Thompson
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Merry Land's officers and directors are indemnified under Georgia law
against certain liabilities. The Articles of Incorporation and Bylaws
require Merry Land to indemnify our directors and officers to the fullest
extent permitted from time to time by Georgia law. Merry Land also
provides its officers and directors with liability insurance coverage.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Merry Land's Articles contain a provision limiting the liability of
its directors and officers to the corporation and its stockholders for
money damages except for liability resulting from (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 for unlawful distributions
to stockholders when the director did not prudently perform his duties in
good faith in the best interests of the corporation; or (d) any
transaction, whether or not involving action in the director's official
capacity, from which the director derived a personal benefit that is
determined by the corporation (or, if necessary, by the courts) to be
improper. Pursuant to its Articles, Merry Land will indemnify its directors
and officers, whether serving Merry Land or at Merry Land's request any
other entity, to the full extent required or permitted by Georgia law,
including the advance of expenses to the full extent permitted by law. This
indemnification and advancement of expenses shall continue to a person who
has ceased to a director or officer, unless otherwise provided when a
director's or officer's term is terminated.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
Merry Land's has not adopted any policies and its governing
instruments contain no provisions limiting any director, officer, security
holder or affiliate from engaging in any transactions to which Merry Land
is a party or has an interest, or from engaging for their own account in
business activities of the types conducted by Merry Land. We may consider
such policies in the future if circumstances warrant.
PRINCIPAL STOCKHOLDERS
VOTING SECURITIES AND PRINCIPAL HOLDERS
On August 31, 1999, the total number of outstanding shares of Merry
Land's common stock (our only voting securities) was 2,601,300, each of
which is entitled to one vote. The table below sets forth certain
information concerning the only persons known to us to beneficially own
more than 5% of the outstanding common stock, and the beneficial ownership
of common stock of the directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP AS OF PERCENT OF
BENEFICIAL OWNER AUGUST 31, 1999 (1) CLASS (2)
- ------------------- -------------------------- ----------
<S> <C> <C>
W. Tennent Houston 466,565 17.93%
2821 Hillcrest Ave.
Augusta, GA 30909
Michael N. Thompson 216,058 8.31%
5 Brigantine Court
Savannah, GA 31410
Boone A. Knox 131,743 5.06%
All Directors and
Officers as a Group 891,356 34.27%
</TABLE>
(1) Assumes 2,601,300 shares outstanding.
(2) See "Management -- Directors and Executive Officers."
<PAGE>
THE OFFERING
BASIC SUBSCRIPTION
Merry Land is distributing to each holder of common shares of record
as of the close of business on [ ], 1999, the record date, one
right for every common share held. Three rights entitle a holder to
purchase one preferred security for $10.00, subject to the minimum
subscription. Merry Land is distributing a total of 2,601,300 rights.
MINIMUM SUBSCRIPTION
The minimum subscription is for 100 preferred securities for a total
investment of $1,000, regardless of the number of rights held. A holder of
less than 300 rights is not entitled to purchase the full minimum
subscription of 100 preferred securities in the basic subscription and,
thus, in order to buy any preferred securities, must exercise the basic
subscription and the oversubscription privilege to subscribe for at least
100 preferred securities for $1,000. The purpose of the minimum
subscription is to attempt to limit the number of odd lot holders of less
than 100 preferred securities, for whom the annual expenses of maintaining
the accounts are disproportionately high. Nevertheless, a holder
exercising less than 300 rights may be allocated an odd lot of preferred
securities if there are not enough unsubscribed preferred securities to
fully satisfy the required oversubscription by that holder.
OVERSUBSCRIPTION PRIVILEGE
A holder of rights who validly exercises in full his or her basic
subscription may also oversubscribe at the $10.00 per preferred security
subscription price for additional preferred securities that have not been
purchased through the basic exercise of rights. A holder may exercise the
oversubscription privilege only concurrently with his or her basic
subscription. If there are not enough unsubscribed preferred securities
available to satisfy fully all exercises of the oversubscription privilege,
the available unsubscribed preferred securities will be allocated pro rata
among holders who exercise the oversubscription privilege based on the
numbers of rights exercised by those holders through the basic
subscription.
No fractional preferred securities will be issued to satisfy any
exercise of the oversubscription privilege. Certificates representing the
preferred securities purchased through the oversubscription privilege will
be delivered to holders as soon as practicable after the offering expires
and after all prorations have been effected. Any amounts overpaid by
holders will be refunded as soon as practicable after the offering expires,
without interest.
WITHDRAWAL
Merry Land reserves the right to withdraw the offering at any time
before or at the time it is due to expire for any reason. If Merry Land
withdraws the offering, all funds received from holders will be refunded
promptly without interest.
SUBSCRIPTION AGENT
The subscription agent and escrow agent for this offering is First
Union National Bank. The address to which Rights Certificates, Notices of
Guaranteed Delivery and payments, other than wire transfers, should be
mailed or delivered is 1525 West W.T. Harris Boulevard, 3C3, Charlotte,
North Carolina 28262.
Other than as set forth above, delivery of Rights Certificates,
Notices of Guaranteed Delivery and payments, other than wire transfers,
will not constitute a valid delivery.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE METHOD OF
SUBSCRIBING FOR PREFERRED SECURITIES OR FOR ADDITIONAL COPIES OF THIS
PROSPECTUS SHOULD BE DIRECTED TO THE REORGANIZATION AREA OF THE
SUBSCRIPTION AGENT, AT 800-829-8432.
FRACTIONAL PREFERRED SECURITIES
No fractional preferred securities will be issued in this offering.
Rights Certificates may not be divided in any manner as to create
fractional rights. Banks, trust companies, securities dealers and brokers
that hold common shares as nominees for more than one beneficial owner may
have a Rights Certificate divided by the subscription agent or may, upon
proper showing to the subscription agent, exercise their rights on the same
basis as if the beneficial owners were record holders on the record date.
Merry Land reserves the right to deny any division of Rights Certificates
if in its opinion the result would be inconsistent with the intent of this
privilege.
METHOD OF EXERCISING RIGHTS AND OVERSUBSCRIPTION PRIVILEGE
A holder may exercise his or her basic subscription and
oversubscription privilege by properly completing and executing the Rights
Certificate and forwarding it, together with payment of the subscription
price for each preferred security subscribed for through the basic
subscription and the oversubscription privilege, to the subscription agent
at the appropriate address set forth above. Persons holding common shares
and receiving rights through a broker, dealer, commercial bank, trust
company or other nominee, as well as persons holding stock certificates who
would prefer to have such institutions effect transactions relating to
rights on their behalf, should contact the appropriate nominee or
institution and request it to effect the transactions for them. Banks,
trust companies, securities dealers and brokers that hold common shares as
nominee for more than one beneficial owner may, upon proper showing to the
subscription agent, exercise their basic subscription and oversubscription
privilege on the same basis as if the beneficial owners were record holders
on the record date. In the case of holders of rights that are held of
record through the Depository Trust Company ("DTC"), those rights may be
exercised by instructing DTC to transfer rights from that holder's DTC
account to the subscription agent's DTC account, together with payment of
the full subscription price. Except as described under "-- Late Delivery of
Payments and Rights Certificates," to be accepted, the properly completed
and duly executed Rights Certificate and the payment must be received by
the subscription agent before the offering expires. Rights certificates
received after that time will not be honored. Payments must be made in
full in United States currency by either:
- a check or bank draft drawn upon a U.S. bank or postal,
telegraphic or express money order payable to First Union National
Bank, or
- a wire transfer of funds to the account maintained by the
subscription agent for that purpose at First Union National Bank at
1525 West W. T. Harris Boulevard, 3C3, Charlotte, North Carolina
28262.
Any wire transfer of funds should clearly indicate the identity of the
subscriber who is paying the subscription price by the wire transfer.
Holders should contact the subscription agent at 800-829-8432 for specific
payment instructions. The subscription price will be deemed to have been
received by the subscription agent only upon:
- clearance of any uncertified check,
- receipt by the subscription agent of any certified check or
bank draft drawn upon a U.S. bank or of any postal, telegraphic or
express money order, or
- receipt of good funds in the subscription agent's account
designated above.
The instruction letter accompanying the Rights Certificate should be
read carefully and strictly followed. DO NOT SEND RIGHTS CERTIFICATES OR
PAYMENTS TO MERRY LAND. Except as described under "-- Late Delivery of
Payments and Rights Certificates," no subscription will be considered
received until the subscription agent has received delivery of a properly
completed and duly executed Rights Certificate and payment of the full
subscription price. The risk of delivery of all documents and payments is
on holders, not Merry Land or the subscription agent.
THE METHOD OF DELIVERY OF RIGHTS CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE RISK OF THE
RIGHTS HOLDERS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT THOSE
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE
ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF
PAYMENT BEFORE THE OFFERING EXPIRES. BECAUSE UNCERTIFIED PERSONAL CHECKS
MAY TAKE UP TO FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY
OR ARRANGE FOR PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY
ORDER OR WIRE TRANSFER OF FUNDS. LATE DELIVERY OF PAYMENTS AND RIGHTS
CERTIFICATES
If, before the offering expires, the subscription agent has received a
properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form accompanying this Prospectus either by hand,
mail, telegram or facsimile transmission, specifying the name of the holder
of rights and the number of preferred securities subscribed for, stating
separately the number of preferred securities subscribed for through the
exercise of the basic subscription and the oversubscription privilege and
guaranteeing that the properly completed and executed Rights Certificate
and payment of the full subscription price for all preferred securities
subscribed and oversubscribed for will be delivered to the subscription
agent within three business days after the offering expires, that
subscription may be accepted, subject to the subscription agent's
withholding the certificates for preferred securities until receipt of the
properly completed and duly executed Rights Certificate and payment of the
appropriate subscription price within that time period. In the case of
holders of rights that are held of record through DTC, those rights may be
exercised by instructing DTC to transfer rights from that holder's DTC
account to the subscription agent's DTC account, together with payment of
the full subscription price. The Notice of Guaranteed Delivery must be
guaranteed by a commercial bank, trust company or credit union having an
office, branch or agency in the United States or by a member of a Stock
Transfer Association approved medallion program such as STAMP, SEMP or MSP.
Notices of Guaranteed Delivery and payments should be mailed or delivered
to the appropriate addresses set forth under "-- Subscription Agent."
TRANSFERABILITY OF RIGHTS
The rights may not be transferred, except by operation of law in the
event of death or dissolution of their holder.
VALIDITY OF SUBSCRIPTIONS
All questions regarding the validity and form of the exercise of the
basic subscription or the oversubscription privilege, including time of
receipt and eligibility to participate in the offering, will be determined
solely by Merry Land, which determination shall be final and binding. Once
made, subscriptions and directions are irrevocable, and no alternative,
conditional or contingent subscriptions or directions will be accepted.
Merry Land reserves the absolute right to reject any subscriptions or
directions not properly submitted or the acceptance of which, in the
opinion of Merry Land's counsel, would be unlawful. Any irregularities in
connection with subscriptions must be cured before the offering expires
unless waived by Merry Land in its sole discretion. Neither Merry Land nor
the subscription agent shall be under any duty to give notification of
defects in subscriptions or incur any liability for failure to give that
notification. A subscription will be considered accepted, subject to Merry
Land's right to withdraw or terminate the offering only when a properly
completed and duly executed Rights Certificate, any other required
documents and payment of the full subscription price with respect to that
subscription have been received by the subscription agent. Merry Land's
interpretations of the terms and conditions of the offering shall be final
and binding.
ESCROW ARRANGEMENTS; RETURN OF FUNDS
Funds received in payment of the subscription price for preferred
securities subscribed for will be held in a segregated account by the
subscription agent pending completion of this offering. Monies will be
held in escrow until this offering is completed or is canceled. If the
offering is canceled for any reason, monies will be returned to subscribers
without interest or deduction promptly thereafter. If a rights holder
exercising the basic subscription or the oversubscription privilege is
allocated fewer than the number of preferred securities that holder
subscribed for, the excess funds paid by such holder will be returned
without interest as soon as practicable after the offering expires.
RIGHTS OF SUBSCRIBERS
Holders will have no rights as security holders of Merry Land Capital
Trust with respect to preferred securities subscribed for until
certificates representing those preferred securities are issued to them.
Holders will have no right to revoke their subscriptions after delivery to
the subscription agent of a completed Rights Certificate and any other
required documents.
FOREIGN STOCKHOLDERS
Rights Certificates will not be mailed to holders whose addresses are
outside the United States or who have an army post office or foreign post
office address, but will be held by the subscription agent for their
account. To exercise rights, those holders must notify the subscription
agent by completing an International Holder Subscription Form which will be
delivered to those holders in lieu of a Rights Certificate, and sending it
by mail or telecopy to the subscription agent at the address and telecopy
number specified above.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION OR THE
OVERSUBSCRIPTION PRIVILEGE THAT EXERCISE MAY NOT BE REVOKED.
DELIVERY OF PREFERRED SECURITIES
Certificates representing preferred securities purchased through the
exercise of the basic subscription or the oversubscription privilege will
be delivered as soon as practicable after the offering expires, the receipt
of all required documents and payment in full of the aggregate subscription
price due for such preferred securities. In the case of stockholders whose
common shares are held through DTC and third-party investors who arrange
for delivery and payment through DTC, the appropriate participant account
will be credited.
TAX TREATMENT OF RIGHTS DISTRIBUTION
Based upon discussions with our financial and tax advisors, we do not
believe the distribution of the rights to purchase the preferred securities
will be taxable to our stockholders. For a discussion of the tax
consequences if the rights are determined by the Internal Revenue Service
to have value, see "United States Federal Income Taxation -- Tax Treatment
of Rights Distribution."
MANAGEMENT PARTICIPATION
Merry Land's three executive officers and its directors have expressed
their non-binding intention to subscribe for preferred units at least in
amounts equal to their basic subscription rights, which is an aggregate of
247,762 preferred securities or approximately $2.5 million.
DILUTION
Stockholders who do not exercise their rights and ultimately convert the
preferred securities into our common shares will have their percentage
ownership in the company diluted to the extent other holders of preferred
securities exercise their conversion rights.
THE TRUST
Merry Land Capital Trust is a statutory business trust formed by Merry
Land under Delaware law by filing a certificate of trust with the Delaware
Secretary of State. An amended and restated trust agreement was signed on
[ ], 1999 by Merry Land as depositor, First Union National
Bank, as property trustee, William J. Reif, as Delaware trustee, and by
three of our officers as administrative trustees. The trust agreement,
indenture and guarantee will each be qualified under the Trust Indenture
Act. The trust has a term of 30 years, but may dissolve earlier as provided
in the trust agreement.
<PAGE>
THE ISSUANCE AND SALE OF THE TRUST SECURITIES
Merry Land created the trust solely to:
- issue and sell its preferred securities and common securities,
which represent proportionate beneficial ownership interests in the
trust and its assets;
- use the proceeds from the sale of the trust securities to buy
junior subordinated debentures from Merry Land; and
- engage in only those other activities necessary or convenient
to accomplish the other purposes.
Because the trust's only assets will be Merry Land's junior
subordinated debentures, Merry Land's payments on those debentures will be
the only source of funds to be paid to the owners of the trust securities.
Merry Land will acquire and own all of the common securities of the
trust. The common securities will have an aggregate liquidation amount of
at least 3% of the total capital of the trust. The remainder, representing
up to 97% of the ownership interests in the trust, will be preferred
securities of the trust that may be sold to Merry Land's stockholders. The
common securities and the preferred securities will have substantially the
same terms, including the same priority of payment, and will receive
proportionate payments from the trust in respect of distributions and
payments upon liquidation, redemption or otherwise at the same times, with
one exception: if Merry Land defaults on the junior subordinated debentures
that it issues to the trust and does not cure the default within the time
specified in the indenture, Merry Land's rights to receive payments as the
holder of the common securities of the trust will be subordinated to the
rights of the holders of the preferred securities. See "Description of the
Preferred Securities -- Subordination of Trust's Common Securities."
The trust's business and affairs will be conducted by its trustees,
whom Merry Land, as holder of the common securities, will appoint. Under
the trust agreement, the trustees for the trust are:
- First Union National Bank, as the property trustee;
- William J. Reif, as the Delaware trustee; and
- Three of our officers, as individual administrative trustees.
We refer to all of these trustees collectively as the "issuer
trustees." First Union National Bank, as property trustee, will act as
sole indenture trustee under the trust agreement for purposes of compliance
with the Trust Indenture Act. First Union National Bank also will act as
guarantee trustee under our guarantee agreement relating to the preferred
securities. See "Guarantee" and "Description of the Junior Subordinated
Debentures."
The property trustee will hold title to the junior subordinated
debentures for the benefit of the trust and the holders of the preferred
securities and common securities and will have the power to exercise all of
the rights, powers and privileges as the holder of the debentures. In
addition, the property trustee will maintain exclusive control of a
segregated non-interest bearing bank account to hold all payments made by
us in respect of the debentures. The property trustee will make all
payments to the holders of the preferred securities and the common
securities out of funds from this bank account. The guarantee trustee will
hold the guarantee for the benefit of the holders of the preferred
securities.
As the holder of the common securities of the trust, Merry Land
ordinarily will have the right to appoint, remove or replace the property
trustee or the Delaware trustee. However, if Merry Land is in default with
respect to the junior subordinated debentures issued to the trust and has
not cured that default within the time specified in the indenture, then the
holders of a majority in liquidation amount of the trust's outstanding
preferred securities will be entitled to appoint, remove or replace the
property trustee and/or the Delaware trustee. In no event will the holders
of the preferred securities have the right to vote to appoint, remove or
replace the administrative trustees; Merry Land retains that right
exclusively as the holder of the common securities. The duties and
obligations of each issuer trustee are governed by the trust agreement.
Under the indenture and the trust agreement, Merry Land promises to
pay all fees and expenses related to the trust and the offering of the
preferred securities. Merry Land also will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the trust, except obligations
under the preferred securities and the common securities.
The trust has no separate financial statements. Separate financial
statements would not be material to holders of the preferred securities
because the trust has no independent operations. It exists solely for the
limited functions summarized above.
The principal executive office of the trust is c/o Merry Land
Properties, Inc., 624 Ellis Street Augusta, Georgia 30901, and its
telephone number is (706)722-6756.
DESCRIPTION OF THE PREFERRED SECURITIES
Under the terms of the trust agreement, the issuer trustees are
authorized to issue preferred securities and common securities on behalf of
the trust. We have summarized selected provisions of the preferred
securities and the trust agreement below. Because this is a summary, it
does not contain all information you should consider. The form of trust
agreement has been filed as an exhibit to the registration statement of
which this Prospectus forms a part. You should read the form of trust
agreement for provisions that may be important to you. You should also
consider applicable provisions of the Trust Indenture Act.
GENERAL
The preferred securities will represent undivided preferred beneficial
ownership interests in the assets of the trust. The common securities will
represent undivided common beneficial ownership interests in the assets of
the trust. The preferred securities of the trust will rank equally, and
payments on the preferred securities will be made pro rata, with the common
securities of the trust, except that the holders of the preferred
securities will be entitled to a preference over holders of the common
securities of the trust in the circumstances described below under "--
Subordination of Trust's Common Securities." Holders of preferred
securities also will have the other benefits described in the trust
agreement.
DISTRIBUTIONS
Distributions on each preferred security will be payable at the annual
rate of [ ]% of the liquidation preference of $10 per preferred
security. Distributions will be cumulative and will accumulate from the
date of original issuance. Distributions will not accrue on unpaid
distributions. Except as set forth below, the property trustee will make
payments quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year to holders of record on the applicable record
date, commencing on December 31, 1999. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve
30-day months.
The funds of the trust available for distribution to the holders of
the preferred securities are limited to payments made under the junior
subordinated debentures by Merry Land to the trust. The debentures will be
the only assets of the trust. Therefore, if Merry Land does not make
interest payments under the debentures, the property trustee will not have
funds available to pay distributions on the preferred securities. Merry
Land has guaranteed the payment of distributions on the preferred
securities on a limited basis, but only if and to the extent the trust has
funds legally available for the payment of distributions. See "Guarantee."
If any date on which distributions are payable on the preferred
securities is not a business day, then the distributions will be payable on
the next succeeding business day. No additional distributions or other
payments will accrue because of the delay in the payment date. For this
purpose, a business day is any day that is not a Saturday, a Sunday, a day
on which banking institutions in New York City may legally close, or a day
on which the corporate trust office of the property trustee or debenture
trustee is closed for business.
The record date for each distribution will be 15 days prior to the
distribution date. Distributions on the preferred securities will be
payable to the holders as they appear on the register of the trust on the
relevant record dates.
DEFERRAL OF DISTRIBUTIONS
If Merry Land is not in default under the terms of the junior
subordinated debentures, Merry Land has the right to defer the payment of
interest on the debentures at any time or times for periods of up to 20
consecutive quarters each; however, Merry Land may not defer the payment of
interest beyond the stated maturity date of the debentures. Merry Land may
exercise this deferral right on multiple occasions during the term of the
debentures. If Merry Land defers the payment of interest on the junior
subordinated debentures, the quarterly distributions to the holders of the
preferred securities will be deferred by the trust for the same period. In
the event Merry Land defers the payment of interest on the debentures, the
interest rate on the debentures will increase to a rate that will yield the
holders of the debentures an annualized return of [ ]% compounded
quarterly. No interest will accrue on unpaid interest. Whenever there is
unpaid deferred interest outstanding, the interest rate will be adjusted
quarterly to the rate corresponding to the number of quarters for which
interest has been deferred, as follows:
<TABLE>
<CAPTION>
Quarters of Quarters of
Deferred Interest Adjusted Rate Deferred Interest Adjusted Rate
- ----------------- ------------- ----------------- -------------
<S> <C> <C> <C>
0 [ ]% 11 [ ]%
1 [ ]% 12 [ ]%
2 [ ]% 13 [ ]%
3 [ ]% 14 [ ]%
4 [ ]% 15 [ ]%
5 [ ]% 16 [ ]%
6 [ ]% 17 [ ]%
7 [ ]% 18 [ ]%
8 [ ]% 19 [ ]%
9 [ ]% 20 [ ]%
10 [ ]%
</TABLE>
The adjusted interest rate will be effective beginning the calendar
day subsequent to the due date of the interest payment. Upon payment of
all deferred interest on the debentures, the interest rate thereon will
return to [ ]% per annum, effective on the date all deferred interest is
paid. The rate of accrual of distributions on the common and preferred
securities will be adjusted to the same extent as any change in the
interest rate due on the debentures.
During any period in which Merry Land elects not to pay interest on
the junior subordinated debentures, Merry Land may not, and its
subsidiaries may not, take any of the following actions:
- declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to,
any of Merry Land's capital shares, or
- make any payment of principal, interest or premium, if any,
on, or repay, repurchase or redeem any of Merry Land's debt that
ranks equal to or junior to the junior subordinated debentures,
except it may:
- make or declare any dividend, redemption, liquidation, interest,
principal or guarantee payment, if the payment is made by way of
securities that rank equal to or junior to the securities on
which the payment is being made,
- make redemptions or purchases of any rights pursuant to a
stockholder rights agreement and the declaration of a dividend of
the rights or the issuance of preferred shares under the
stockholder rights agreement in the future,
- make any payment under the guarantee relating to the preferred
securities of the trust,
- make purchases of common shares related to the issuance of common
shares under any of Merry Land's benefit plans for its directors,
officers or employees,
- make reclassifications of Merry Land's capital shares, or
exchanges or conversions of one series or class of Merry Land's
capital shares for another series or class of capital shares, and
- make purchases of fractional interests in Merry Land's capital
shares pursuant to the conversion or exchange provisions of the
capital shares or the security being converted or exchanged.
Merry Land has no current intention to exercise its right to defer
payments of interest under the junior subordinated debentures.
<PAGE>
CONVERSION RIGHTS -- GENERALLY
The holders of the preferred securities may convert their securities
into Merry Land's common shares at any time in the manner described below
at the conversion ratio of [ ] common shares for each preferred
security, subject to adjustment as described under "Conversion Price
Adjustments." This equates to an initial conversion price of $[ ] per
common share. Merry Land will not issue fractional common shares as a
result of conversion, but rather will pay cash in lieu of any fractional
share interest.
A holder of preferred securities who desires to convert preferred
securities should contact the property trustee, as conversion agent, to
obtain the required form of conversion notice. The holder will surrender
the certificates representing the preferred securities to the conversion
agent, along with an irrevocable conversion notice. The conversion agent
will then exchange the holder's preferred securities for a portion of the
junior subordinated debentures and immediately convert those debentures
into Merry Land's common shares.
When Merry Land delivers the fixed number of common shares into which
the junior subordinated debentures are convertible, together with any cash
payment made in lieu of payment of a fractional share, Merry Land will have
no further obligation to pay the principal amount at maturity of the
debentures that were converted or to pay any interest that had accrued on
those debentures at the time of conversion.
The trust will not pay accrued distributions on preferred securities
that are converted, unless the conversion occurs during the period between
the record date for the payment of a distribution and the corresponding
distribution payment date. Each conversion will be effective as of the end
of the day before the day on which the conversion agent receives the notice
of conversion.
Common shares issued upon conversion of the preferred securities will
be validly issued, fully paid and non-assessable.
CONVERSION PRICE ADJUSTMENTS
GENERAL
Merry Land may reduce the conversion price of the debentures, and thus
the conversion price of the preferred securities, at any time, by any
amount it selects, and for any period of at least 30 days. Merry Land may
exercise this right by giving at least 15 days' notice of the reduction.
Merry Land may also, at its option, make other reductions in the conversion
price, if its Board of Directors deems those reductions to be advisable to
avoid or diminish any income tax to Merry Land's stockholders resulting
from any dividend or distribution of shares, or rights to acquire shares,
or from any event treated similarly for federal income tax purposes. See
"United States Federal Income Taxation -- Adjustment of Conversion Price."
The conversion price of the preferred securities will be adjusted,
without duplication, upon the happening of the following events:
- the payment of dividends and other distributions payable
exclusively in common shares on common shares;
- the issuance to all holders of common shares of rights or
warrants entitling holders of those rights or warrants to subscribe
for or purchase common shares for a period not exceeding 45 days at
less than the then current market price of the common shares;
- subdivisions and combinations of common shares;
- the payment of dividends and other distributions to all
holders of common shares consisting of evidences of our
indebtedness, securities or capital stock, cash or assets, except
for those rights or warrants referred to in the second bullet
clause above and dividends and distributions paid exclusively in
cash;
- payment in respect of a tender or exchange offer, other than
an odd lot offer, by Merry Land or any of its subsidiaries for
common shares at a price per share in excess of 110% of the current
market price of a common share on the trading day next succeeding
the last date tenders or exchanges may be made pursuant to the
tender or exchange offer. In this case, the adjustment is limited,
in respect of the excess over current market price, to the amount
in excess of 110% of the current market price; and
- the payment of dividends and other distributions on common
shares paid exclusively in cash, excluding any regular quarterly
dividend payable solely in cash that may be established by our
board of directors in the future.
The conversion price will not be adjusted in the case of the issuance
of any of Merry Land's common shares, or securities convertible into common
shares, except as specifically described above. If any action would require
adjustment of the conversion price pursuant to more than one of the
anti-dilution provisions described in the bullet points above, only one
adjustment will be made. It will be the adjustment that has the highest
absolute value to the holders of the preferred securities. In addition, no
adjustment in the conversion price will be required unless the adjustment
would require an increase or decrease of at least 1% of the conversion
price. If the adjustment is not made because the adjustment does not change
the conversion price by more than 1%, then the adjustment that is not made
will be carried forward and taken into account in any future adjustment.
As used above, "current market price" of a common share for any day
means the last reported sale price on that day, or if no sale takes place
on that day, the average of the reported closing bid and asked prices on
that day, as reported on the Nasdaq SmallCap Market consolidated
transactions tape. If our common shares are not listed or admitted to
trading on the Nasdaq SmallCap Market on that day, then the current market
price will be determined based on the alternative exchanges or systems set
forth in the trust agreement.
MERGER, CONSOLIDATION OR SALE OF MERRY LAND'S ASSETs. If Merry Land
is a party to a transaction which results in its common shares being
converted into the right to receive, or being exchanged for, securities,
cash or other property of a third party, the conversion price may be
adjusted as described below. Examples of transactions which may result in
an adjustment to the conversion price include:
- a merger;
- a consolidation;
- a sale of all or substantially all of our assets;
- a recapitalization or reclassification of Merry Land's common
shares, except for changes relating to par value or occurring as a
result of a subdivision or combination of common shares; or
- any compulsory share exchange.
The holders of preferred securities will have no voting rights with
respect to any of these transactions.
TRANSACTIONS AFFECTING ALL OR SUBSTANTIALLY ALL OF MERRY LAND'S
COMMON SHARES -- OVER 50% CONSIDERATION PAID IN STOCK. If all or substantially
all of Merry Land's common shares are exchanged for, converted into or
acquired for securities, cash or other property in a transaction in which
more than 50% of the value of the consideration received by Merry Land's
stockholders consists of common stock of another corporation that has been
admitted for listing on a national securities exchange or quoted on the
Nasdaq National Market, then each preferred security will thereafter be
convertible into common stock of the kind received by Merry Land's
stockholders in the transaction. For this to be applicable, the common
stock received by Merry Land's stockholders must have been admitted for
listing or admitted for listing subject to notice of issuance on the
exchange or Nasdaq for each of the ten consecutive trading days prior to
the record date for the determination of Merry Land's stockholders entitled
to receive consideration in the transaction. In addition, one of the
following also must be true:
- Merry Land continues to exist after the transaction closes and
the outstanding preferred securities of the trust continue to exist
as outstanding preferred securities; or
- on or before the closing of the transaction, the outstanding
preferred securities are converted into or exchanged for shares of
convertible preferred stock of an entity succeeding to Merry Land's
business or the business of one of Merry Land's subsidiaries, and
that convertible preferred stock has powers, preferences and
relative rights and limitations substantially similar to those of
the preferred securities.
If the transaction meets the requirements described above, the
conversion price of the preferred securities in effect immediately prior to
the transaction will be adjusted immediately after the closing of the
transaction by multiplying the current conversion price by a fraction. The
numerator of the fraction will be the average of the closing prices for the
common stock received from the third party in the transaction for the ten
consecutive trading days prior to and including the record date for the
determination of our stockholders entitled to receive consideration in the
transaction, as adjusted by Merry Land in good faith to appropriately
reflect any of the events referred to in the six bullet points appearing
under "Conversion Price Adjustments -- General." The denominator will be
the average of the closing prices for Merry Land's common shares during the
ten trading days prior to the record date for the determination of Merry
Land's stockholders entitled to receive consideration in the transaction.
The term "closing price" means on any day the last reported sale price on
that day or in case no sale takes place on that day, the average of the
reported closing bid and asked prices, in each case on the Nasdaq SmallCap
Market consolidated transactions tape, or if the stock is not listed or
admitted to trading on the Nasdaq SmallCap Market, then on the alternative
exchanges or systems set forth in the trust agreement.
If the transaction meets the requirements described above, but:
- the consideration received by Merry Land's stockholders was
paid entirely in common stock of the third party, except for any
cash payment for fractional share interests, and
- all of Merry Land's outstanding common shares were exchanged
for, converted into or acquired in the transaction, except for any
cash payment for fractional share interests,
then the conversion price of the preferred securities will be adjusted by
using a different fraction than the one set forth above. In this case, the
conversion price will be multiplied by a fraction in which the numerator is
one, and the denominator is the number of shares of common stock of the
third party received by Merry Land's stockholders for each one of Merry
Land's shares that they owned.
TRANSACTIONS AFFECTING ALL OR SUBSTANTIALLY ALL OF MERRY LAND'S COMMON
SHARES -- OTHER CONSIDERATION. In all other transactions in which all or
substantially all of Merry Land's common shares are exchanged for,
converted into or acquired for securities, cash or other property, then
each preferred security will thereafter be convertible into the kind of
consideration received by Merry Land's stockholders in the transaction. In
this case, the conversion price of the preferred securities will be
adjusted immediately after the transaction, but only if the calculation set
forth below results in a lower conversion price than the one in effect
immediately prior to the closing of the transaction:
Step One: If the only consideration received by Merry Land's
stockholders in the transaction was cash, determine which is greater:
- the amount of cash received by our stockholders for one common
share, and
- $ , as this number may be adjusted from time to time.
Alternative Step One: If the consideration received by Merry Land's
stockholders in the transaction was not entirely cash, determine which is
greater:
- the average of the closing prices for Merry Land's common
shares during the ten trading days prior to the record date for the
determination of Merry Land's stockholders entitled to receive
consideration in the transaction, and
- $ , as this number may be adjusted from time to time.
Step Two: Determine the amount of (a) the redemption price for one
preferred security, assuming that the redemption date was on the closing
date of the transaction, plus (b) the then-accrued and unpaid distributions
on one preferred security.
Step Three: Multiply the number determined in Step One or Alternative
Step One by a fraction. The numerator of the fraction is $10. The
denominator of the fraction is the amount determined in Step Two.
The conversion price of the preferred securities following any
transaction described above will be the lower of:
- the conversion price in effect immediately prior to the
closing of the transaction, but after giving effect to any other
prior adjustments, and
- the conversion price resulting from the three-step calculation
set forth above.
The number that is referenced as the second bullet point in each of
Step One and Alternative Step One above is an amount equal to 66 2/3% of
the reported last sales price of a common share on the Nasdaq SmallCap
Market on [ ], 1999. That number will be adjusted any time
the conversion price of the preferred securities is adjusted, unless the
conversion price adjustment occurs as a result of the above three-step
calculation, so that the ratio of this number to the conversion price,
after giving effect to the adjustment, will always be the same as the
original ratio of the initial number to the initial conversion price.
If, with respect to any adjustment to the conversion price, reference
is made to the record date for the determination of Merry Land's
stockholders entitled to receive consideration in the transaction, and no
record date exists, then the relevant date will be the date upon which
Merry Land's stockholders became entitled to receive the consideration.
TRANSACTIONS AFFECTING LESS THAN SUBSTANTIALLY ALL OF MERRY LAND'S
COMMON SHARES. In all other transactions in which some, but not all or
substantially all, of Merry Land's common shares are converted into the
right to receive, or are exchanged for, securities, cash or other property
of a third party, then each preferred security thereafter will be
convertible into the kind and amount of securities, cash or other property
received by a shareholder of that number of common shares into which a
preferred security was convertible immediately prior to the closing of the
transaction.
TAX EVENT EXCHANGE OR REDEMPTION
If a tax event, as described below, occurs, Merry Land may:
- redeem the junior subordinated debentures, causing a
redemption of the preferred securities;
- pay additional sums for distribution to the holders of
preferred securities; or
- take no action and thereby allow the preferred securities to
be exchanged for junior subordinated debentures.
If a tax event occurs and is continuing, Merry Land will have the
right, upon not less than 30 nor more than 60 days' notice, to redeem all
or a portion of the junior subordinated debentures for cash within 90 days
following the occurrence of the tax event. Following the redemption, the
trust will redeem preferred securities and common securities with an
aggregate liquidation preference equal to the aggregate principal amount of
the debentures that are being redeemed, at the liquidation preference of
the securities, plus accrued and unpaid distributions on those securities
to the redemption date. The common securities will be redeemed on a pro
rata basis with the preferred securities, except that if an event of
default under the trust agreement has occurred and is continuing, the
preferred securities will have priority over the common securities in the
redemption.
If a tax event occurs and is continuing, Merry Land will also have the
right to elect to pay whatever additional amounts as are necessary in order
that the amount of distributions then due and payable by the trust to the
holders of the preferred securities and the common securities are not
reduced as a result of any additional taxes, duties and other governmental
charges to which the trust has become subject to as a result of a tax
event. Merry Land may exercise this right with respect to all or a portion
of the outstanding preferred securities.
If Merry Land does not exercise its redemption right or its right to
pay additional sums as described above with respect to any or all of the
preferred securities, the property trustee will direct the conversion agent
to exchange such preferred securities for junior subordinated debentures.
A "tax event" occurs if the property trustee, on behalf of the trust,
receives an opinion of counsel stating that there is more than an
insubstantial risk that after the date of the opinion one of the following
will occur:
- the trust is, or will be within 90 days after the date of the
opinion, subject to United States federal income tax with respect
to income received or accrued on the junior subordinated
debentures;
- interest payable by Merry Land on the junior subordinated
debentures is not, or within 90 days after the date of the opinion
will not be, deductible by Merry Land, in whole or in part, for
federal income tax purposes; or
- the trust is, or will be within 90 days after the date of the
opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
Additionally, in order for any of the above to constitute a tax event,
the event must have occurred as a result of any amendment or change in the
tax laws or regulations of the United States, tax laws or regulations of
any political subdivision or taxing authority in the United States, or any
official administrative pronouncement or judicial decision interpreting or
applying those laws or regulations, which does not pertain to the use of
the proceeds from the issuance of the junior subordinated debentures. The
change or amendment also must be effective, or the pronouncement or
decision must be announced, on or after the date that the preferred
securities are originally issued.
INVESTMENT COMPANY EVENT EXCHANGE
If an investment company event occurs, as described below, the
property trustee will direct the conversion agent to exchange all
outstanding preferred securities for junior subordinated debentures. An
"investment company event" occurs if the property trustee, on behalf of the
trust, receives an opinion of counsel to the effect that, as a result of a
change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the
trust is or will be considered an "investment company" that is required to
be registered under the Investment Company Act of 1940, as amended.
The trust agreement provides that the holders of preferred securities,
by purchasing the securities, will be deemed to have agreed to be bound by
these provisions and those described in " -- Tax Event Exchange or
Redemption" regarding the exchange of preferred securities for junior
subordinated debentures.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Merry Land will have the right to terminate the trust at any time and,
after satisfaction of the liabilities to creditors of the trust as provided
by applicable law, cause the junior subordinated debentures to be
distributed to the holders of the preferred securities in liquidation of
the trust. Under current United States federal income tax law and its
interpretations and assuming, as expected, that the trust is not treated as
an association taxable as a corporation for United States federal income
tax purposes, a distribution of the debentures will not be a taxable event
to the trust and holders of the preferred securities. Should there be a
change in law, a change in legal interpretation, a tax event or an
investment company event or other circumstances, however, the distribution
could be a taxable event to holders of the preferred securities. See
"United States Federal Income Taxation -- Redemption of Preferred
Securities for Junior Subordinated Debentures or Cash."
After the liquidation date fixed for any distribution of junior
subordinated debentures for preferred securities:
- the preferred securities will no longer be deemed to be
outstanding, and
- certificates representing the preferred securities will be
deemed to represent the junior subordinated debentures having a
principal amount equal to the liquidation preference of those
preferred securities, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid distributions on those
preferred securities until the certificates are presented to the
property trustee for transfer or reissuance.
OPTIONAL REDEMPTION
The preferred securities may not be redeemed by the trust prior to
, 2004, except as described below and as provided under " -- Tax Event
Exchange or Redemption" above and under " -- Mandatory Redemption" below.
On and after , 2004, the preferred securities are subject
to redemption, in whole or in part, at 100% of the liquidation preference
of the preferred securities, plus accrued and unpaid distributions, if any,
to the date fixed for redemption.
The trust also may redeem the preferred securities, in whole or in
part, at any time, at a redemption price of $10 for preferred security,
plus accrued and unpaid distributions, if any, to the date fixed for
redemption if the closing price of Merry Land's common shares has exceeded
150% of the conversion price then in effect for at least 20 trading days
within a period of 30 consecutive trading days ending not more than five
trading days prior to the date of mailing of the notice of redemption.
The trust may not redeem less than all of the outstanding preferred
securities unless all accrued and unpaid distributions have been paid in
full on all outstanding preferred securities for all quarterly distribution
periods terminating on or prior to the redemption date.
MANDATORY REDEMPTION
The junior subordinated debentures will be redeemed by Merry Land in
their entirety upon repayment of the indebtedness represented by the
debentures at maturity or as a result of the acceleration of the
debentures. The proceeds from Merry Land's repayment will be applied to
redeem preferred securities and common securities having an aggregate
liquidation preference equal to the aggregate principal amount of
debentures so repaid or redeemed at a redemption price equal to the
respective liquidation preference of the preferred securities and common
securities or, in the case of a redemption of the debentures, at the
redemption price paid with respect to the debentures, as described below,
together with accrued and unpaid distributions on the preferred securities
and common securities to the date of redemption. If the indebtedness under
the junior subordinated debentures is accelerated, the preferred securities
will be redeemed only when repayment of the junior subordinated debentures
actually has been received by the trust.
REDEMPTION PROCEDURES
Any preferred securities that are redeemed will receive the redemption
price from the contemporaneous redemption of the junior subordinated
debentures. Redemptions of the preferred securities will be made and the
redemption price will be payable on the redemption date only to the extent
that the trust has funds on hand available for the payment of the
redemption price. See " --Distributions."
The property trustee will mail to each record holder of preferred
securities that are being redeemed an irrevocable notice of any optional or
mandatory redemption at least 30 but not more than 60 days prior to the
redemption date. If the property trustee gives a notice of redemption,
then, by 12:00 noon New York City time on the redemption date, to the
extent funds are available, the property trustee will deposit irrevocably
with the paying agent for the preferred securities funds sufficient to pay
the applicable redemption price and will give the paying agent irrevocable
instructions and authority to pay the redemption price to the holders upon
surrender of their certificates evidencing the preferred securities.
Distributions payable on or prior to the redemption date for any
preferred securities called for redemption will be paid to the holders of
the preferred securities as of the relevant record dates for the related
distribution dates. If a notice of redemption has been given and funds
deposited as required, all rights of the holders of the preferred
securities called for redemption will cease, except the rights to convert
and to receive the redemption price, but without interest on the redemption
price, and those preferred securities will cease to be outstanding.
In the event that any redemption date is not a business day, then
payment of the redemption price will be made on the next succeeding day
that is a business day (and without any interest or other payment in
respect of any such delay). However, if the next business day falls in the
next calendar year, the redemption price will be payable on the immediately
preceding business day. In the event that payment of the redemption price
is improperly withheld or refused and not paid either by the trust or by
Merry Land pursuant to its guarantee as described under "Guarantee," then:
- distributions on the preferred securities will continue to
accrue at the then applicable rate, from the redemption date
originally established by the trust for those preferred securities
to the date the redemption price is actually paid, and
- the actual payment date will be the date fixed for redemption
for purposes of calculating the redemption price.
Subject to applicable law, which includes United States federal
securities law, Merry Land may at any time and from time to time purchase
outstanding preferred securities by tender, in the open market or by
private agreement.
Payment of the redemption price and any distribution or exchange of
junior subordinated debentures will be made to the record holders as they
appear on the register for the preferred securities on the relevant record
date. The record date will be the 15th day prior to the redemption date or
liquidation date, as applicable.
If less than all of the outstanding preferred securities and common
securities are to be redeemed on a redemption date, then the aggregate
liquidation preference of the preferred securities and common securities to
be redeemed shall be allocated pro rata among the preferred securities and
the common securities based on the relative liquidation amounts of the two
classes. The property trustee will select the particular preferred
securities to be redeemed not more than 60 days prior to the redemption
date from the outstanding preferred securities not previously called for
redemption, by lot or by another method that the property trustee
determines is fair and appropriate and which may provide for the selection
for redemption of portions (equal to $10 or an integral multiple of $10 in
excess thereof) of the liquidation preference of the preferred securities.
The property trustee will promptly notify the securities registrar and the
conversion agent in writing of the preferred securities selected for
redemption and, in the case of any preferred securities selected for
partial redemption, the liquidation preference of those securities to be
redeemed.
Unless we default in paying the redemption price, interest will cease
to accrue on the junior subordinated debentures being redeemed on and after
the redemption date.
SUBORDINATION OF TRUST'S COMMON SECURITIES
Payment of distributions on, and the redemption price of, the trust's
preferred securities and common securities generally shall be made pro rata
based on the liquidation amount of the preferred securities and the common
securities. If on any distribution date or redemption date an event of
default exists under the trust agreement, then:
- the trust will not pay any distribution on, or redemption
price of, any of the trust's common securities, and the trust will
not make any other payment on account of the redemption,
liquidation or other acquisition of its common securities, unless:
- all accumulated and unpaid distributions on all of the trust's
outstanding preferred securities are paid in cash for all
distribution periods ending on or prior to any payment on the
common securities; or
- in the case of a payment of the redemption price, the full amount
of the redemption price on all of the trust's outstanding
preferred securities then called for redemption shall have been
paid or provided for; and
- all funds available to the property trustee shall first be
applied to the payment in full in cash of all distributions on,
or redemption price of, the preferred securities then due and
payable.
If an event of default occurs under the trust agreement, we (as holder
of the trust's common securities) will be deemed to have waived any right
to act with respect to the event of default until the effect of all events
of default with respect to the preferred securities has been cured, waived
or otherwise eliminated. Until any events of default under the trust
agreement have been cured, waived or otherwise eliminated, the property
trustee is required to act solely on behalf of the holders of the preferred
securities and not on Merry Land's behalf as holder of the common
securities, and only the holders of the preferred securities will have the
right to direct the property trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Upon any voluntary or involuntary liquidation, termination,
dissolution or winding up of the trust, the holders of the preferred
securities will be entitled to receive out of the assets of the trust,
after all liabilities of the trust to its creditors are satisfied:
- distributions in an amount equal to the aggregate of the
stated liquidation preference of $10 per preferred security, plus
accrued and unpaid distributions on the preferred securities to the
date of payment; or
- distributions of junior subordinated debentures on a pro rata
basis in exchange for the preferred securities, together with
accrued and unpaid interest equal to accrued and unpaid
distributions on the preferred securities. The debentures
distributed will be in an aggregate principal amount equal to the
aggregate stated liquidation preference of, and with an interest
rate identical to the distribution rate of, the preferred
securities.
If the liquidation distribution can be paid only in part because the
trust has insufficient assets available to pay in full the aggregate
liquidation distribution, then the amounts payable directly by the trust on
its preferred securities will be paid on a pro rata basis.
As the holder of the trust's common securities, we will be entitled to
receive distributions upon any liquidation pro rata with the holders of the
preferred securities. However, if an event of default relating to the
junior subordinated debentures has occurred and is continuing, the
preferred securities will have a priority over the common securities.
The trust automatically will dissolve upon expiration of its term and
will dissolve on the first to occur of:
- specified events relating to our bankruptcy, dissolution or
liquidation;
- Merry Land's discretionary, written direction to the property
trustee to dissolve the trust and distribute the junior
subordinated debentures to the holders of the preferred securities
and common securities;
- the redemption, conversion or exchange of all of the trust's
preferred securities and common securities;
- the entry of an order for the dissolution of the trust by a
court of competent jurisdiction; and
- the occurrence of a tax event or investment company event,
except in the case of a tax event after which Merry Land elects to
pay additional amounts to the holders of the preferred securities,
as described in "--Tax Event Exchange or Redemption," and
Merry Land has not revoked the election or failed to make the
required payments.
EVENTS OF DEFAULT; NOTICE
An event of default under the indenture for the junior subordinated
debentures also is an event of default under the trust agreement. This is
true regardless of the type of default under the indenture. A waiver of an
event of default under the indenture by the property trustee at the
direction of or with the consent of the holders of the preferred securities
also is valid as a waiver of the corresponding event of default under the
trust agreement.
Within 60 days after the property trustee learns of a trust agreement
event of default, the property trustee must give notice of that event of
default to the holders of the preferred securities, to the administrative
trustees and to us, unless the event of default has been cured or waived.
Merry Land and the administrative trustees are required to file annually
with the property trustee a certificate as to whether or not we each are in
compliance with all the conditions and covenants applicable to us under the
trust agreement.
If an event of default exists with respect to the junior subordinated
debentures, the preferred securities will have a preference over the common
securities on termination of the trust as described under " -- Liquidation
Distribution Upon Dissolution" above. The existence of a trust agreement
event of default does not entitle the holders of preferred securities to
have their preferred securities redeemed.
ENFORCEMENT OF RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a trust agreement event of default exists, the holders of preferred
securities may rely on the property trustee, as holder of the junior
subordinated debentures, to enforce its rights against us. The property
trustee is required to notify each holder of preferred securities whenever
the property trustee receives notice of default with respect to the junior
subordinated debentures, unless the property trustee determines in good
faith that withholding notice is in the best interests of the holders of
the preferred securities or the default has been cured or waived. The
holders of a majority in aggregate liquidation preference amount of the
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the property trustee
or to direct the exercise of any trust or power conferred upon the property
trustee under the trust agreement, including the right to direct the
property trustee to exercise the remedies available to it as a holder of
the junior subordinated debentures. If the property trustee fails to
enforce its rights as holder of the junior subordinated debentures after it
is requested to do so by a holder of preferred securities, the holder may
proceed to enforce his rights directly against Merry Land.
However, if the trust agreement event of default is attributable to
our failure to pay interest or principal on the junior subordinated
debentures on the date the interest or principal otherwise is payable, or
on the redemption date in the case of redemption, then a holder of
preferred securities may institute action directly against us for
enforcement of payment to him of the principal of or interest on junior
subordinated debentures having a principal amount equal to the aggregate
liquidation preference of the holder's preferred securities on or after the
respective due date specified in the debentures. In connection with this
direct action by a holder, Merry Land will be subrogated to the rights of
the holder under the trust agreement to the extent of any payment made by
us to the holder in the direct action. The holders of preferred securities
will not be able to exercise directly against us any other remedy available
to the property trustee unless the property trustee first fails to do so.
<PAGE>
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any successor to the property trustee, the Delaware trustee or any
administrative trustee by merger, conversion or consolidation or which
otherwise succeeds to that trustee's corporate trust business will take the
place of that trustee under the trust agreement if the successor otherwise
is qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The trust may not merge, consolidate, amalgamate or be replaced by
transferring or leasing its assets substantially as an entirety except as
described below. The trust may, at our request, with the consent of the
administrative trustees and without the consent of the property trustee,
the Delaware trustee or the holders of the preferred securities, merge with
or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any state if:
- the successor entity either (a) expressly assumes all of the
obligations of the trust with respect to the preferred securities,
or (b) substitutes for the preferred securities other successor
securities having substantially the same terms as the preferred
securities so long as the successor securities rank the same as the
preferred securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise;
- Merry Land expressly appoints a trustee of the successor
entity possessing the same powers and duties that the property
trustee has as the holder of the junior subordinated debentures;
- the successor securities are listed on the same national
securities exchange or other organization on which the preferred
securities are then listed, if any;
- the transaction does not adversely affect the rights,
preferences and privileges of the holders of the preferred
securities, including any successor securities, in any material
respect;
- the successor entity has a purpose substantially identical to
that of the trust;
- prior to the transaction Merry Land receives an opinion from
independent counsel to the trust experienced in such matters to the
effect that:
- the transaction does not adversely affect the rights, preferences
and privileges of the holders of the preferred securities,
including any successor securities, in any material respect,
other than with respect to any dilution of the holders' interest
in the new entity, and
- following the transaction, neither the trust nor the successor
entity will be required to register as an investment company
under the Investment Company Act; and
- following the transaction, the successor entity will be treated
as a grantor trust for United States federal income tax purposes;
and
- Merry Land or any permitted successor or assignee owns all of the
common securities of the successor entity and guarantees the
obligations of the successor entity under the successor
securities at least to the extent provided by the guarantee
relating to the preferred securities of the trust.
Notwithstanding the general provisions described above, the trust may
not, except with the consent of holders of 100% in aggregate liquidation
amount of the preferred securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties
and assets substantially as an entirety to any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it
if the transaction would cause the trust or the successor entity to be
classified as other than a grantor trust for United States federal income
tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
The holders of the preferred securities have only the voting rights
described below and under " Guarantee -- Amendments and Assignment," plus
any voting rights required by law. No annual meetings for holders of
preferred securities are planned.
<PAGE>
Merry Land and the issuer trustees may amend the trust agreement from
time to time without the consent of any of the holders of the preferred
securities:
- to cure any ambiguity, correct or supplement any provisions in
the trust agreement that may be inconsistent with any other
provision, or to address matters or questions arising under the
trust agreement in a way that is consistent with the other
provisions of the trust agreement, in each case so long as the
amendment does not materially adversely affect the interests of
the holders of the trust's securities; or
- to modify, eliminate or add to any provision of the trust
agreement if necessary to ensure that the trust will be classified
for United States federal income tax purposes as a grantor trust at
all times that any preferred securities and common securities are
outstanding or to ensure that the trust will not be required to
register as an "investment company" under the Investment Company
Act; or
- to maintain the qualification of the trust agreement under the
Trust Indenture Act.
Merry Land and the issuer trustees may amend the trust agreement in
other respects with the consent of holders representing not less than a
majority of the liquidation amounts of the outstanding preferred securities
and common securities acting as a single class. In order to make these
amendments, the issuer trustees must first receive an opinion of counsel
experienced in these matters to the effect that the amendment or the
exercise of any power granted to the issuer trustees in accordance with the
amendment will not affect the trust's status as a grantor trust for United
States federal income tax purposes or the trust's exemption from status as
an "investment company" under the Investment Company Act.
Additionally, without the consent of each holder of preferred
securities and common securities, no amendment may:
- change the amount or timing of any distribution on the
preferred securities and common securities or otherwise adversely
affect the amount of any distribution required to be made in
respect of the preferred securities and common securities as of a
specified date; or
- restrict the right of a holder of preferred securities or
common securities to sue for the enforcement of any distribution
payment.
If any proposed amendment to the trust agreement provides for, or the
issuer trustees otherwise propose to effect, the dissolution, winding-up or
termination of the trust in a manner that is not permitted by the trust
agreement, then the holders of the then outstanding preferred securities
are entitled to vote as a class on the proposed amendment or proposal. The
amendment or proposal will not be effective except with the approval of the
holders of the majority in aggregate liquidation preference of the
preferred securities.
Any amendment of the trust agreement becomes effective when Merry Land
gives notice of the amendment to the holders of the preferred securities
and common securities.
The property trustee is required to notify each holder of preferred
securities whenever the property trustee receives notice of a default with
respect to the junior subordinated debentures, unless the property trustee
determines in good faith that withholding notice is in the best interests
of the holders of the preferred securities. The holders of a majority in
aggregate liquidation preference amount of preferred securities have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the property trustee or to direct the exercise of
any trust or power conferred upon the property trustee under the trust
agreement. This includes the right to direct the property trustee to
exercise the remedies available to it as a holder of the junior
subordinated debentures. If a default occurs while the junior subordinated
debentures are held by the property trustee, the issuer trustees are not
permitted to:
- direct the time, method and place of conducting any proceeding
for any remedy available to the debenture trustee, or execute any
trust or power conferred on the debenture trustee with respect to
the junior subordinated debentures;
- waive any past default that is waivable under the indenture
governing the junior subordinated debentures;
- exercise any right to rescind or annul a declaration that the
principal of all the junior subordinated debentures shall be due
and payable; or
- give a required consent to any amendment, modification or
termination of the indenture or the junior subordinated debentures,
unless, in each case, they first obtain the approval of the holders of a
majority in aggregate liquidation amount of all outstanding preferred
securities. In the case of the fourth bullet clause above, when no trust
agreement event of default exists, the holders of the preferred securities
and the common securities, voting together as a single class, must approve.
When the indenture requires the consent of the holders of the junior
subordinated debentures, the property trustee cannot give the consent
without first obtaining the consent of each holder of the preferred
securities. The issuer trustees cannot revoke any action previously
authorized or approved by a vote of the holders of the preferred securities
except by subsequent vote of the holders of the preferred securities.
Any required approval of holders of preferred securities may be given
either at a properly convened meeting of holders of preferred securities or
by a written consent. The property trustee must notify record holders of
preferred securities of any meeting or of any matter upon which written
action is requested.
No vote or consent of the holders of preferred securities is required
for the trust to redeem the preferred securities in accordance with the
trust agreement. Holders of preferred securities have no right to appoint
or remove the issuer trustees.
Whenever holders of preferred securities are entitled to vote or
consent under any of the circumstances described above, neither Merry Land
nor the issuer trustees are permitted to vote, and any preferred securities
that Merry Land or any of the issuer trustees or any of our affiliates own
will be treated as if they were not outstanding for that purpose.
PAYMENT AND PAYING AGENCY
The paying agent will mail checks to the registered holders at their
addresses as shown on its register, and the redemption price or liquidation
amount will be paid in immediately available funds when the holder
surrenders the preferred security. The paying agent will initially be the
property trustee and any co-paying agent chosen by the property trustee and
acceptable to the administrative trustees and to us. The paying agent can
resign upon 30 days' written notice to the property trustee and to us. If
the property trustee resigns as paying agent, the administrative trustees
will appoint a bank or trust company acceptable to the administrative
trustees and to us to act as paying agent.
TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The property trustee will act as transfer agent, registrar and paying,
conversion and exchange agent for the preferred securities. The preferred
securities will be registered in the name of the security holder. The
preferred securities may be transferred or exchanged, based on
administrative procedures described in the trust agreement, without the
payment of any service charge (other than any tax or other governmental
charge) by contacting the registrar and transfer agent, First Union
National Bank, 1525 West W.T. Harris Boulevard, 3C3, Charlotte, North
Carolina 28262. The trust will not register transfers of the preferred
securities after they are called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee is required to perform only the duties that are
specifically set forth in the trust agreement, other than during the
continuance of a trust agreement event of default. After a trust agreement
event of default, the property trustee is required to exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the property
trustee has no obligation to exercise any of its powers under the trust
agreement at the request of any holder of preferred securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities
that it might incur by doing so. If no trust agreement event of default
exists and the property trustee is required to decide between alternative
courses of action, construe ambiguous provisions in the trust agreement or
is unsure of the application of any provision of the trust agreement, then
we will have the right to tell the property trustee which action to take
unless the matter is one on which holders of preferred securities are
entitled to vote. If Merry Land does not give any directions, the property
trustee will take whatever action it deems advisable and in the best
interests of the holders of the preferred securities and common securities.
The property trustee will have no liability except for its own bad faith,
negligence or willful misconduct. Merry Land may maintain deposit accounts
and conduct other banking and securities transactions and relationships
with the property trustee.
EXPENSES OF THE TRUST
Merry Land will pay all of the costs, expenses or liabilities of the
trust, other than obligations of the trust to pay to the holders of any
preferred securities or common securities the amounts due to the holders
under the terms of those securities.
MISCELLANEOUS
The administrative trustees are to operate the trust in such a way
that:
- the trust will not be:
- deemed to be an "investment company" required to be registered
under the Investment Company Act; or
- classified as an association taxable as a corporation or
partnership for United States federal income tax purposes; and
- the junior subordinated debentures will be treated as our
indebtedness for United States federal income tax purposes.
Merry Land and the administrative trustees are authorized to take any
lawful action consistent with the certificate of trust and the trust
agreement that Merry Land and the administrative trustees determine in our
discretion to be necessary or desirable for these purposes, as long as the
action does not materially and adversely affect the interests of the
holders of the preferred securities.
Holders of the preferred securities have no preemptive or similar
rights.
The trust may not borrow money or issue debt or mortgage or pledge any
of its assets.
GOVERNING LAW
The trust agreement and the preferred securities are governed by
Delaware law, excluding Sections 3540 and 3561 of Title 12 of the Delaware
Code.
GUARANTEE
Merry Land will execute and deliver a guarantee agreement for the
benefit of the holders of the preferred securities. The guarantee agreement
will be qualified as an indenture under the Trust Indenture Act. First
Union National Bank will act as guarantee trustee under the guarantee for
the purposes of compliance with the Trust Indenture Act, and will hold the
guarantee for the benefit of the holders of the preferred securities. We
have summarized certain provisions of the guarantee below. Because this is
a summary, it does not contain all information you should consider. The
form of the guarantee agreement has been filed as an exhibit to the
registration statement of which this Prospectus is a part, and you should
read the guarantee agreement for provisions that may be important to you.
GENERAL
Merry Land will promise to make the guarantee payments to the holders
of the preferred securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the trust may have or assert, other
than the defense of payment. The guarantee covers the following payments,
to the extent not paid by or on behalf of the trust:
- any accumulated and unpaid distributions required to be paid
on the preferred securities, but only if and to the extent that the
trust has funds on hand available for the distributions at that
time;
- the redemption price of any preferred securities called for
redemption, if and to the extent that the trust has funds on hand
available to pay the redemption price at that time; or
- upon a voluntary or involuntary dissolution, winding up or
liquidation of the trust, unless the junior subordinated debentures
are distributed to the holders of the preferred securities, the
lesser of
- the liquidation distribution to the extent that the trust has
funds on hand available to make the distribution; or
- the amount of assets of the trust remaining available for
distribution to holders of preferred securities.
Our obligation to make a guarantee payment may be satisfied either by
our direct payment of the required amounts to the holders of the preferred
securities or by causing the trust to pay them.
The guarantee is an irrevocable guarantee on a subordinated basis of
the trust's obligations under the preferred securities, but applies only to
the extent that the trust has funds sufficient to make the required
payments. If Merry Land does not make interest payments on the junior
subordinated debentures held by the trust, the trust will not be able to
pay distributions on the preferred securities. The guarantee is a guarantee
of payment, not a guarantee of collection. This means that the guaranteed
party may institute legal proceedings against Merry Land as the guarantor
to enforce its rights under the guarantee without first suing anyone else.
Merry Land also has agreed to guarantee the obligations of the trust
with respect to the common securities to the same extent as its guarantee
to holders of the preferred securities. If there is a trust agreement event
of default, however, the holders of preferred securities will have priority
over the holders of common securities as to distributions and payments on
liquidation, redemption or otherwise during the continuance of the default.
Merry Land's obligations described in this Prospectus under the
guarantee agreement, the trust agreement, and the junior subordinated
debentures, taken together, constitute Merry Land's full, irrevocable and
unconditional guarantee of payments due on the preferred securities. No
single document standing alone or operating in conjunction with fewer than
all of the other documents constitutes the guarantee. It is only the
combined operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the trust's obligations
under the preferred securities. See "The Trust," "Description of the
Preferred Securities" and "Description of the Junior Subordinated
Debentures."
SUBORDINATION OF THE GUARANTEE
The guarantee is an unsecured obligation and will rank subordinate and
junior in right of payment to all of Merry Land's other liabilities. The
guarantee will rank equal in right of payment with most senior preferred
shares, if any, which Merry Land may issue and with any guarantee of any
preferred shares of any of Merry Land's affiliates that Merry Land may
enter into.
The guarantee will be held for the benefit of the holders of the
preferred securities. The guarantee does not limit the additional debt
that Merry Land may incur.
AMENDMENTS AND ASSIGNMENT
The guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate liquidation amount of
the outstanding preferred securities, except that no approval is required
for changes that do not adversely affect the rights of the holders of the
preferred securities. The manner of obtaining approval is the same as
described under "Description of the Preferred Securities -- Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained
in the guarantee agreement will bind Merry Land's successors, assigns,
receivers, trustees and representatives.
MERRY LAND'S PROMISES
Merry Land promises in the guarantee that it will pay all required
additional sums to the trust, if the trust holds all of the junior
subordinated debentures, a tax event exists and we elect to pay additional
amounts with respect to the preferred securities and common securities.
This promise is subject to the subordination provisions described above.
For a description of a tax event and our right to elect to pay additional
amounts, see "Description of the Preferred Securities -- Tax Event Exchange
or Redemption."
Merry Land also promises to be bound by a number of restrictions if:
- Merry Land actually knows of a debenture event of default or
an event that, with notice or time will be a debenture event of
default, and Merry Land has not taken reasonable steps to cure that
default;
- Merry Land is in default in paying any of its obligations
under the guarantee; or
- Merry Land has given notice of its election to defer interest
payments on the junior subordinated debentures and Merry Land has
not rescinded that notice.
The restrictions that will be in effect in the above instances are the
same ones that are described in "Description of the Preferred Securities --
Distributions" that will be in effect if Merry Land elects to defer
interest payments.
Merry Land also promises in the guarantee agreement:
- for so long as preferred securities are outstanding, Merry
Land will not convert junior subordinated debentures except
pursuant to a notice of conversion delivered to the conversion
agent by a holder of preferred securities;
- to maintain, directly or indirectly, 100% ownership of the
common securities, except that successors described in the
indenture are permitted to succeed to our ownership of the common
securities;
- not to voluntarily terminate, wind-up or liquidate the trust
except in connection with a distribution of the junior subordinated
debentures to the holders of the preferred securities in
liquidation of the trust or in connection with the mergers,
consolidations or amalgamations permitted by the trust agreement;
- to reserve for issuance the number of common shares that would
be required from time to time to be issued upon the conversion of
all the junior subordinated debentures then outstanding;
- to use its reasonable efforts, consistent with the terms of
the trust agreement, to cause the trust to remain classified as a
grantor trust and not as an association taxable as a corporation or
a partnership for United States federal income tax purposes; and
- to deliver common shares upon the conversion of preferred
securities by the holders.
Merry Land also promises to honor all obligations described in the
guarantee relating to the conversion or exchange of the preferred
securities into or for common shares or junior subordinated debentures.
EVENTS OF DEFAULT
Merry Land will be in default under the guarantee agreement if it does
not make required payments when due or if it fails to perform some other
obligation and Merry Land does not cure its failure to perform within 60
days after it receives notice of that failure. The holders of a majority in
aggregate liquidation amount of the preferred securities have the right:
- to direct the time, method and place of conducting any
proceeding for any remedy available to the guarantee trustee under
the guarantee agreement; and
- to direct the exercise of any power conferred upon the
guarantee trustee under the guarantee agreement; and
- to waive any event of default and its consequences.
If the guarantee trustee fails to enforce the guarantee, any holder of
preferred securities may institute a legal proceeding directly against
Merry Land to enforce that holder's rights under the guarantee agreement
without first instituting a legal proceeding against the trust, the
guarantee trustee or anyone else. In addition, any record holder of
preferred securities may proceed directly against Merry Land to obtain
payment of the guaranteed amounts described under " -- General" above
without first waiting for the guarantee trustee to enforce the guarantee
and without instituting any legal proceedings against the trust, the
guarantee trustee or anyone else.
As guarantor, Merry Land is required to file annually with the
guarantee trustee a certificate stating whether or not Merry Land is in
compliance with all the conditions and covenants applicable to Merry Land
under the guarantee agreement.
<PAGE>
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee promises to perform only the duties that are
specifically set forth in the guarantee agreement, unless Merry Land is in
default in performing the guarantee. When Merry Land is in default under
the guarantee, the guarantee trustee must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the guarantee trustee is
under no obligation to exercise any of the powers vested in it by the
guarantee agreement at the request of any holder of preferred securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that it might incur by doing so.
TERMINATION OF THE GUARANTEE
The guarantee will terminate upon:
- full payment of the redemption price of the preferred
securities,
- full payment of the amounts payable upon liquidation of the
trust,
- a distribution of common shares to the holders of preferred
securities upon conversion of their preferred securities, or
- the distribution of junior subordinated debentures to the
holders of the preferred securities in exchange for all of the
preferred securities.
The guarantee will continue to be effective or will be reinstated, as
the case may be, if any holder of the preferred securities must ever
restore payment of any sums paid under the preferred securities or the
guarantee.
GOVERNING LAW
The guarantee agreement is governed by the laws of Georgia.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Merry Land will issue the junior subordinated debentures under a
Junior Convertible Subordinated Indenture between Merry Land and First
Union National Bank, as debenture trustee. We have summarized selected
provisions of the junior subordinated debentures and the indenture below.
Because this is a summary, it does not contain all information you should
consider. The form of indenture has been filed as an exhibit to the
registration statement of which this Prospectus is a part. You should read
the form of indenture for provisions that may be important to you.
GENERAL
The junior subordinated debentures are unsecured and rank junior and
subordinate in right of payment to all of Merry Land's senior debt, as
described below. The debentures are limited in aggregate principal amount
to approximately $8,939,175, which equals the sum of the aggregate stated
liquidation preference of the preferred securities and the capital
contributed by us in exchange for the common securities. The indenture
does not limit Merry Land from incurring or issuing additional debt. See "
- -- Subordination." Concurrently with the issuance of the preferred
securities, the trust will invest the proceeds of the sale of those
securities and the consideration paid by Merry Land for the common
securities in the junior subordinated debentures.
The junior subordinated debentures are not subject to any sinking fund
provision. The entire principal amount of the debentures matures, and
becomes due and payable, together with any accrued and unpaid interest on
the debentures, on [ ], 2029.
<PAGE>
DEFINITION OF SENIOR DEBT
For purposes of the junior subordinated debentures, "senior debt"
means the obligation for the payment of the principal of and premium, if
any, and interest, if any, on the following types of Merry Land's debt:
- all of Merry Land's obligations for borrowed money;
- all of Merry Land's obligations evidenced by bonds,
debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of
property, assets or businesses;
- all of Merry Land's reimbursement obligations with respect to
letters of credit, bankers' acceptances or similar facilities
issued for Merry Land's account;
- all of Merry Land's obligations issued or assumed as the
deferred purchase price of property or services, except trade
accounts payable or accrued liabilities arising in the ordinary
course of business;
- all of Merry Land's capital lease obligations; and
- all obligations of another person or entity of the nature set
forth above that Merry Land has guaranteed or for which Merry Land
is responsible or liable, directly or indirectly, as obligor or in
any other capacity.
Nevertheless, if the documents that create or evidence any of the
foregoing kinds of debt specifically state that the particular obligation
is not superior in right of payment to the junior subordinated debentures
or to other of our debt that ranks equally with or subordinate to the
debentures, then that debt will not be senior debt. Senior debt can be
contingent indebtedness, and it includes both existing indebtedness and
indebtedness that Merry Land may incur in the future.
However, in no event will the following types of debt ever be
considered to be senior debt:
- any of our debt which is without recourse to us when it is
incurred and without respect to any election under Section 1111(b)
of the United States Bankruptcy Code;
- any debt Merry Land owes to its subsidiaries;
- any debt Merry Land owes to any of its employees;
- any liability for taxes;
- any debt or other monetary obligations to trade creditors or
assumed by Merry Land or any of its subsidiaries in the ordinary
course of business in connection with obtaining goods, materials or
services; and
- the junior subordinated debentures issued to the trust.
INTEREST
The junior subordinated debentures bear interest at the annual rate of
[ ]% per annum, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing on December 31, 1999,
to the holders of record at the close of business on the last business day
before the interest payment date. Merry Land anticipates that each
debenture will be held in the name of the property trustee in trust for the
benefit of the holders of the preferred securities and the common
securities, unless and until the trust is liquidated. The amount of
interest payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
If any date on which interest is payable is not a business day, then
payment of the interest payable on that date will be made on the next
succeeding day that is a business day. No additional interest or other
payment will accrue because of this delay in the payment date. Accrued
interest that is not paid on the applicable interest payment date will not
bear additional interest. However, the interest rate on the principal
amount of the debentures will increase to a rate that will yield the
holders of the debentures an annualized return of [ ]% compounded
quarterly. See "Description of the Preferred Securities--Deferral of
Distributions." The term "interest" includes quarterly interest payments
and additional sums described in "Description of the Preferred Securities
- -- Tax Event Exchange or Redemption," as applicable.
<PAGE>
PAYMENT AND PAYING AGENTS
Principal and any interest on debentures will be payable, the transfer
of the debentures will be registerable, and the debentures will be
exchangeable for debentures of other denominations of a like aggregate
principal amount at the corporate office of the debenture trustee or at the
office of any paying agent or paying agents as we may designate. However,
at Merry Land's option, payment of any interest may be made:
- by check mailed to the holder at the address appearing in the
securities register, or
- by wire transfer to an account maintained by the holder as
specified in the securities register, provided that proper transfer
instructions have been received by the record date.
Payment of any interest on junior subordinated debentures will be made
to the registered holder of the debentures at the close of business on the
record date for such interest, except in the case of defaulted interest.
The record date for the interest payable on any interest payment date will
be 15 days prior to the relevant interest payment date. Merry Land may at
any time designate additional paying agents or rescind the designation of
any paying agent.
If Merry Land has deposited any monies with the debenture trustee or
any paying agent, or if Merry Land holds any monies in trust, for payments
due and payable on the junior subordinated debentures and those funds
remain unclaimed after two years, then we may request that those funds be
returned to Merry Land or Merry Land may cease holding them in trust. In
that case, the holder of the debenture may seek payment of the unpaid
amount only from us in the capacity of a general unsecured creditor.
OPTION TO DEFER PAYMENT OF INTEREST
If Merry Land is not in default under the indenture, Merry Land has
the right to defer the payment of interest, including any liquidated
damages, on the junior subordinated debentures at any time or times for
periods of up to 20 consecutive quarters each. Merry Land may not,
however, defer the payment of interest beyond the stated maturity date of
the debentures. Merry Land may exercise this deferral right on multiple
occasions during the term of the junior subordinated debentures. At the
end of any interest deferral period, Merry Land must pay all interest then
accrued and unpaid. During an interest deferral period, the holders of the
debentures, or the holders of preferred securities while the preferred
securities are outstanding, will continue to be required to accrue interest
income for United States federal income tax purposes. See "United States
Federal Income Taxation -- Interest Income and Original Issue Discount."
Merry Land is restricted during any interest deferral period from
taking certain actions. These restrictions are described in "Description of
the Preferred Securities -- Deferral of Distributions."
If Merry Land intends to defer interest as described above, Merry Land
will give the property trustee, the administrative trustees and the
debenture trustee notice of our election to defer interest at least one
business day before the earlier of:
- the record date for distributions on the preferred securities,
or if no preferred securities are outstanding, the record date for
the date interest on the junior subordinated debentures would have
been payable except for the election to defer interest; and
- the date the property trustee is required to give notice of
the record date to the Nasdaq SmallCap Market or other applicable
self-regulatory organization or to holders of the preferred
securities, or if no preferred securities are outstanding, the date
the debenture trustee is required to give notice of the record date
to the Nasdaq SmallCap Market or other applicable self-regulatory
organization or to holders of the junior subordinated debentures.
The debenture trustee and the property trustee will notify the holders
of the junior subordinated debentures and the preferred securities,
respectively, of Merry Land's election to defer interest payments.
<PAGE>
MANDATORY REDEMPTION
Merry Land will redeem the junior subordinated debentures in their
entirety upon repayment of the indebtedness represented by the debentures
at maturity or as a result of acceleration upon the occurrence of an
indenture event of default. The redemption price will equal 100% of the
principal amount of the debentures, together with any accrued and unpaid
interest on the debentures. The redemption payment will be made prior to
12:00 noon, New York City time, on the date of the repayment or
acceleration or at any other time on any earlier date that Merry Land and
the holders of the debentures may agree. The debentures are not entitled to
the benefit of any sinking fund or, except as set forth above or as a
result of acceleration, any other provision for mandatory prepayment.
OPTIONAL REDEMPTION
On and after [ ], 2004, Merry Land will have the right, at
any time and from time to time, to redeem all or any part of the junior
subordinated debentures, upon notice given as provided below.
Merry Land also may redeem the junior subordinated debentures, in
whole or in part, at any time, at a redemption price of $10, plus accrued
and unpaid interest, if any, to the date fixed for redemption if the
closing price of Merry Land's common shares has exceeded 150% of the
conversion price then in effect for at least 20 trading days within a
period of 30 consecutive trading days ending not more than five trading
days prior to the date of mailing of the notice of redemption.
For so long as the trust holds all the outstanding junior subordinated
debentures, the proceeds of any redemption will be used by the trust to
redeem preferred securities and common securities in accordance with their
terms. Merry Land may not redeem the debentures in part unless all accrued
and unpaid interest has been paid in full on all outstanding debentures.
Merry Land may not, in any case, redeem the junior subordinated debentures
unless all accrued and unpaid interest has been paid in full on all
outstanding debentures through the last interest payment date prior to and
including the date of redemption.
Merry Land also will have the right to redeem the junior subordinated
debentures following the occurrence of a tax event, as described in
"Description of the Preferred Securities -- Tax Event Exchange or
Redemption," at a redemption price equal to the principal amount of the
debentures, plus any accrued and unpaid interest.
REDEMPTION PROCEDURES
Notice of a redemption of the junior subordinated debentures and the
procedures for the redemption will be as provided with respect to the
preferred securities under "Description of the Preferred Securities --
Redemption Procedures." Merry Land will mail notice of a redemption at
least 30 days but not more than 60 days before the redemption date to each
holder of junior subordinated debentures to be redeemed at its registered
address. Unless Merry Land fails to pay the redemption price, interest will
cease to accrue on the debentures called for redemption on and after the
redemption date.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Merry Land has the right to terminate the trust at any time and cause
the junior subordinated debentures to be distributed to the holders of the
preferred securities after all liabilities to creditors of the trust are
satisfied as provided by applicable law.
CONVERSION OF THE JUNIOR SUBORDINATED DEBENTURES
The junior subordinated debentures are convertible at the option of
the holders into Merry Land's common shares at any time prior to redemption
or maturity at the rate of [ ] common shares for each $10 in
principal amount of the debentures, subject to the conversion price
adjustments described under "Description of the Preferred Securities --
Conversion Price Adjustments." This equates to an initial conversion price
of $[ ]per common share. For so long as the preferred securities are
outstanding, the trust is prevented from converting the junior subordinated
debentures except pursuant to a notice of conversion delivered to the
conversion agent by a holder of preferred securities. Upon surrender of
preferred securities to the conversion agent for conversion, the trust will
distribute the commensurate principal amount of the debentures to the
conversion agent on behalf of the holder of the preferred security
converted. The conversion agent will convert those debentures into common
shares on behalf of the holder. Merry Land's delivery through the
conversion agent to the holders of the debentures of the fixed number of
common shares into which the debentures are convertible (together with the
cash payment, if any, in lieu of fractional shares) will satisfy Merry
Land's obligation to pay the principal amount of the debentures, and the
accrued and unpaid interest attributable to the period from the last date
to which interest has been paid or provided for.
MODIFICATION OF INDENTURE
Merry Land and the debenture trustee may amend the indenture from time
to time without the consent of any of the holders of the junior
subordinated debentures:
- to cure ambiguities, defects or inconsistencies, if such
action does not materially adversely affect the interest of the
holders of the junior subordinated debentures or the holders of the
preferred securities as long as they remain outstanding; or
- to qualify or maintain the qualification of the indenture
under the Trust Indenture Act.
Merry Land and the debenture trustee may amend the indenture in other
respects with the consent of holders representing not less than a majority
in principal amount of the outstanding junior subordinated debentures.
However, without the consent of each holder of the junior subordinated
debentures so affected, no amendment may:
- change the stated maturity of the junior subordinated
debentures;
- reduce the principal amount of the junior subordinated
debentures;
- reduce the rate or extend the time of payment of interest on
the junior subordinated debentures, other than deferrals of the
payments of interest as described above under " -- Option to Defer
Payment of Interest";
- impair any right to institute suit for the enforcement of any
payment on the junior subordinated debentures;
- change the subordination provisions of the indenture;
- change any right to convert any junior subordinated debentures
in a manner adverse to the holders; or
- reduce the percentage of principal amount of the junior
subordinated debentures that is required to consent to any
modification of the indenture.
In addition, for so long as any of the preferred securities remain
outstanding and any indebtedness remains outstanding under the junior
subordinated debentures, none of the following actions may occur without
the prior consent of the holders of at least a majority in aggregate
liquidation preference of the preferred securities then outstanding:
- no modification of the indenture may be made that adversely
effects the holders of the preferred securities in any material
respect;
- no termination of the indenture may occur; or
- no waiver of any debenture event of default or waiver of any
covenant under the indenture may be effective.
Finally, where a consent under the indenture would require the consent
of each holder of junior subordinated debentures, the property trustee will
not give this consent without the prior consent of each holder of the
preferred securities.
<PAGE>
DEBENTURE EVENTS OF DEFAULT
Each of the following is an event of default with respect to the
junior subordinated debentures:
- Merry Land's failure for 30 days to pay any interest on the
junior subordinated debentures when due, except in the case of
permitted deferrals of interest as described under " -- Option to
Defer Payment of Interest;"
- Merry Land's failure to pay any principal of the junior
subordinated debentures when due, whether at maturity, upon
redemption by declaration, or at any other time;
- Merry Land's failure to deliver common shares upon an election
by a holder of junior subordinated debentures to convert the
debentures;
- Merry Land's continued failure for 90 days to observe or
perform any other promise Merry Land made in the indenture after
written notice of the default is given as provided in the
indenture; or
- certain events of bankruptcy, insolvency or reorganization
relating to Merry Land.
The holders of a majority in aggregate outstanding principal amount of
the junior subordinated debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to
the debenture trustee or exercising any trust or power conferred on the
trustee consistent with the indenture. The debenture trustee or the holders
of not less than 25% in aggregate principal amount of the junior
subordinated debentures then outstanding may declare the principal due and
payable immediately upon an event of default described above. If the
debenture trustee or the holders of the junior subordinated debentures fail
to make the declaration, the holders of at least 25% in aggregate
liquidation preference of the preferred securities then outstanding will
have that right. The holders of a majority in aggregate outstanding
principal amount of the debentures may annul and rescind this declaration
if the default (other than the non-payment of the principal of the
debentures that has become due solely by acceleration) has been cured or
waived and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
debenture trustee. If the holders of the debentures fail to annul and
rescind the declaration, the holders of a majority in aggregate liquidation
preference of the preferred securities then outstanding will have that
right.
The holders of a majority in aggregate outstanding principal amount of
the junior subordinated debentures affected may, on behalf of the holders
of all the debentures, waive any past default, except:
- a default in the payment of principal or interest, unless
Merry Land has cured the default and deposited with the debenture
trustee an amount sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration; or
- a default under a provision which under the indenture cannot
be modified or amended without the consent of the holder of each
outstanding debenture.
If the holders of the junior subordinated debentures fail to waive the
default, the holders of a majority in aggregate liquidation preference of
the preferred securities will have that right. Merry Land is required to
file annually with the debenture trustee a certificate as to whether or not
Merry Land is in compliance with all the conditions and covenants
applicable to us under the indenture.
If a debenture event of default exists, the property trustee has the
right to declare the principal of and the interest on the debentures and
any other amounts payable under the indenture to be immediately due and
payable and to enforce its other rights as a creditor with respect to the
junior subordinated debentures.
ENFORCEMENT OF RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a debenture event of default exists and the event is attributable
to our failure to pay interest or principal on the junior subordinated
debentures on the date interest or principal is due, a holder of preferred
securities may institute a direct action for payment after the due date.
Merry Land may not amend the indenture to remove the foregoing right to
bring a direct action unless Merry Land has received the prior written
consent of the holders of all of the preferred securities. Merry Land's
payment to a holder of preferred securities in connection with a direct
action will not affect its obligation to pay the principal of or interest
on the junior subordinated debentures held by the trust or the property
trustee. Merry Land will be subrogated to the rights of the holder of the
preferred securities with respect to payments on the preferred securities
to the extent of any payments made by Merry Land to the holder in any
direct action.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
Merry Land may not merge, consolidate, transfer or lease its assets
substantially as an entirety to any entity, and no entity may merge,
consolidate or transfer or lease its assets substantially as an entirety to
Merry Land, unless:
- in case Merry Land consolidates with or merges into another
entity or transfer our assets substantially as an entirety to any
entity, the successor entity is organized under the laws of the
United States or any state or the District of Columbia and the
successor expressly assumes our obligations under the junior
subordinated debentures;
- immediately after giving effect to the transaction, no
debenture event of default, and no event that with notice or time
would be a debenture event of default, will exist;
- in the case of the junior subordinated debentures, the
transaction is permitted under the trust agreement and guarantee
relating to the preferred securities, and does not give rise to any
breach or violation of the trust agreement or the guarantee; and
- other conditions as prescribed in the indenture are met.
The general provisions of the indenture do not afford holders of the junior
subordinated debentures protection in the event of a highly leveraged or
other transaction involving Merry Land that may adversely affect those
holders.
SATISFACTION AND DISCHARGE
The indenture will cease to be effective, with limited exceptions, and
Merry Land will have satisfied and discharged the indenture, if sufficient
funds are deposited in trust to pay all junior subordinated debentures not
previously delivered to the debenture trustee for cancellation. Merry Land
may make this deposit with respect to the debentures when they are due and
payable or when they have been properly called for redemption or tendered
for conversion.
SUBORDINATION
All junior subordinated debentures issued under the indenture will be
subordinate and junior in right of payment to all our senior debt. Upon any
payment or distribution of our assets to creditors upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding, the holders of our senior debt first will be
entitled to receive payment of the senior debt in full before the property
trustee, on behalf of the holders of the junior subordinated debentures,
will be entitled to receive or retain any payment on the debentures.
If the maturity of the junior subordinated debentures is accelerated,
the holders of all senior debt outstanding at the time of the acceleration
first will be entitled to receive payment of all amounts due on the senior
debt, including any amounts due upon its acceleration, in full before the
holders of debentures will be entitled to receive or retain any payment on
the debentures.
No payments may be made on account of the junior subordinated
debentures if a default in paying any senior debt exists or if an event of
default with respect to any senior debt resulting in the acceleration of
the maturity of the senior debt exists or if any judicial proceeding is
pending with respect to any default.
GOVERNING LAW
The indenture and the junior subordinated debentures are governed by
the laws of Georgia.
INFORMATION CONCERNING THE JUNIOR SUBORDINATED DEBENTURE TRUSTEE
The debenture trustee is under no obligation to exercise any of the
powers vested in it by the indenture at the request of any holder of the
debentures, unless offered reasonable indemnity against the costs, expenses
and liabilities that it might incur by doing so. The debenture trustee is
not required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the debenture
trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR SUBORDINATED
DEBENTURES AND THE GUARANTEE
Merry Land irrevocably guarantees payment of distributions and other
amounts due on the preferred securities to the extent that the trust has
funds available for the payment of the distributions and as set forth under
"Guarantee." Taken together, our obligations under the junior subordinated
debentures, the indenture, the trust agreement and the guarantee agreement
provide, in the aggregate, a full, irrevocable and unconditional guarantee
of payments of distributions and other amounts due on the preferred
securities. No single document standing alone or operating in conjunction
with fewer than all of the other documents constitutes the full guarantee.
It is only the combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of the trust's
obligations under the preferred securities.
If and to the extent that Merry Land does not make payments on the
junior subordinated debentures, the trust will not make distributions or
pay other amounts due on the preferred securities. The guarantee does not
cover payment of distributions when the trust does not have sufficient
funds to pay the distributions. In that event, the remedy for a holder of
preferred securities is to institute a legal proceeding directly against us
for enforcement of payment of the distributions to the holder. Merry
Land's obligations under the guarantee are subordinate and junior in right
of payment to all of its other liabilities and rank pari passu with most
senior preferred shares, if any, Merry Land may issue and with any
guarantee Merry Land may enter into within respect of any preferred shares
of any of Merry Land's affiliates.
SUFFICIENCY OF PAYMENTS
As long as all payments are made when due on the junior subordinated
debentures, those payments will be sufficient to cover distributions and
other payments due on the preferred securities. This is primarily because:
- the aggregate principal amount of the junior subordinated
debentures will be equal to the sum of the aggregate stated
liquidation amount of the preferred securities and related common
securities;
- the interest rate and interest and other payment dates on the
junior subordinated debentures will match the distribution rate and
distribution and other payment dates for the preferred securities;
- Merry Land has promised to pay any and all costs, expenses and
liabilities of the trust other than the trust's obligations under
its preferred and common securities; and
- the trust agreement provides that the trust will not engage in
any activity that is not consistent with the limited purposes of
the trust.
Merry Land has the right to set-off any payment it is otherwise
required to make under the indenture if and to the extent Merry Land has
already made, or is concurrently making, a payment under the guarantee
agreement.
ENFORCEMENT OF RIGHTS OF HOLDERS OF PREFERRED SECURITIES
If the guarantee trustee fails to enforce the guarantee agreement, a
holder of a preferred security may institute a legal proceeding directly
against us to enforce the holder's rights under the guarantee agreement
without first instituting a legal proceeding against the guarantee trustee,
the trust or anyone else.
In the event of a payment default under, or acceleration of, Merry
Land's senior debt, the subordination provisions of the indenture provide
that no payments may be made with respect to the junior subordinated
debentures until the senior debt has been paid in full or any payment
default under the senior debt has been cured or waived. For a definition of
Merry Land's senior debt, see "Description of the Junior Subordinated
Debentures -- Definition of Senior Debt." Merry Land's failure to make
required payments on the junior subordinated debentures would constitute a
trust agreement event of default.
LIMITED PURPOSE OF THE TRUST
The trust's preferred securities evidence undivided beneficial
ownership interests in the assets of the trust, and the trust exists for
the sole purpose of issuing its preferred securities and common securities,
investing the proceeds in junior subordinated debentures and engaging in
only those other activities necessary, convenient or incidental to those
purposes. A principal difference between the rights of a holder of a
preferred security and a holder of a debenture is that a holder of a
debenture is entitled to receive from Merry Land the principal amount of
and interest accrued on junior subordinated debentures held, while a holder
of preferred securities is entitled to receive distributions from the
trust, or from Merry Land, under the guarantee agreement, if and to the
extent the trust has funds available for the payment of the distributions.
RIGHTS UPON LIQUIDATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of the trust involving the liquidation of the junior
subordinated debentures, the holders of the preferred securities will be
entitled to receive the liquidation distribution in cash, out of the assets
of the trust. See "Description of the Preferred Securities -- Liquidation
Distribution upon Dissolution." If Merry Land becomes subject to any
voluntary or involuntary liquidation or bankruptcy, the property trustee,
as holder of the junior subordinated debentures, would be one of our
subordinated creditors. The property trustee would be subordinated in right
of payment to all of our senior debt, but it would be entitled to receive
payment in full of principal and interest before our stockholders receive
payments or distributions. Merry Land is the guarantor under the guarantee
agreement and pursuant to the indenture has agreed to pay all costs,
expenses and liabilities of the trust, other than the trust's obligations
to the holders of its preferred and common securities. Accordingly, in the
event of Merry Land's liquidation or bankruptcy, the positions of a holder
of preferred securities and of a holder of junior subordinated debentures
are expected to be substantially the same relative to Merry Land's other
creditors and to Merry Land's stockholders.
DESCRIPTION OF MERRY LAND'S CAPITAL STOCK
Merry Land's Articles of Incorporation provide that it may issue up to
5,000,000 common shares and 2,000,000 preferred shares. As of August 31,
1999, we had a total of 2,601,300 common shares outstanding. No preferred
shares are outstanding. The following description of our capital shares is
intended to be a summary and does not describe all of the provisions of our
articles of incorporation or regulations. For a more thorough understanding
of the terms of our capital shares, you should refer to our articles of
incorporation and regulations, which are filed with the Securities and
Exchange Commission and included as exhibits to the registration statement
of which this Prospectus is a part. See "Available Information" below.
COMMON SHARES
Merry Land's outstanding common shares are listed on the Nasdaq
SmallCap Market. The holders of the common shares are entitled to one vote
per share on each matter on which the stockholders vote. Subject to the
preferences of any outstanding preferred shares, the holders of the common
shares are entitled to receive ratably any dividends declared by the Board
of Directors. If Merry Land liquidates, is dissolved or its business is
wound up, the holders of the common shares are entitled to share ratably in
all assets remaining after payment of all liabilities and any liquidation
preference of any outstanding preferred shares. All outstanding common
shares are fully paid and non-assessable, and all common shares issued upon
conversion of junior subordinated debentures will be fully paid and
non-assessable when issued.
The transfer agent and registrar for our common shares is First Union
National Bank, 1525 West W.T. Harris Boulevard, 3C3, Charlotte, North
Carolina 28262.
PREFERRED SHARES
Merry Land's Board of Directors has the authority, without further
action by the stockholders, to issue up to 2,000,000 shares in one or more
series and may designate the dividend rates, dividend payment dates,
redemption rates, redemption prices, liquidation prices, sinking fund
requirements, conversion rights, restrictions on the issuance of shares of
the same series or of any other class or series and the like. The Board of
Directors also has the authority to amend the terms of the preferred shares
to fix the voting rights of the entire class at any time that there are no
preferred shares outstanding. Accordingly, without shareholder approval,
Merry Land can issue preferred shares with conversion, voting and other
rights which might discourage or prevent a takeover or other change in
control. Merry Land has no current plans to issue any preferred shares.
GEORGIA BUSINESS COMBINATIONS RESTRICTIONS
Merry Land is subject to Georgia law's restrictions on business
combinations with interested stockholders. This act prohibits Merry Land
from engaging in specified business transactions, including mergers, asset
sales, loans, liquidation and the like, with a beneficial owner of 10% or
more of Merry Land's outstanding common shares during the five-year period
following the date the person became the owner of the 10% interest unless:
- prior to that date, the specified transaction or the person's
acquisition of shares was approved by our directors,
- in the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder became the
beneficial owner of at least 90% of the corporation's outstanding
voting stock at the time the transaction commenced, excluding
shares owned by directors and officers of the corporation,
subsidiaries of the corporation, and certain employee stock plans
of the corporation; or
- subsequent to becoming an interested stockholder, such
stockholder acquired additional shares resulting in the interested
stockholder being the beneficial owner of at least 90% of the
outstanding voting stock of the corporation, excluding shares owned
by directors and officers of the corporation, subsidiaries of the
corporation, and certain employee stock plans of the corporation.
Furthermore, Georgia law provides that a business combination must be
either:
- unanimously approved by the continuing directors, provided
that the continuing directors constitute at least three members of
the board of directors at the time of such approval; or
- recommended by at least two-thirds of the continuing directors
and approved by a majority of the votes entitled to be cast by
holders of voting shares, other than voting shares beneficially
owned by the interested stockholders unless, among other
conditions, the Georgia corporation's common shareholders receive a
minimum price for their shares and the consideration is received in
cash or in the same form as previously paid by the interested
stockholder for its shares.
UNITED STATES FEDERAL INCOME TAXATION
The following discussion summarizes certain of the material United
States federal income tax consequences of the distribution and exercise of
rights and the purchase, ownership, disposition and conversion of the
preferred securities and junior subordinated debentures. Unless otherwise
stated, this summary deals with only preferred securities held as capital
assets by holders who purchase the preferred securities upon original
issuance. This summary does not deal with special classes of holders such
as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, foreign taxpayers (except to the extent discussed
under the heading "United States Alien Holders") or persons that will hold
the preferred securities as a position in a straddle, as part of a
synthetic security or hedge, as part of a conversion transaction or other
integrated investment or as other than a capital asset. This summary also
does not address the tax consequences to persons that have a functional
currency other than the United States dollar. Further, it does not include
any description of any alternative minimum tax consequences or the tax laws
of any state or local government or of any foreign government that may be
applicable to the preferred securities. The following discussion
constitutes the opinion of Hull, Towill, Norman, Barrett & Salley, P.C.,
tax counsel for Merry Land and the trust. This summary is based on the
Internal Revenue Code of 1986, legislative history, Treasury regulations,
and administrative and judicial interpretations thereof, as of the date of
this Prospectus, all of which are subject to change, possibly on a
retroactive basis. The authorities on which this discussion is based are
subject to various interpretations, and it is therefore possible that the
United States federal income tax treatment of the distribution and exercise
of rights and the purchase, ownership, disposition and conversion of the
preferred securities and junior subordinated debentures may differ from the
treatment described below.
We cannot assure you that the IRS will not challenge the positions
discussed below with respect to the tax consequences associated with the
rights, preferred securities or junior subordinated debentures.
YOU SHOULD CONSULT YOUR TAX ADVISORS AS TO THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE RECEIPT AND EXERCISE OF THE RIGHTS AND THE
OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES AND JUNIOR SUBORDINATED
DEBENTURES IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT
OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
TAX TREATMENT OF RIGHTS DISTRIBUTION
Based upon discussions with our financial and tax advisors, we do not
believe the distribution of rights to purchase preferred securities will be
taxable to our stockholders. However, the distribution of the rights to
purchase the preferred securities is a dividend by Merry Land to its
stockholders. Stockholders may be required to include the value of the
rights received in their taxable income for federal tax purposes. Because
we believe the preferred securities are priced at their fair market value
and because the rights to purchase the preferred securities are not
transferable, we do not believe the rights themselves have any inherent
value. Accordingly, we will not treat the distribution as a taxable
dividend. We can give no assurance that the Internal Revenue Service will
not assign a value to each right and attempt to impose a corresponding
income tax on our stockholders.
A stockholder's tax basis of a right is its fair market value, which
we assume to be zero. If the rights are determined to have value, the
stockholder's basis will be treated as follows:
- If the rights are exercised, the basis in the rights will be
added to the stockholder's basis in the preferred securities.
- If the rights lapse without being exercised, the stockholder
will generally be able to recognize a loss in the amount of the
basis in the rights (which would be in the same amount as the
amount of dividend income recognized by the stockholder).
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Based in part upon certain factual assumptions and upon certain
factual representations made by us, which Hull, Towill, Norman, Barrett &
Salley, P.C. has relied upon and assumed to be true, correct and complete,
the junior subordinated debentures will be classified for United States
federal income tax purposes as our indebtedness under current law. By
accepting the preferred securities, each holder agrees to treat the junior
subordinated debentures as indebtedness and the preferred securities as
evidence of the holder's indirect beneficial ownership interest in the
corresponding debentures. Because the junior subordinated debentures are
treated as indebtedness and the preferred securities are treated as an
indirect interest in the debentures, corporate holders of preferred
securities will not be entitled to a dividends-received deduction with
respect to any income recognized with respect to the debentures.
We are aware of several recent actions by the IRS concerning
obligations that are similar to the junior subordinated debentures. First,
in a case involving Enron Corporation now pending before the United States
Tax Court, the IRS initially sought to disallow the deduction for interest
expense on obligations that are similar to, although different in a number
of respects from, the junior subordinated debentures. Those obligations
were issued in 1993 and 1994 to partnerships which, in turn, issued
"monthly income preferred securities" to investors. In a stipulation filed
on December 28, 1998 in the United States Tax Court, the IRS conceded that
Enron was entitled to deduct its interest expense on the obligations.
Although the IRS apparently has conceded the interest deductibility issue
in the Enron case, we cannot assure you that the IRS will not challenge the
interest deductions of other taxpayers (such as Merry Land) that engage in
similar arrangements.
The IRS also recently issued a technical advice memorandum (PLR
1999-10-046) that addresses whether obligations that are similar to,
although different in a number of respects from, the junior subordinated
debentures constituted debt or equity for federal income tax purposes. The
IRS concluded that the instruments constituted debt. A technical advice
memorandum is not binding on the IRS, but it does provide some indication
of the views of the IRS National Office on the issues addressed in the
memorandum.
A successful IRS challenge to the classification of the junior
subordinated debentures as debt would prevent us from deducting the
interest paid or accrued on the debentures for United States federal income
tax purposes and would be a "tax event" that results in the exchange of the
debentures for preferred securities or, in certain limited circumstances,
the redemption of the debentures by Merry Land and the distribution of the
resulting cash in redemption of the preferred securities (see "--Redemption
of Preferred Securities for Junior Subordinated Debentures or Cash"
below), or a payment of additional amounts to holders of the preferred
securities. Additionally, if the interest on the junior subordinated
debentures is not deductible, it could adversely affect Merry Land's
ability to make payments on the junior subordinated debentures. The
remainder of this discussion assumes that the junior subordinated
debentures will be classified as our indebtedness for United States federal
income tax purposes.
CLASSIFICATION OF THE TRUST
The trust will be classified as a grantor trust with respect to United
States holders and will not be classified as an association taxable as a
corporation or partnership for United States federal income tax purposes.
Accordingly, for United States federal income tax purposes, each United
States holder of preferred securities generally will be considered the
owner of an undivided interest in the junior subordinated debentures held
by the trust, and each holder of preferred securities will be required to
include in the holder's gross income any interest with respect to the
holder's allocable share of those junior subordinated debentures. In
effect, the preferred securities are ignored for federal income tax
purposes, and each United States holder is treated as owning an allocable
share of the junior subordinated debentures held by the trust. The trust
may not be classified as grantor trust with respect to foreign holders, and
the trust could incur an income tax on the income attributable to foreign
holders, especially if Merry Land elects to defer payment of quarterly
distributions. The existence of a significant percentage of foreign
holders could possibly trigger a "tax event" that results in the exchange
of the junior subordinated debentures for preferred securities or, in
certain limited circumstances, the redemption of the junior subordinated
debentures by Merry Land and the distribution of the resulting cash in
redemption of the preferred securities or a payment of additional amounts
to holders of the preferred securities. See "Description of the Preferred
Securities--Tax Event Exchange or Redemption."
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the indenture, Merry Land has the option to defer the payment of
interest on the junior subordinated debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to
each deferral so long as the deferral does not extend beyond the stated
maturity of the debentures. Merry Land's option to defer the payment of
interest on the junior subordinated debentures will cause the debentures to
have original issue discount.
Regardless of a holder's regular method of accounting, a holder will
recognize interest income (in the form of original issue discount) as it
accrues daily on an economic accrual basis instead of on the dates the
holder actually received the cash payments. The amount of original issue
discount that will be recognized in any quarter (other than during a period
in which Merry Land exercises its option to defer interest payments on the
junior subordinated debentures) will equal approximately the amount of
income that accrues on the junior subordinated debentures in that quarter
at the stated interest rate. A holder will include interest (in the form of
original issue discount) in the holder's gross income regardless of whether
the holder receives cash with respect to the period to which the income is
attributable. Thus, if Merry Land exercises the option to extend any
interest payment period, each holder will be required to include original
issue discount in gross income even though the holder will not receive any
cash payments from the trust during that period.
The application of the original issue discount rules also may cause
certain United States federal income tax consequences when the holder sells
the preferred securities. See " -- Sale of Preferred Securities."
<PAGE>
DEDUCTIBILITY OF INTEREST BY MERRY LAND
Interest accrued on the junior subordinated debentures will generally
be deductible by Merry Land for United States federal income tax purposes,
except to the extent construction period interest may be capitalized.
Merry Land has reviewed the following federal income tax provisions
in determining whether all or a portion of the interest or original issue
discount deductions on the junior subordinated debentures is deductible:
- Section 163(l) of the Internal Revenue Code disallows interest
deductions on certain convertible debt instruments. According to
its legislative history, this section does not apply where the
conversion price of the debt instrument is significantly higher
than the market price of the stock on the date of the debt
issuance. The junior subordinated debentures are issued with a
conversion price that is significantly higher than the market price
of our common shares on the date the junior subordinated debentures
are issued. Thus, Section 163(l) should not adversely affect our
interest or original issue discount deduction with respect to the
junior subordinated debentures.
- Section 279 of the Internal Revenue Code disallows interest
deductions on certain subordinated convertible debt. This section
does not apply to the junior subordinated debentures because:
- Merry Land will use the proceeds from the junior subordinated
debentures to repay bank revolving credit debt and other
obligations that are not subject to Section 279;
- Merry Land incurred the revolving credit debt and other
obligations to achieve certain business objectives (rather than
the avoidance of taxes); and
- at the time Merry Land incurred the revolving credit debt and
other obligations, Merry Land did not contemplate that it would
refinance the debt and other obligations with the proceeds from
the junior subordinated debentures.
A successful IRS challenge to the deductibility of interest paid or
accrued on the junior subordinated debentures could be a "tax event" that
results in the exchange of the junior subordinated debentures for preferred
securities or, in certain limited circumstances, the redemption of the
junior subordinated debentures by Merry Land and the distribution of the
resulting cash in redemption of the preferred securities (see "Redemption
of Preferred Securities for Junior Subordinated Debentures or Cash"), or a
payment of additional amounts to holders of the preferred securities.
Additionally, if the interest on the junior subordinated debentures is not
deductible, it could adversely affect Merry Land's ability to make payments
on the junior subordinated debentures.
REDEMPTION OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES OR CASH
Under some circumstances, the junior subordinated debentures may be
distributed to the holders of the preferred securities in exchange for
their preferred securities. Upon the distribution, a holder will receive
directly a proportional share of the junior subordinated debentures
previously held indirectly through the trust. Assuming the treatment of the
trust as a grantor trust is respected, a holder will not be taxed on the
distribution of the junior subordinated debentures. In that case, a
holder's holding period and aggregate tax basis in its junior subordinated
debentures will be equal to the holding period and aggregate tax basis in
the preferred securities before the distribution. If, however, the trust is
treated as an association taxable as a corporation, the distribution likely
would constitute a taxable event to the trust and holders of the preferred
securities.
Under certain circumstances, the junior subordinated debentures may be
redeemed by Merry Land for cash and the proceeds of such redemption
distributed to holders in redemption of their preferred securities. See
"Description of The Preferred Securities -- Tax Event Exchange or
Redemption"). Under current law, such a redemption would constitute a
taxable disposition of the redeemed preferred securities, and a holder
would recognize gain or loss in the same manner as if it sold such redeemed
preferred securities for cash. See " -- Sale of Preferred Securities."
SALE OF PREFERRED SECURITIES
A holder of preferred securities that sells preferred securities will
recognize gain or loss equal to the difference between the amount realized
on the sale of the preferred securities and the holder's adjusted tax basis
in the preferred securities sold. The tax basis of a preferred security
will be increased by the amount of any interest (in the form of original
issue discount) that is included in income, and will be decreased by the
amount of any payment Merry Land made on the junior subordinated
debentures. In general, the gain or loss will be a capital gain or loss and
will be a long-term capital gain or loss if the preferred securities have
been held for more than one year at the time of sale. Long-term capital
gain of an individual United States holder is subject to a maximum United
States federal income tax rate of 20% for capital assets held for more than
one year. Capital gain on the disposition of assets held for not more than
one year is taxed at the rates applicable for ordinary income (i.e., up to
39.6% for individuals for United States federal income tax purposes).
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying junior subordinated debentures (for example, if Merry Land
exercised its option to defer interest payments on the debentures). A
holder that disposes of its preferred securities before the record date for
the payment of distributions will not receive payment of distributions for
the period before the sale. The holder, however, will be required to
include accrued original issue discount on the junior subordinated
debentures through the date of the sale as ordinary income for United
States federal income tax purposes. This accrued but unpaid original issue
discount will increase the holder's adjusted tax basis in the preferred
securities. This increase in the adjusted tax basis in the preferred
securities will increase the amount of any capital loss or reduce the
amount of any capital gain that the holder may have otherwise realized on
the sale. In general, an individual U.S. taxpayer may use capital losses to
offset capital gains plus up to $3,000 ($1,500 for married individuals
filing separate returns) of ordinary income for United States federal
income tax purposes.
CONVERSION OF PREFERRED SECURITIES INTO COMMON SHARES
A holder of preferred securities may at any time elect to convert the
preferred securities into Merry Land's common shares. Upon exercising this
election, the holder will exchange the preferred securities that are
converted for a portion of the corresponding junior subordinated debentures
held by the trust, and the junior subordinated debentures will be converted
into common shares. Assuming the treatment of the trust as a grantor trust
is respected, a holder of preferred securities will not recognize income,
gain or loss upon the exchange of the preferred securities for the
corresponding amount of junior subordinated debentures, and then converted
into common shares. A holder of preferred securities will recognize gain,
however, upon the receipt of cash in lieu of a fractional common share
equal to the small amount of cash received less the holder's tax basis in
the fractional share. The holder's tax basis in the common shares received
upon conversion will be equal to such holder's tax basis in the preferred
securities delivered to the conversion agent for exchange, which will
include any accrued but unpaid original issue discount, less the basis
allocated to any fractional share for which cash is received. The holder's
holding period in the common shares received upon conversion begins on the
date the holder acquired the preferred securities.
ADJUSTMENT OF CONVERSION PRICE
A holder of preferred securities may at any time elect to convert the
preferred securities into Merry Land's common shares at an established
conversion ratio. This conversion ratio is subject to an adjustment in
certain events. See "Description of the Preferred Securities -- Conversion
Price Adjustments." Under some circumstances, an increase in the
conversion ratio (i.e., a reduction in the conversion price) for the junior
subordinated debentures will be treated as a deemed distribution from Merry
Land. The deemed distribution would be treated as dividend income to
holders of the preferred securities to the extent of Merry Land's current
or accumulated earnings and profits. The holders of the preferred
securities would be required to include this deemed distribution in gross
income but would not receive any cash. Dividend income is taxed at the
rates applicable for ordinary income (i.e., up to 39.6% for an individual
for United States federal income tax purposes). A holder's tax basis in the
preferred securities will be increased by the amount of the deemed
dividend.
NON-UNITED STATES HOLDERS
The taxation of non-United States holders is very complex. Non-United
States stockholders should consult their tax advisors regarding the tax
consequences of the receipt and exercise of the rights and the ownership,
disposition or conversion of preferred securities or junior subordinated
debentures.
INFORMATION REPORTING TO HOLDERS
Income on the preferred securities will be reported to non-corporate
holders on Form 1099-OID. These forms will be mailed to holders of record
of the preferred securities prior to January 31 following each calendar
year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, preferred securities
may be subject to a backup withholding tax of 31% if the holder:
- failed to provide its social security or taxpayer
identification number to its broker;
- provided its broker with an incorrect social security or tax
identification number;
- failed to provide its broker with a certified statement that
its social security or tax identification number is correct and
that it is not subject to backup withholding; or
- improperly reported interest and dividends on its tax return.
Any withheld amounts will generally be allowed as a credit against the
holder's United States federal income tax, provided the required
information is timely filed with the Internal Revenue Service.
POSSIBLE TAX LEGISLATION
Legislation has been introduced in the United States Congress in the
past that would, if enacted, deny an interest deduction to issuers of
instruments such as the junior subordinated debentures. The proposed
legislation has not been enacted as of the date of this Prospectus. There
can be no assurance, however, that similar legislation will not ultimately
be enacted into law, or that other developments will not occur after the
date hereof that would adversely affect the tax treatment of the junior
subordinated debentures and could be a "tax event" and result in the
exchange of the junior subordinated debentures for preferred securities or,
in certain circumstances, the redemption of the junior subordinated
debentures by Merry Land and the distribution of the resulting cash in
redemption of the preferred securities, or a payment of additional amounts
to holders of the preferred securities. See "Description of the Preferred
Securities -- Tax Event Exchange or Redemption."
The Clinton Administration has recommended legislative changes this
year that would defer the deduction for accrued stated interest and
original issue discount on convertible debt (such as the junior
subordinated debentures) until actual payment. This proposal, if enacted,
could apply to the junior subordinated debentures. This could be a "tax
event" and result in the exchange of the junior subordinated debentures for
preferred securities or the redemption of the junior subordinated
debentures by Merry Land and the distribution of the resulting cash in
redemption of the preferred securities (see " -- Redemption of Preferred
Securities For Junior Subordinated Debentures or Cash" above), or a payment
of additional amounts to holders of the preferred securities.
<PAGE>
ENGAGEMENT OF FINANCIAL ADVISOR
We engaged Wachovia Securities, Inc. to act as our exclusive financial
advisor with respect to this transaction. Under this engagement, Wachovia
Securities, Inc. assisted us in analyzing alternatives, helped us consider
various structures for the securities to be offered to our shareholders,
advised us on the timing and approach for this transaction, and assisted us
in executing this transaction. For these services, we have agreed to pay
Wachovia Securities, Inc. total fees of $100,000.
LEGAL MATTERS
Certain legal matters in connection with the offering will be passed
upon for us by Hull, Towill, Norman, Barrett & Salley, P.C. , Augusta,
Georgia. Legal matters in connection with the validity of the preferred
securities under Delaware law will be passed upon for the trust by Young
Conaway Stargett and Taylor LLP, special Delaware counsel to us and the
trust.
EXPERTS
The financial statements and schedule included in this Prospectus, to
the extent and for the periods indicated in their reports thereto, have
been audited by Arthur Andersen LLP, independent public accountants, and
are included herein in reliance upon the authority of said firm as experts
in auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act
and, in accordance therewith, we file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials
can be obtained by mail from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file
electronically with the Commission. In addition, reports, proxy statements
and other information concerning us can be inspected at the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form
S-11 (together with amendments and exhibits thereto, the "Registration
Statement") filed by the Registrants with the Commission under the
Securities Act. The Prospectus omits certain of the information contained
in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to the
Registrant and the securities offered hereby. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of
such document so filed. Each such statement is qualified in its entirety by
such reference.
<PAGE>
INDEX TO FINANCIAL INFORMATION
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
Historical Financial Statements from Form 10-Q For the Quarter Ended
June 30, 1999
Cover Page..................................................F-2
Consolidated Balance Sheets as of June 30, 1999
(Unaudited) and December 31, 1998...........................F-3
Consolidated Statements of Income for the Three and Six Months
ended June 30, 1999 and 1998 (Unaudited).................F-4
Consolidated Statement of Cash Flows for the Six Months ended
June 30, 1999 and 1998 (Unaudited).......................F-5
Notes to Consolidated Financial Statements..................F-6
Historical Financial Statements from Form 10-K For the Year Ended
December 31, 1998
Cover Page...................................................F-11
Report of Independent Public Accountants.....................F-12
Consolidated Balance Sheets as of December 31, 1998,
1997 and 1996................................................F-13
Consolidated Statements of Income for the Years
ended December 31, 1998, 1997, and 1996...................F-14
Consolidated Statements of Stockholders' Equity for the
Years ended December 31, 1998, 1997, and 1996.............F-15
Consolidated Statements of Cash Flows for the Years ended
December 31, 1998, 1997, and 1996.........................F-16
Notes to Consolidated Financial Statements...................F-17
Report of Independent Public Accountants on Schedule.........F-23
Schedule XI - Real Estate and Accumulated Depreciation
as of December 31, 1998...................................F-24
Pro Forma Financial Statements (Unaudited)
Consolidated Statements of Income for the Six Months
ended June 30, 1999.......................................F-26
Consolidated Statements of Income for the Year
Ended December 31, 1998.................................. F-27
Notes and Assumptions to Consolidated Statements of Income...F-28
Consolidated Balance Sheet as of June 30, 1999...............F-29
Notes and Assumptions to Consolidated Balance Sheet..........F-31
Properties Acquired From the Equity Residential Properties Trust
Limited Liability Companies.......................................F-32
Report of Independent Public Accountants.....................F-33
Combined Statements of the Excess of Revenues over Certain
Operating Expenses for the Years Ended December 31, 1996,
1997, and 1998 and the Six Months Ended June 30, 1999
(Unaudited)...............................................F-34
Notes to Combined Statements of Excess Revenues..............F-35
<PAGE>
MERRY LAND PROPERTIES, INC.
HISTORICAL FINANCIAL STATEMENTS FROM FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited
June 30, December 31,
1999 1998
--------- -----------
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land held for mining, development, and
investment $ 5,802,298 $ 7,255,130
Apartments 41,188,653 40,765,214
Commercial rental property 2,627,652 2,622,024
Furniture and equipment 1,890,555 1,836,144
Development in progress 2,483,516 -
----------- -----------
Total cost 53,992,674 52,478,512
Accumulated depreciation and depletion (12,184,117) (11,496,904)
----------- -----------
41,808,557 40,981,608
CASH AND CASH EQUIVALENTS 4,065,482 3,995,365
RESTRICTED CASH 360,367 -
OTHER ASSETS
Notes receivable 1,222,686 1,342,246
Other receivable 265,200 1,434,512
Deferred tax asset 5,649,625 6,909,857
Deferred loan costs 574,819 -
Other 142,659 79,620
----------- -----------
7,854,989 9,766,235
----------- -----------
TOTAL ASSETS $54,089,395 $54,743,208
=========== ===========
NOTES PAYABLE
Line of credit $ - $ -
Senior debt - 18,317,429
Subordinated debt - 20,000,000
Mortgage loans 41,241,000 -
---------- -----------
41,241,000 38,317,429
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued interest - 444,553
Accrued income taxes (478,183) 123,846
Accrued property taxes 237,213 309,936
Accrued dividends payable - 81,111
Deferred revenue 182,373 771,627
Other 703,571 477,967
---------- -----------
644,974 2,209,040
PREFERRED STOCK - 5,000,000
STOCKHOLDERS' EQUITY
Common stock, at $1 stated value 2,595,300 2,597,633
Capital surplus 10,277,229 9,121,985
Unamortized compensation (1,776,848) (1,854,291)
Cumulative undistributed net earnings (deficit) 1,107,740 (648,588)
----------- -----------
12,203,421 9,216,739
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $54,089,395 $54,743,208
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended June 30, Six Months ended June 30,
--------------------------- -------------------------
(Accounting (Accounting
Predecessor) Predecessor)
INCOME 1999 1998 1999 1998
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Rental income $2,062,043 $2,021,545 $4,070,347 $4,006,277
Royalty income 526,047 469,692 938,830 860,581
Interest income 76,410 27,711 144,974 56,073
Management fees 231,844 - 432,606 -
Development fees 428,766 - 1,014,516 -
Long term loss - - (29,512) -
---------- ---------- ---------- ----------
3,325,110 2,518,948 6,571,761 4,922,931
EXPENSES
Rental expense 812,660 763,288 1,577,353 1,519,236
Interest expense 843,299 - 1,684,328 -
Depreciation 359,776 390,620 718,144 781,240
General and
administrative expense 652,945 30,120 1,171,347 60,240
--------- ---------- ---------- ----------
2,668,680 1,184,028 5,151,172 2,360,716
INCOME BEFORE TAXES AND
EXTRAORDINARY ITEM 656,430 1,334,920 1,420,589 2,562,215
Income taxes 66,512 - 386,230 -
--------- ---------- ---------- ----------
INCOME BEFORE 589,918 1,334,920 1,034,359 2,562,215
EXTRAORDINARY ITEM
Extraordinary gain -
discount on repayment
of debt, net of income
tax provision
of $441,746 721,969 - 721,969 -
--------- ---------- ---------- ----------
NET INCOME 1,311,887 1,334,920 1,756,328 2,562,215
Discount on redemption
of preferred stock 1,163,715 - 1,163,715 -
NET INCOME - COMMON $2,475,602 $1,334,920 $2,920,043 $2,562,215
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES
Basic 2,181,070 2,136,900 2,181,070 2,067,100
Diluted 2,264,523 2,207,850 2,246,043 2,103,650
EARNINGS PER COMMON
SHARE
Basic $ 1.14 $ .62 $ 1.34 $ 1.24
========== ========== ========== ==========
Diluted $ 1.09 $ .60 $ 1.30 $ 1.22
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
(Accounting
CASH FLOWS FROM OPERATING ACTIVITIES Predecessor)
Net income $ 1,756,328 $ 2,562,215
Adjustments to reconcile net income to net
cash provided by
by operating activities:
Discount on repayment of debt, net of taxes (721,969) -
Depreciation expense 718,144 781,240
Deferred tax expense 818,486 -
Decrease in property taxes payable (72,723) (122,313)
Decrease in income taxes payable (602,029) -
Decrease in deferred revenue (609,954) 220,464
Decrease in accrued interest (444,553) -
Other 853,157 (10,858)
---------- -----------
Net cash provided by operating activities 1,694,887 3,430,748
CASH FLOWS FROM INVESTING ACTIVITIES
Payments received on notes receivable 119,560 30,468
Purchase of real property (826,342) -
Investment in real estate assets (718,751) (680,398)
Other 124,581 -
---------- -----------
Net cash used in investing activities (1,300,952) (649,930)
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions from Merry Land &
Investment Co., Inc. - 680,398
Distributions to Merry Land &
Investment Co., Inc. - (3,461,216)
Repayment of senior debt (18,317,429) -
Repayment of subordinated debt (18,836,285) -
Redemption of preferred stock (3,836,285) -
Proceeds from mortgage loans 41,241,000 -
Loan costs (574,819) -
----------- -----------
Net cash used in financing activities (323,818) (2,780,818)
NET INCREASE IN CASH 70,117 -
CASH AT BEGINNING OF PERIOD 3,995,365 -
----------- -----------
CASH AT END OF PERIOD $4,065,482 $ -
Interest paid $1,935,548 $ -
Income taxes paid $ 169,773 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 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, the common stock of Merry Land Properties was spun off to the common
stockholders 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.
NOTE 2. BASIS OF PRESENTATION
The financial statements for Merry Land Properties include its wholly-
owned subsidiaries and five limited liability companies. These limited
liability companies are also wholly-owned by Merry Land Properties and its
subsidiaries and were formed in connection with the $41,241,000 mortgage
loans financing in June, 1999. Each limited liability company is a separate
legal entity and its assets and liabilities are neither available to pay
the debts of Merry Land Properties nor constitute obligations of Merry Land
Properties.
The financial statements for periods prior to the spin off include
only those assets and liabilities contributed by Merry Land & Investment
Company. 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 stipulate
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, comparisons of periods subsequent to the spin
off with periods prior to the spin off may be difficult and misleading.
The consolidated financial statements for the six month periods ended
June 30, 1999 and June 30, 1998, reflect all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim period.
NOTE 3. 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>
Six months ending
---------------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Weighted average shares outstanding-basic 2,181,070 2,067,100
Dilutive potential common shares 64,973 36,550
Weighted average shares outstanding-diluted 2,246,043 2,103,650
</TABLE>
NOTE 4. NOTES RECEIVABLE
At June 30, 1999 and December 31, 1998, notes receivable consisted of
the following:
<TABLE>
<CAPTION>
Note Balances at
-----------------
Original June 30, December 31,
Note Rate Due Amount 1999 1998
- ---- ---- --- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Augusta Partners 10.00% 10/99 695,000 - 573,566
Brothersville 6.00% 11/12 675,000 546,464 636,512
Brothersville 10.00% 9/02 327,600 44,099 74,717
New Zion 7.00% 11/12 60,000 56,208 57,451
ESOP LIBOR + 2.5% 3/04 575,915 575,915 -
---------- --------- ----------
$2,333,515 $1,222,686 $1,342,246
</TABLE>
During February, the company received $542,734 from Augusta Partners in
total satisfaction of its note receivable, generating a loss of $29,512.
During the first quarter of 1999, the company loaned $575,915 to the Merry
Land Employee Stock Ownership Plan. The loan bears interest at LIBOR plus
250 basis points and matures on March 31, 2004. The loan is secured by
127,771 shares of the company's common stock which were purchased by the
ESOP.
NOTE 5. DEBT
At June 30, 1999, debt consisted of the following:
<TABLE>
<CAPTION>
Note Balances at
-------------------------
June 30, December 30,
1999 1999
Maturity Interest ------- -----------
DEBT date rate Balance Balance
- ---- -------- -------- ------- -----------
<S> <C> <C> <C> <C>
Line of credit June 24, 2001 LIBOR + 1.25% $ - $ -
Senior debt October 15, 1999 LIBOR + 2.5% - 18,317,429
Subordinated debt October 15, 2013 8% - 20,000,000
Mortgage Loan -
Greentree,L.L.C. July 1, 2009 7.73% 6,719,000 -
Mortgage Loan -
Marsh Cove,L.L.C. July 1, 2009 7.73% 8,160,000 -
Mortgage Loan -
Quarterdeck,L.L.C. July 1, 2009 7.73% 9,964,000 -
Mortgage Loan -
Waters Edge, L.L.C. July 1, 2009 7.73% 7,198,000 -
Mortgage Loan - West
Wind Landing, L.L.C. July 1, 2009 7.73% 9,200,000 -
----------- -----------
Total $41,241,000 $38,317,429
</TABLE>
On June 24, 1999, the company closed $41,241,000 in mortgage
financing. The five nonrecourse loans are secured by five apartment
communities in Charleston and Savannah. At the time of the closing, the
company transferred the apartment communities to five newly created limited
liability companies, which are wholly-owned by the company and its
subsidiaries. The proceeds of the financing were used to retire all of the
company's debt and preferred stock obligations to Equity Residential
Properties Trust, including the Senior debt and Subordinated debt.
NOTE 6. INCOME TAXES
The company is a taxable "C" corporation. It is assumed that the
accounting predecessor distributed sufficient taxable income to
stockholders 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 for the six months ended
June 30, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Current federal tax $(364,039)
Current state tax (68,218)
Deferred federal tax 689,115
Deferred state tax 129,372
Income tax expense $ 386,230
</TABLE>
The reconciliation of income tax computed at the U.S. federal
statutory rate to income tax expense for the six months ended June 30, 1999
is as follows:
<TABLE>
<CAPTION>
% of
Pretax
Amount Income
------ ------
<S> <C> <C>
Income tax expense at statutory rate $ 483,000 34.0%
Increases (reductions) in taxes resulting from:
State and local income taxes, net of federal income
tax benefit 56,255 4.0%
Dividends not deductible 73,390 5.2%
Non-taxable clay lease income (226,415) (16.0)%
--------- -----
$ 386,230 27.2%
</TABLE>
<PAGE>
MERRY LAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7. 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
Three months ending APARTMENTS COMMERCIAL LAND SERVICES CORPORATE CONSOLIDATED
---------- ---------- ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1999
Real estate rental $1,991,985 $ 46,939 $ 23,119 $ - $ - $ 2,062,043
Real estate expense 710,660 74,989 27,011 - - 812,660
Depreciation and
amortization 276,451 9,052 1,406 - 72,867 359,776
Income from real ---------- ---------- --------- -------- --------- ------------
estate 1,004,874 (37,102) (5,298) - (72,867) 889,607
Other income - - 526,047 660,610 76,410 1,263,067
Segment income 1,004,874 (37,102) 520,749 660,610 3,543 2,152,674
Interest expense - - - - (843,299) (843,299)
General and
administrative - - - (345,229) (307,716) (652,945)
Income before taxes and
extraordinary item 1,004,874 (37,102) 520,749 315,381 (1,147,472) 656,430
---------- ---------- --------- -------- --------- ------------
Income tax - - - - (66,512) (66,512)
Income before
extraordinary item $1,004,874 $ (37,102) $ 520,749 $315,381$(1,213,984) $ 589,918
---------- --------- --------- -------- --------- ------------
Extraordinary item - - - - 721,969 721,969
Net income $1,004,874 $ (37,102) $ 520,749 $315,381 $ (492,015) $ 1,311,887
========== ========= ========= ======== ========== ===========
Capital investments $ 207,356 $ - $ 162,859 $ - $ 232,799 $ 603,014
Total real estate
assets $30,534,847 $2,307,014 $8,285,814 $ - $ 680,882 $41,808,557
THIRD
Accounting Predecessor PARTY
Three months ending APARTMENTS COMMERCIAL LAND SERVICES CORPORATE CONSOLIDATED
June 30, 1998 ---------- ---------- ---- -------- --------- ------------
Real estate rental
revenue $ 1,899,167 $ 105,283 $ 17,095 $ - $ - $ 2,021,545
Real estate expense 689,723 57,433 16,132 - - 763,288
Depreciation and
amortization 297,007 93,613 - - - 390,620
----------- ---------- -------- -------- --------- -----------
Income from real
estate 912,437 (45,763) 963 - - 867,637
Other income - - 469,692 - 27,711 497,403
----------- ---------- -------- -------- --------- -----------
Segment income 912,437 (45,763) 470,655 - 27,711 1,365,040
Interest expense - - - - - -
Insurance expense - - - - - -
General and
administrative - - - - (30,120) (30,120)
---------- ---------- -------- -------- --------- -----------
Income before taxes 912,437 (45,763) 470,655 - (2,409) 1,334,920
---------- ---------- -------- -------- --------- -----------
Income tax - - - - - -
Net income $ 912,437 $ (45,763) $ 470,655 $ - $ (2,409) $ 1,334,920
========== ========== ========= ======== ========= ===========
Capital investments $ 81,252 $ 48,046 $ 94,566 $ - $ 91,028 $ 314,892
Total real estate
assets $31,025,122 $4,032,528 $6,560,889 $ - $ 76,918 $41,695,457
Third
Party
Six months ending APARTMENTS COMMERCIAL LAND SERVICES Corporate Consolidated
June 30, 1999 ---------- ---------- ---- -------- --------- ------------
Real estate rental
revenue $ 3,938,971 $ 84,967 $ 46,409 $ - $ - $ 4,070,347
Real estate expense 1,397,337 126,763 53,253 - - 1,577,353
Depreciation and
amortization 552,901 18,104 1,406 - 145,733 718,144
----------- ---------- -------- -------- --------- -----------
Income from real
estate 1,988,733 (59,900) (8,250) - (145,733) 1,774,850
Other income - - 938,830 1,447,122 115,462 2,501,414
----------- ---------- -------- -------- --------- -----------
Segment income 1,988,733 (59,900) 930,580 1,447,122 (30,271) 4,276,264
Interest expense - - - - (1,684,328) (1,684,328)
General/and
administrative - - - (466,121) (705,226) (1,171,347)
----------- ---------- -------- -------- --------- -----------
Income before taxes
and extraordinary
items 1,988,733 (59,900) 930,580 981,001 (2,419,825) 1,420,589
=========== ========== ======== ======== ========= ===========
Income tax - - - - (386,230) (386,230)
Income before
extraordinary item $ 1,988,733 $ (59,900) $930,580 $981,001$(2,806,055) $ 1,034,359
----------- ---------- -------- -------- ---------- -----------
Extraordinary item - - - - 721,969 721,969
Net income $ 1,988,733 $ (59,900) $930,580 $981,001$(2,084,086) $ 1,756,328
=========== ========== ======== ======== ========== ===========
Capital investments $ 267,726 $ - $208,838 $ - $ 242,187 $ 718,751
Total real estate
assets $30,534,847 $2,307,014 $8,285,814 $ - $ 680,882 $41,808,557
Third
Accounting Predecessor Party
Six months ending APARTMENTS COMMERCIAL LAND SERVICES Corporate Consolidated
June 30, 1998 ---------- ---------- ---- -------- --------- ------------
Real estate
rental revenue $ 3,761,464 $ 208,378 $ 36,435 $ - $ - $ 4,006,277
Real estate expense 1,353,260 125,097 40,879 - - 1,519,236
Depreciation and
amortization 594,012 187,228 - - - 781,240
----------- ---------- -------- -------- ---------- -----------
Income from real
estate 1,814,192 (103,947) (4,444) - - 1,705,801
Other income - - 860,581 - 56,073 916,654
----------- ---------- -------- -------- ---------- -----------
Segment income 1,814,192 (103,947) 856,137 - 56,073 2,622,455
Interest expense - - - - - -
Insurance expense - - - - -
General and
administrative - - - - (60,240) (60,240)
Income before taxes 1,814,192 (103,947) 856,137 - (4,167) 2,562,215
----------- ---------- -------- -------- ---------- -----------
Income tax - - - - - -
Net income $ 1,814,192 $ (103,947) $ 856,137 $ - $ (4,167) $ 2,562,215
=========== ========== ========= ======== ========== ===========
Capital investments $ 171,258 $ 202,521 $ 169,528 $ - $ 137,091 $ 680,398
Total real estate
assets $31,025,122 $4,032,528 $6,560,889 $ - $ 876,918 $42,495,457
</TABLE>
<PAGE>
MERRY LAND PROPERTIES, INC.
HISTORICAL FINANCIAL STATEMENTS FROM FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
<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 present 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.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
Arthur Andersen LLP
Atlanta, Georgia
January 27, 1999
<PAGE>
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)
----------- -----------
40,981,608 42,596,299
CASH AND CASH EQIVALENTS 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 -
----------- -----------
9,766,235 1,411,727
----------- -----------
TOTAL ASSETS $54,743,208 $44,008,026
=========== ===========
NOTES PAYABLE
Senior debt $18,317,429 $ -
Subordinated debt 20,000,000 -
----------- -----------
38,317,429 -
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 -
STOCKHOLDERS' 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 2 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 INCOME
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------
1998 1997 1996
---- ---- ----
INCOME
<S> <C> <C> <C>
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 2 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>
Common Stock Cumulative Total
Investment ------------------- Capital Unamortized Undistributed Stockholders'
By Parent Shares Amount Surplus Compensation Net Earnings (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-Note 1 3,706,033 - - - - - 3,706,033
Net distributions
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 spin off - - - - - (648,588) (648,588)
----------- ---------- ---------- ---------- ----------- --------- -----------
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 2 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
---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Net income $ 3,057,445 $ 4,608,987 $ 3,584,254
Adjustments to reconcile 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 Company, Inc. 1,554,584 2,546,187 407,147
Other capital contributions 2,400,000 - -
Distributions to Merry Land &
Investment Company, 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 - - -
$ 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 contribution $ 5,000,000 $ - $ -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Specific reference is made in Note 2 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
NOTE 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, 4,800 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 stockholders 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.
NOTE 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 stipulate 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, comparisons of periods subsequent to the spin off with periods
prior to the spin off may be difficult and misleading.
<PAGE>
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company
and its wholly-owned subsidiaries. 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.
<PAGE>
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.
NOTE 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% 09/02 327,600 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>
NOTE 5. DEBT
As of 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. Borrowings 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%.
<PAGE>
(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 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 10.50%
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.
NOTE 6. MANAGEMENT INCENTIVE PLAN
In October 1998, the stockholders 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.
NOTE 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.
NOTE 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 10.50%
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>
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.
NOTE 9. COMMON DIVIDENDS
The company did not pay any dividends to common stockholders in 1998.
<PAGE>
NOTE 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 stockholders 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:
<TABLE>
<CAPTION>
Jan 1, 1998 to
Dec 31, 1998
--------------
<S> <C>
Current federal tax $104,271
Current state tax 19,575
Deferred federal tax (493,749)
Deferred state tax (92,694)
---------
$(462,597)
</TABLE>
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:
<TABLE>
<CAPTION>
Deferred tax asset: DEC. 31, 1998
- ------------------ -------------
<S> <C>
Excess of tax basis of assets over book basis of assets $6,956,003
Other (46,146)
Total deferred tax asset $6,909,857
</TABLE>
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.
NOTE 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.
<PAGE>
NOTE 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, APARTMENTS COMMERCIAL LAND SERVICES CORPORATE CONSOLIDATED
1998 ---------- ---------- ---- -------- --------- ------------
<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>
To Merry Land Properties, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in this Registration Statement
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>
ITEM 14 - SCHEDULE XI -- REAL ESTATE AND ACCUMULATED DEPRECIATION FOR
THE YEAR
ENDING DECEMBER 31, 1998:
<TABLE>
<CAPTION>
Cost Capitalized
Subsequent Gross Amount at Which
Initial Cost to Company to Acquisition Carried at December 31, 1998
----------------------- ---------------- ----------------------------
Buildings & Carrying Buildings & Accumulated Date of Date Deprec.
Residential Land Improvements Improvements Cost Land Improvements Total(a) Depreciation Construction Acquired Life
- ----------- ---- ------------ ------------ ---- ---- ------------ -------- ------------ ------------ -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 1983 1986 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
Landing 960,000 5,597,500 791,720 - 960,000 6,389,220 7,349,220 1,187,441 1985 1993 5-50 yr.
--------- ----------- ----------- ------- -------- ------------ ---------- -----------
Total
Apartments 2,642,786 32,954,830 5,167,598 - 2,682,539 38,082,675 40,765,214 10,100,904
COMMERCIAL 356,000 1,612,486 653,538 - 370,920 2,251,104 2,622,024 302,535 various various 5-50 yr.
- ----------
LAND 5,716,070 -- 1,539,060 - 7,255,130 -- 7,255,130 29,526 various -- 5-50 yr.
- ---- ---------- ----------- ---------- ------- --------- ----------- ---------- -----------
Total $8,714,856 $34,567,316 $7,360,196 $ -$10,308,589 $40,333,779$50,642,368 $10,432,965
========== =========== ========== ====== ========== =========== ========== ===========
</TABLE>
Note: (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>
Balance at beginning of
period $50,603,514 $49,677,413 $48,248,064 $10,264,894 $ 8,981,301 $7,721,600
Additions--acquisition
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>
MERRY LAND PROPERTIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
The unaudited consolidated statements of income are presented as if
Merry Land Properties, Inc. ("the Company") acquired Hammocks at Long Point
Apartments, Huntington Apartments, Magnolia Villas Apartments, Summit Place
Apartments, Windsor Place Apartments and Woodcrest Apartments ("the
Properties") as of the beginning of each period presented. In management's
opinion, all adjustments necessary to present fairly the effects of the
property acquisitions and securities issuances have been made.
The unaudited pro forma consolidated statements of income are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired the Properties as of the
beginning of each period presented, nor do they purport to represent the
results of operations for future periods.
<PAGE>
MERRY LAND PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Combined Results Adjustments--
Company of Acquired Acquisition of Company
Historical Properties Properties Pro Forma
---------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
INCOME:
Rental income $4,070,347 $4,820,162(a) $ 8,890,509
Royalty income 938,830 0 938,830
Interest income 144,974 0 $(36,605)(f) 108,369
Management income 432,606 0 (192,807)(g) 239,799
Development fees 1,014,516 0 0 1,014,516
Long term loss (29,512) 0 0 (29,512)
---------- ---------- --------- -----------
6,571,761 4,820,162 (229,412) 11,162,511
---------- ---------- --------- -----------
EXPENSES:
Rental expense 1,577,353 1,665,487(a) 0 3,242,840
Interest expense 1,684,328 0 2,022,460(c) 3,754,118
47,330(d)
Depreciation 718,144 0 570,593(b) 1,288,737
Amortization 0 0 13,142(e) 13,142
General and administrative
expenses 1,171,347 0 0 1,171,347
---------- ---------- --------- -----------
5,151,172 1,665,487 2,653,525 9,470,184
---------- ---------- --------- -----------
INCOME BEFORE MINORITY
INTEREST, TAXES, AND
EXTRAORDINARY ITEM 1,420,589 3,154,675 (2,882,937) 1,692,327
INCOME TAX PROVISION 386,230 0 103,260(h) 489,490
---------- ---------- ---------- -----------
INCOME BEFORE
EXTRAORDINARY ITEM 1,034,359 3,154,675 (2,986,197) 1,202,837
EXTRAORDINARY GAIN--DISCOUNT
ON REPAYMENT OF DEBT, net of
income tax provision of
$441,746 721,969 0 0 721,969
---------- ---------- ---------- -----------
NET INCOME 1,756,328 3,154,675 (2,986,197) 1,924,806
DISCOUNT ON REDEMPTION OF
PREFERRED STOCK 1,163,715 0 0 1,163,715
---------- ---------- ---------- -----------
NET INCOME--COMMON $2,920,043 $3,154,675 $(2,986,197) $ 3,088,521
========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES:
Basic 2,181,070 2,181,070
========= =========
Diluted 2,264,523 2,264,523
========= =========
EARNINGS PER SHARE:
Basic $ 1.34 $ 1.42
========== ===========
Diluted $ 1.30 $ 1.36
========== ===========
</TABLE>
<PAGE>
MERRY LAND PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Combined Results Adjustments--
Company of Acquired Acquisition Company
Historical Properties Properties Pro Forma
---------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
INCOME:
Rental income $ 8,120,569 $9,121,974(a) $17,242,543
Royalty income 1,693,489 0 1,693,489
Interest income 136,644 0 $ (73,211)(f) 63,433
Management income 148,958 0 (75,088)(g) 73,870
Development fees 515,016 0 0 515,016
----------- ---------- ---------- -----------
10,614,676 9,121,974 (148,299) 19,588,351
EXPENSES:
Rental expense 3,449,045 3,485,783(a) 6,934,828
Interest expense 694,462 0 4,044,920(c) 4,841,307
101,925(d)
Depreciation 1,556,457 0 1,141,187(b) 2,697,644
Amortization 0 0 26,283(e) 26,283
Insurance 42,066 0 0 42,066
General and
administrative expenses 611,335 0 0 611,335
Impairment charge 1,666,463 0 0 1,666,463
----------- ---------- ---------- -----------
8,019,828 3,485,783 5,314,315 16,819,926
----------- ---------- ---------- -----------
INCOME BEFORE TAXES 2,594,848 5,636,191 (5,462,614) 2,768,425
INCOME TAX BENEFIT
(PROVISION) 462,597 0 (65,959)(h) 396,638
----------- ---------- ---------- -----------
NET INCOME $ 3,057,445 $5,636,191 $(5,528,573) $ 3,165,063
WEIGHTED AVERAGE
COMMON SHARES:
Basic 2,113,393 2,113,393
=========== ===========
Diluted 2,129,479 2,129,479
=========== ===========
EARNINGS PER SHARE:
Basic $ 1.45 $ 1.50
=========== ===========
Diluted $ 1.44 $ 1.49
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
MERRY LAND PROPERTIES, INC.
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF INCOME
(a)Reflects rental revenue, other property revenues, and property
operating and maintenance expenses (exclusive of depreciation expense)
for the Properties. All of the Properties were operational for both
periods presented.
(b)Reflects depreciation expense for the Properties during the periods
presented based on the depreciable lives used by the Company for similar
Properties.
(c)Reflects interest expense during the periods presented associated
with the mortgage debt issued to fund the acquisitions of the
Properties. The weighted average interest rate for the mortgages was
7.98% for both periods presented.
(d)Reflects interest expense during the periods presented associated
with borrowings under the Company's line of credit facility which was
utilized to acquire the Properties. The Company's borrowings bear
interest at LIBOR plus 1.25%. The weighted average rates used for the
periods ended December 31, 1998 and June 30, 1999 were 6.80% and 6.31%,
respectively.
(e)Reflects the amortization of the deferred loan costs associated with
the acquisitions of the Properties based on the lives of the loans.
(f)Reflects the reduction in interest income during the periods
presented associated with the cash used to fund the acquisitions of the
Properties. The weighted average interest rate was 5% for both periods.
(g)Reflects the reduction in management income during the periods
presented associated with the management fees earned relating to the
Properties acquired.
(h)Reflects the income tax impact of operations of the Properties
acquired and other pro forma adjustments computed at an estimated
effective rate of 38%.
<PAGE>
MERRY LAND PROPERTIES, INC.
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
The unaudited pro forma consolidated balance sheet is presented as if
all of the acquisitions of the Properties had been consummated as of June
30, 1999.
The unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual position would have been at June 30, 1999,
nor does it purport to represent the future financial position of the
company.
<PAGE>
MERRY LAND PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments--
Company Acquisition Company
Historical of Properties Pro Forma
---------- ------------- ---------
<S> <C> <C> <C>
ASSETS:
Real estate assets, at cost:
Land held for mining,
development, and sale $ 5,802,298 $ 5,802,298
Apartment 41,188,653 $53,528,659(a) 94,717,312
Commercial rental property 2,627,652 0 2,627,652
Furniture and equipment 1,890,555 0 1,890,555
Development in progress 2,483,516 0 2,483,516
------------ ----------- -----------
Total cost 53,992,674 53,528,659(a) 107,521,333
Accumulated depreciation and
depletion (12,184,117) 0 (12,184,117)
------------ ----------- -----------
41,808,557 53,528,659(a) 95,337,216
------------ ----------- -----------
CASH AND CASH EQUIVALENTS 4,065,482 (2,283,572)(a) 1,781,910
RESTRICTED CASH 360,367 819,358(a) 1,179,725
OTHER ASSETS:
Notes receivable 1,222,686 0 1,222,686
Other receivables 265,200 0 265,200
Deferred tax asset 5,649,625 0 5,649,625
Deferred loan costs 574,819 262,833(a) 837,652
Other 142,659 158,028(a) 300,687
------------ ----------- -----------
7,854,989 420,861 8,275,850
Total assets
$54,089,395 $52,485,306 $106,574,701
============ =========== ============
NOTES PAYABLE:
Senior debt $ 0 $ 0 $ 0
Line of credit 0 1,500,000(a) 1,500,000
Subordinated debt 0 0 0
Mortgage debt 41,241,000 50,683,000(a) 91,924,000
----------- ----------- ------------
41,241,000 52,183,000 93,424,000
----------- ----------- ------------
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES:
Accrued interest 0 0 0
Accrued income taxes (478,183) 0 (478,183)
Accrued property taxes 237,213 258,079(a) 495,292
Accrued dividends payable 0 0 0
Deferred revenue 182,373 0 182,373
703,571 44,227(a) 747,798
----------- ----------- ------------
644,974 302,306 947,280
STOCKHOLDERS' EQUITY:
Common stock, at $1 stated
value, 2,597,633 shares issued
and outstanding 2,595,300 0 2,595,300
Capital surplus 10,277,229 0 10,277,229
Unamortized compensation (1,776,848) 0 (1,776,848)
Cumulative undistributed net
earnings 1,107,740 0 1,107,740
----------- ----------- ------------
12,203,421 0 12,203,421
----------- ----------- ------------
Total liabilities and
stockholders' equity $54,089,395 $52,485,306 $106,574,701
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
MERRY LAND PROPERTIES, INC.
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(a) Reflects the acquisitions of the Properties, which took place after
June 30, 1999, the related application of the earnest money deposits
to the purchase price, issuance of mortgage debt, borrowings under the
credit facility and the assumption of security deposits, accrued
property taxes, and other liabilities.
<PAGE>
COMBINED STATEMENTS OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merry Land Properties, Inc.:
We have audited the accompanying combined statements of excess of
revenues over specific operating expenses of the PROPERTIES ACQUIRED FROM
THE EQUITY RESIDENTIAL PROPERTIES TRUST LIMITED LIABILITY COMPANIES
for the
years ended December 31, 1996, 1997, and 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 statements of excess of
revenues over specific operating expenses are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined statements of excess
of revenues over specific operating expenses. 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.
As described in Note 2, the financial statements exclude certain
expenses that would not be comparable with those resulting from the
operations of the property after acquisition by Merry Land Properties, Inc.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission and are not intended to be a complete presentation of the
properties' revenues and expenses.
In our opinion, the combined statements of excess of revenues over
specific operating expenses referred to above present fairly, in all
material respects, the excess of revenues over specific operating expenses
(exclusive of expenses described in Note 2) of the Properties Acquired from
the Equity Residential Properties Trust Limited Liability Companies for the
years ended December 31, 1996, 1997, and 1998 in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
Arthur Andersen LLP
Atlanta, Georgia
August 27, 1999
<PAGE>
COMBINED STATEMENTS OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
1996 1997 1998 1999
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Rents (Note 1) $5,371,850 $6,417,773 $8,670,730 $4,570,227
Other income 297,801 415,909 451,244 249,935
---------- ---------- ---------- ----------
Total revenues 5,669,651 6,833,682 9,121,974 4,820,162
SPECIFIC OPERATING EXPENSES
(Note 2):
Operating 1,967,490 2,288,552 2,591,636 1,196,759
General and administrative 122,223 208,931 232,526 98,972
Real property taxes 417,432 440,204 661,621 369,756
---------- ---------- ---------- ----------
Total specific
operating expenses 2,507,145 2,937,687 3,485,783 1,665,487
EXCESS OF REVENUES OVER
SPECIFIC OPERATING EXPENSES $3,162,506 $3,895,995 $5,636,191 $3,154,675
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO COMBINED STATEMENTS OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF TRANSACTION
In six separate transactions on August 23, 1999, Merry Land
Properties, Inc. and a wholly owned subsidiary (collectively, the
"Company") acquired all of the membership interests in six limited
liability companies, each of which own one of the acquired apartment
communities. Each of the six acquired communities had been owned by one of
six Delaware limited liability companies whose members were the Company and
ERP Operating Partnership, a subsidiary of Equity Residential Properties
Trust. ERP Operating Partnership held substantially all of the capital
accounts of each limited liability company, having contributed the
apartment communities to the limited liability companies. The Company held
a 50% profits interest, after payment of a preferred return to ERP
Operating Partnership, in each Delaware limited liability company. The
Company also had an option to purchase the Delaware limited liability
company interests owned by ERP Operating Partnership. The acquisition cost
of the properties listed below for each property represents the option
price paid directly or indirectly to ERP Operating Partnership for indirect
ownership interests in the properties.
DESCRIPTION OF PROPERTIES
Below are descriptions of the properties acquired:
<TABLE>
<CAPTION>
Date Acquisition
Name of Apartments Market Location Units Built Cost
- ------------------ --------------- ----- ----- -----------
<S> <C> <C> <C> <C>
Hammocks at Long Point Savannah, Georgia 308 1997 $20,621,789
Huntington Savannah, Georgia 147 1986 5,752,204
Magnolia Villa Savannah, Georgia 144 1986 5,001,066
Summit Place Charleston, South Carolina 226 1985 6,939,825
Windsor Place Charleston, South Carolina 224 1984 9,753,695
Woodcrest Augusta, Georgia 248 1982 5,991,757
</TABLE>
RENTAL INCOME
Rents from leases are accounted for ratably over the term of each
lease, which is generally for a period of 12 months or less.
2. BASIS OF ACCOUNTING
The accompanying combined statements of excess of revenues over
specific operating expenses are presented on the accrual basis of
accounting. The statements have been prepared in accordance with the
applicable rules and regulations of the Securities and Exchange Commission
for real estate properties acquired. Accordingly, the statements exclude
certain historical expenses not comparable to the operations of the
properties after acquisition by the Company, such as depreciation,
interest, and management fees.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate (other than the Commission Registration
Fee and the National Association of Securities Dealers, Inc. (the "NASD"
Filing Fee)) of the fees and expenses, all of which are payable by the
company, in connection with the registration and sale of the securities
being registered hereunder:
<TABLE>
<CAPTION>
<S> <C>
Commission Registration Fee...................
OTC Bulletin Board............................
Initial Trustees' Fees........................
Blue Sky Fees and Expenses....................
Legal Fees and Expenses.......................
Wachovia Securities, Inc. Fees................ 100,000
Accounting Fees and Expenses.................. 10,000
Printing Expenses............................. 30,000
Miscellaneous.................................
Total
</TABLE>
ITEM 32. SALES TO SPECIAL PARTIES
None.
ITEM 33. 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, approximately 4,800 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 stockholders of Merry Land & Investment Company, Inc.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The company provides officers and directors liability insurance
coverage. In addition, the Georgia Business Corporation Code ("GBCC")
permits a Georgia corporation to include in its articles of incorporation
and Merry Land's articles contain a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money
damages except for liability resulting from (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 for unlawful distributions
to stockholders when the director did not prudently perform his duties in
good faith in the best interests of the corporation; or (d) any
transaction, whether or not involving action in the director's official
capacity, from which the directors derived a personal benefit that is
determined by the corporation (or, if necessary, by the courts) to be
improper. Pursuant to Merry Land's Articles, Merry Land shall indemnify
its directors and officers, whether serving Merry Land or at its request
any other entity, to the full extent required or permitted by the GBCC now
if force, including the advance of expenses to the full extent permitted by
law. This indemnification and advancement of expenses shall continue to a
person who has ceased to be a director or officer, unless otherwise
provided when a director's or officer's term is terminated.
<PAGE>
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED
Not Applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements are filed as a part of the
registration statement in the prospectus:
Historical Financial Statements from Form 10-Q for the Quarter Ended
June 30, 1999
Consolidated Balance Sheets as of June 30, 1999 (Unaudited) and
December 31, 1998
Consolidated Statements of Income for the Three and Six Months
ended June 30, 1999
and 1998 (Unaudited)
Consolidated Statement of Cash Flows for the Six Months ended
June 30, 1999 and 1998 (Unaudited)
Historical Financial Statements from Form 10-K for the Year Ended
December 31, 1998
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1998, 1997 and
1996
Consolidated Statements of Income for the Years ended December
31, 1998, 1997, and 1996
Consolidated Statements of Stockholders' Equity for the Years
ended December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows for the Years ended
December 31, 1998, 1997, and 1996
Notes to Consolidated Financial Statements
Report of Independent Public Accountants on Schedule
Schedule XI - Real Estate and Accumulated Depreciation as of
December 31, 1998
Pro Forma Financial Statements (Unaudited)
Consolidated Statements of Income for the Six Months ended June
30, 1999
Consolidated Statements of Income for the Year Ended December 31,
1998
Notes and Assumptions to Consolidated Statements of Income
Consolidated Balance Sheet as of June 30, 1999
Notes and Assumptions to Consolidated Balance Sheet
Properties Acquired From the Equity Residential Properties Trust
Limited Liability Companies
Report of Independent Public Accountants
Combined Statements of the Excess of Revenues over Certain
Operating
Expenses for the Years Ended December 31, 1996, 1997, and 1998
and the Six Months Ended June 30, 1999 (Unaudited)
Notes to Combined Statements of Excess Revenues
<PAGE>
(b) The following exhibits are included as part of this registration
statement:
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation, as amended by Articles of
Amendment to Articles of Incorporation re Series A
Redeemable Cumulative Preferred Stock (incorporated
herein by reference to Exhibit 3(i) to Merry Land's
Annual Report on Form 10-K filed March 31, 1999, file
number 000-29778).
3.2 Bylaws, as amended on January 28, 1999 (incorporated
herein by reference to Exhibit 3(ii) to Merry Land's
Annual Report on Form 10-K filed March 31, 1999, file
number 000-29778).
(4) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.1 Form of Common Stock Certificate.+
4.2 Form of Preferred Security.+
4.3 Certificate of Trust of Merry Land Capital Trust.*
4.4 Form of Amended and Restated Trust Agreement of Merry
Land Capital Trust.*
4.5 Form of Junior Convertible Subordinated Trust Indenture
between Merry Land Properties, Inc. and First Union
National Bank as Indenture Trustee.*
4.6 Form of Junior Convertible Subordinated Debenture
(included as Sections __ and __ to Exhibit 4.5).*
4.7 Form of Guarantee Agreement between Merry Land
Properties, Inc. as Guarantor and First Union National
Bank as Guarantee Trustee, regarding the Preferred
Securities of Merry Land Capital Trust.*
4.8 The following instruments each dated August 23, 1999:
(a) Deed to Secure Debt and Security Agreement for ML
Hammocks at Long Point, L.L.C.*; and
(b) Promissory Note for ML Hammocks at Long Point,
L.L.C.*
The Company has additional long-term debt that does not
exceed ten (10%) percent of the total assets of Merry
Land and its subsidiaries on a consolidated basis. Merry
Land agrees to furnish a copy of any such instrument to
the Commission upon request.
(5) OPINION REGARDING LEGALITY
5.1 Opinion of Hull, Towill, Norman, Barrett & Salley, P.C.
with respect to the legality of the securities being
registered.+
5.2 Opinion of Young Conaway Stargatt and Taylor, LLP,
special Delaware Counsel, as to the validity of the
issuance of the Preferred Securities being issued by
Merry Land Capital Trust.+
(8) OPINION REGARDING TAX MATTERS
8.1 Opinion of Hull, Towill, Norman, Barrett & Salley, P.C.
with respect to tax matters.+
(10) MATERIAL CONTRACTS
10.1 The Company's Development Agreement with ERP Operating
Limited Partnership dated October 19, 1998 (incorporated
herein by reference to Exhibit 10.1 to Merry Land's
Annual Report on Form 10-K filed March 31, 1999, file
number 000-29778.
10.2 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).
10.3 Directors Stock Compensation Plan (incorporated herein by
reference as Exhibit 4.3 to the Company's Registration
Statement on Form S-8 filed April 19, 1999, registration
number 333-76521.
(12) STATEMENTS REGARDING COMPUTATION OF RATIOS
12.1 Ratio of Earnings to Fixed Charges and Preferred
Dividends*
(21) SUBSIDIARIES OF MERRY LAND PROPERTIES, INC.*
(23) CONSENTS OF EXPERTS AND COUNSEL:
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Hull, Towill, Norman, Barrett & Salley, P.C.
(contained in their opinion set forth in Exhibit 5.1 and
8.1).+
23.3 Consent of Young Conaway Stargett and Taylor, LLP
(contained in their opinion set forth in Exhibit 5.2).+
(24) POWER OF ATTORNEY:
24.1 Power of Attorney (included on signature pages of this
Registration Statement).
(25) STATEMENT OF ELIGIBILITY OF TRUSTEE:
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank, as Trustee under the Trust Agreement with
respect to the Preferred Securities.*
25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of First Union
National Bank, as Trustee under the Trust Agreement with
respect to the Trust Indenture and Guarantee Agreement.*
(99) FORM OF RIGHTS CERTIFICATE.+
* Filed herewith.
+ To be filed by Amendment
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-11 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Augusta, State of Georgia, on
October 21, 1999.
MERRY LAND PROPERTIES, INC.
By: /s/ W. Tennent Houston
---------------------------
W. Tennent Houston
Chairman of the Board, Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes and appoints
W. Tennent Houston and Michael N. Thompson or any of them, as his
attorney-in-fact, with full power of substitution and resubstitution, to
sign and execute on behalf of the undersigned any amendment or amendments
to this Registration Statement on Form S-11, and to perform any acts
necessary to be done in order to file such amendment with exhibits thereto
and other documents in connection therewith with the Securities and
Exchange Commission, and each of the undersigned does hereby ratify and
confirm all that said attorneys-in-fact and agents, or their substitutes,
shall do or cause to be done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
--------------- --------------- ---------------
<S> <C> <C>
/s/ W. Tennent Houston
______________________________ Chairman of the Board, October 21, 1999
W. Tennent Houston Chief Executive Officer
/s/ Michael N. Thompson
______________________________ Director, President and October 21, 1999
Michael N. Thompson Chief Operating Officer
/s/ Dorrie E. Green
______________________________ Vice President, Chief
Dorrie E. Green Financial Officer,
Treasurer and Secretary October 21, 1999
/s/ David W. Cobb
______________________________ Director October 21, 1999
David W. Cobb
/s/ Boone A. Knox
______________________________ Director October 21, 1999
Boone A. Knox
/s/ Stewart R. Speed
______________________________ Director October 21, 1999
Stewart R. Speed
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, Merry Land
Capital Trust certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-11 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Augusta, State of Georgia on
October 21, 1999.
MERRY LAND PROPERTIES, INC.
By: /s/ W. Tennent Houston
---------------------------
W. Tennent Houston
Chairman of the Board, Chief Executive Officer
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
<TABLE>
<CAPTION>
June 30, Years Ended December 31
-------- ------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on Debt $1,684 $ 694 $ - $ - $ - $ -
Amortization of debt
discount and expense - - - - - -
------ ----- ----- ----- ----- -----
Total $1,684 $ 694 $ - $ - $ - $ -
====== ===== ===== ===== ===== =====
Preferred Dividends:
Amount Declared $ - $ - $ - $ - $ - $ -
====== ===== ===== ===== ===== =====
Gross up to pretax on
37.97% effective
tax rate $ - $ - $ - $ - $ - $ -
====== ===== ===== ===== ===== =====
Earnings:
Net Income $1,756 $3,057 $4,609 $3,584 $3,554 $3,959
Add:
Discount on repayment of
debt, net of taxes (722) - - - - -
Provision for
income taxes 386 (462) - - - -
Fixed charges 1,684 694 - - - -
------ ------ ------ ------ ------ ------
$3,104 $3,289 $4,609 $3,584 $3,554 $3,959
Ratio of Earnings to
Fixed Charges: 1.8 4.7 N/A N/A N/A N/A
Ratio of Earnings to Fixed
Charges and Preferred
Dividends 1.8 4.7 N/A N/A N/A N/A
</TABLE>
All periods presented prior to October 16, 1998 represent certain
assets and liabilities of Old Merry Land which were spun off to form
Merry Land. These statements were prepared in accordance with rules
and regulations of the Securities and Exchange Commission applicable
to subsidiaries which have been spun off and according, no debt or
interest expense has been allocated to Merry Land for these periods.
Thus, Merry Land does not have any fixed charges for these periods and
disclosure of the ration of earnings to fixed charges is not
applicable.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
1. Merry Land Property Management, Inc., a Georgia corporation
2. ML South Augusta, Inc., a Georgia corporation
3. ML Apartments I, Inc.
4. ML Apartments II, Inc.
5. ML Apartments III, Inc.
6. ML Apartments IV, Inc.
7. Greentree LLC
8 Marsh Cove LLC
9. West Wind LLC
10.Quarterdeck Apartments LLC
11.Waters Edge Apartments LLC
12.ML Hammocks at Long Point, L.L.C.
13.ML Summit Place, L.L.C.
14.ML Windsor Place, L.L.C.
15.ML Woodcrest (Augusta), L.L.C.
16.ML Huntington, L.L.C.
17. ML Magnolia Villa, L.L.C.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
As independent public accountants, we hereby consent to the inclusion
in this registration statement of our reports dated January 27, 1999 on the
consolidated financial statements and schedule of Merry Land Properties,
Inc. and of our report dated August 27, 1999 on the combined statements of
excess of revenues over specific operating expenses of the Properties
Acquired from the Equity Residential Properties Trust Limited Liability
Companies, and to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
Arthur Andersen LLP
Atlanta, Georgia
October 21, 1999
CERTIFICATE OF TRUST
OF
MERRY LAND CAPITAL TRUST
THIS Certificate of Trust of Merry Land Capital Trust (the "Trust"),
dated as of September ___, 1999, is being duly executed and filed by the
undersigned, as trustee, to form a business trust under the Delaware
Business Trust Act (12 DEL. C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is Merry Land
Capital Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware
is William J. Reif, The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust,
has executed this Certificate of Trust as of the date first written above.
/s/ William J. Reif
_____________________________________
William J. Reif, not in his individual capacity
but solely a trustee of the Trust
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
MERRY LAND PROPERTIES, INC.
AS DEPOSITOR,
FIRST UNION NATIONAL BANK
AS PROPERTY TRUSTEE,
WILLIAM J. REIF
AS DELAWARE TRUSTEE,
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF ___________, 1999
MERRY LAND CAPITAL TRUST
<PAGE>
MERRY LAND CAPITAL TRUST
Certain Sections of this Trust Agreement
relating to Sections 310 through 318
of the Trust Indenture Act of 1939:
TRUST INDENTURE TRUST AGREEMENT
ACT SECTION SECTION
Section 310 (a)(1).......................................8.7
(a)(2) .............................................8.7
(a)(3) ..................................Not Applicable
(a)(4) ......................................2.7(a)(ii)
(b).................................................8.8
Section 311 (a).........................................8.12
(b)................................................8.12
Section 312 (a) .........................................5.7
(b).................................................5.7
(c).................................................5.7
Section 313 (a). ....................................8.13(a)
(b).............................................8.13(b)
(c)................................................10.8
(d).............................................8.13(c)
Section 314 (a) ........................................8.14
(b)......................................Not Applicable
(c)(1). .................................Not Applicable
(c)(2). ...........................................8.15
(c)(3) ..................................Not Applicable
(d)......................................Not Applicable
(e)...........................................1.1, 8.15
Section 315 (a) ..............................8.1(a), 8.3(a)
(b)...........................................8.2, 10.8
(c)..............................................8.1(a)
(d)............................................8.1, 8.3
(e)......................................Not Applicable
Section 316 (a) ......................................6.1(b)
(a)(1)(A). ......................................6.1(b)
(a)(1)(B)........................................6.1(b)
(a)(2). .................................Not Applicable
(b).................................................6.8
(c).................................................6.7
Section 317 (a)(1). ....................................2.7
(b).................................................5.9
Section 318 (a). ......................................10.10
* This reconciliation and tie sheet shall not, for any purpose, be deemed
to be a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINED TERMS...................................................1
SECTION 1.1. DEFINITIONS........................................1
ARTICLE 2 ESTABLISHMENT OF THE TRUST......................................9
SECTION 2.1. NAME...............................................9
SECTION 2.2. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS........................................................9
SECTION 2.3. ORGANIZATIONAL EXPENSES...........................10
SECTION 2.4. ISSUANCE OF THE PREFERRED SECURITIES..............10
SECTION 2.5. SUBSCRIPTION AND PURCHASE OF DEBENTURES; ISSUANCE OF
THE COMMON SECURITIES. ........................................10
SECTION 2.6. DECLARATION OF TRUST..............................10
SECTION 2.7. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
...............................................................11
SECTION 2.8. ASSETS OF TRUST...................................14
SECTION 2.9. TITLE TO TRUST PROPERTY...........................14
ARTICLE 3 PAYMENT ACCOUNT................................................14
SECTION 3.1. PAYMENT ACCOUNT...................................14
ARTICLE 4 DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION................15
SECTION 4.1. DISTRIBUTIONS.....................................15
SECTION 4.2. REDEMPTION........................................16
SECTION 4.3. CONVERSION........................................18
SECTION 4.4. SPECIAL EVENT EXCHANGE OR REDEMPTION...................20
SECTION 4.5. SUBORDINATION OF COMMON SECURITIES................21
SECTION 4.6. PAYMENT PROCEDURES................................22
SECTION 4.7. TAX RETURNS AND REPORTS...........................22
SECTION 4.8. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.......22
SECTION 4.9. PAYMENTS UNDER INDENTURE..........................22
ARTICLE 5 TRUST SECURITIES CERTIFICATES..................................22
SECTION 5.1. INITIAL OWNERSHIP.................................22
SECTION 5.2. THE TRUST SECURITIES CERTIFICATES.................22
SECTION 5.3. DELIVERY OF TRUST SECURITIES CERTIFICATES.........23
SECTION 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES.....................................................23
SECTION 5.5. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
SECURITIES CERTIFICATES........................................24
SECTION 5.6. PERSONS DEEMED SECURITY HOLDERS...................24
SECTION 5.7. ACCESS TO LIST OF SECURITY HOLDERS' NAMES AND
ADDRESSES......................................................24
SECTION 5.8. MAINTENANCE OF OFFICE OR AGENCY...................25
SECTION 5.9. APPOINTMENT OF PAYING AGENT.......................25
SECTION 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR......25
SECTION 5.11. COMMON SECURITIES CERTIFICATE....................26
SECTION 5.12. RIGHTS OF SECURITY HOLDERS.......................26
ARTICLE 6 ACT OF SECURITY HOLDERS; MEETINGS; VOTING......................26
SECTION 6.1. LIMITATIONS ON VOTING RIGHTS......................26
SECTION 6.2. NOTICE OF MEETINGS................................28
SECTION 6.3. MEETINGS OF PREFERRED SECURITY HOLDERS............28
SECTION 6.4. VOTING RIGHTS.....................................28
SECTION 6.5. PROXIES, ETC......................................29
SECTION 6.6. SECURITY HOLDER ACTION BY WRITTEN CONSENT.........29
SECTION 6.7. RECORD DATE FOR VOTING AND OTHER PURPOSES.........29
SECTION 6.8. ACTS OF SECURITY HOLDERS..........................29
SECTION 6.9. INSPECTION OF RECORDS.............................30
ARTICLE 7 REPRESENTATIONS AND WARRANTIES.................................30
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY
TRUSTEE AND THE DELAWARE TRUSTEE...............................30
SECTION 7.2. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.......31
ARTICLE 8 THE TRUSTEES...................................................31
SECTION 8.1. CERTAIN DUTIES AND RESPONSIBILITIES...............31
SECTION 8.2. NOTICE OF DEFAULTS................................33
SECTION 8.3. CERTAIN RIGHTS OF PROPERTY TRUSTEE................35
SECTION 8.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.....................................................37
SECTION 8.5. MAY HOLD SECURITIES...............................37
SECTION 8.6. COMPENSATION; INDEMNITY; FEES.....................37
SECTION 8.7. PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
...............................................................38
SECTION 8.8. CONFLICTING INTERESTS.............................38
SECTION 8.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
...............................................................39
SECTION 8.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR...........40
SECTION 8.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.......................................................41
SECTION 8.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR
OR TRUST. .....................................................41
SECTION 8.13. REPORTS BY PROPERTY TRUSTEE......................41
SECTION 8.14. REPORTS TO THE PROPERTY TRUSTEE..................42
SECTION 8.15. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
...............................................................42
SECTION 8.16. NUMBER OF TRUSTEES...............................42
SECTION 8.17. DELEGATION OF POWER..............................42
ARTICLE 9 DISSOLUTION, LIQUIDATION AND MERGER............................43
SECTION 9.1. DISSOLUTION UPON EXPIRATION DATE..................43
SECTION 9.2. EARLY DISSOLUTION.................................43
SECTION 9.3. DISSOLUTION.......................................43
SECTION 9.4. LIQUIDATION.......................................43
SECTION 9.5. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR
REPLACEMENTS OF THE TRUST......................................45
ARTICLE 10 MISCELLANEOUS PROVISIONS......................................45
SECTION 10.1. LIMITATION OF RIGHTS OF SECURITY HOLDERS.........45
SECTION 10.2. AMENDMENT........................................46
SECTION 10.3. SEPARABILITY.....................................47
SECTION 10.4. GOVERNING LAW....................................47
SECTION 10.5. PAYMENTS DUE ON NON-BUSINESS DAY.................47
SECTION 10.6. SUCCESSORS.......................................47
SECTION 10.7. HEADINGS.........................................47
SECTION 10.8. REPORTS, NOTICES AND DEMANDS.....................47
SECTION 10.9. AGREEMENT NOT TO PETITION........................48
SECTION 10.10. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE
ACT............................................................48
SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE
AND INDENTURE. ................................................49
SECTION 10.12. COUNTERPARTS....................................49
EXHIBIT A -- Certificate of Trust of Merry Land Capital Trust............51
EXHIBIT B -- Form of Common Securities of Merry Land Capital Trust.......52
EXHIBIT C -- Form of Preferred Securities of Merry Land Capital Trust....54
EXHIBIT D -- Form of Notice of Conversion................................54
<PAGE>
THIS AMENDED AND RESTATED TRUST AGREEMENT is dated as of ________,
1999 among: (i) Merry Land Properties, Inc., a Georgia corporation
(including any successors or assigns, the "Depositor"); (ii) First Union
National Bank, a national banking association, as property trustee (in such
capacity, the "Property Trustee" and, in its personal capacity and not in
its capacity as Property Trustee, the "Bank"); (iii) William J. Reif, as
Delaware trustee (in such capacity, the "Delaware Trustee"); (iv) W.
Tennent Houston, Michael N. Thompson, and Dorrie E. Green, each of whose
address is c/o Merry Land Properties, Inc., 624 Ellis Street, Augusta,
Georgia 30901 (each, an "Administrative Trustee" and, collectively, the
"Administrative Trustees" and, collectively with the Property Trustee and
Delaware Trustee, the "Trustees") and (iv) the several Holders as
hereinafter defined.
W I T N E S S E T H:
WHEREAS, the Depositor and the Delaware Trustee have duly declared and
created a business trust pursuant to the Delaware Business Trust Act by the
entering into a certain trust agreement dated as of September 20, 1999 (the
"Original Trust Agreement"), and by the execution and filing by the
Delaware Trustee with the Secretary of State of the State of Delaware of
the Certificate of Trust, filed on September 20, 1999, attached as Exhibit
A, for the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in the Debentures (as defined herein); and
WHEREAS, the parties hereto desire to amend and restate the Original
Trust Agreement in its entirety as set forth herein to provide for, among
other things, (i) the issuance and sale of the Common Securities (as
defined herein) by the Trust to the Depositor, (ii) the issuance and sale
of the Preferred Securities by the Trust and (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the
Debentures;
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, each party, for the benefit of the other
parties and for the benefit of the Holders of the Preferred Securities,
hereby agrees as follows:
ARTICLE 1 DEFINED TERMS
SECTION 1.1. DEFINITIONS. For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as
the case may be, of this Trust Agreement; and
(d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and
not to any particular Article, Section or other subdivision.
"ACT" has the meaning specified in Section 6.8.
"ADDITIONAL SUMS" means, with respect to the Trust Securities, the
amount of Additional Sums (as defined in the Indenture) paid by the
Depositor on the Debentures.
"ADMINISTRATIVE TRUSTEE" means each of W. Tennent Houston, Michael N.
Thompson, and Dorrie E. Green, each solely in his capacity as
Administrative Trustee of the Trust and not in his individual
capacity, or such Administrative Trustee's successor in interest in
such capacity, or any successor in interest in such capacity, or any
successor administrative trustee appointed as herein provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, provided, however that an
Affiliate of the Depositor shall be deemed not to include the Trust.
For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BANK" has the meaning specified in the preamble to this Trust
Agreement.
"BANKRUPTCY EVENT" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction
in the premises judging such Person as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjudication or composition of or in respect of such
Person under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of
its property or ordering the winding-up or liquidation of its
affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law, or
the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of such Person or of any
substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they
become due and its willingness to be adjudicated a bankrupt, or
the taking of corporate action by such Person in furtherance of
any such action.
"BANKRUPTCY LAWS" has the meaning specified in Section 10.9.
"BOARD OF DIRECTORS" means either the board of directors of the
Depositor or any committee of that board duly authorized to act
hereunder.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which banking institutions in the city of New York are authorized
or required by law or executive order to remain closed or a day on
which the Corporate Trust Office of the Property Trustee or the
corporate trust office of the Debenture Trustee, is closed for
business.
"CLOSING DATE" means the date of execution and delivery of this Trust
Agreement.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of
1934, as amended, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties
now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"COMMON SECURITIES CERTIFICATE" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as
Exhibit B.
"COMMON SECURITY" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount with respect to the assets
of the Trust of $10 and having the rights provided therefor in this
Trust Agreement, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"COMMON STOCK" means the Common Shares, without par value, of the
Depositor.
"CONVERSION AGENT" has the meaning specified in Section 4.3.
"CONVERSION DATE" has the meaning specified in Section 4.3.
"CONVERSION PRICE" has the meaning specified in Section 4.3.
"CORPORATE TRUST OFFICE" means the office of the Property Trustee at
which at any particular time its duties and responsibilities hereunder
are to be administered, which office at the date hereof is located at
999 Peachtree Street, N.E., Suite 1100, Atlanta, Georgia 30309.
"CURRENT MARKET PRICE," with respect to Common Stock, means for any
day the last reported sale price, regular way, on such day, or, if no
sale takes place on such day, the average of the reported closing bid
and asked prices on such day, regular way, in either case as reported
on the New York Stock Exchange Composite Transactions Tape, or, if
Common Stock is not listed or admitted to trading on the New York
Stock Exchange on such day, on the principal national securities
exchange on which Common Stock is listed or admitted to trading, if
Common Stock is listed on a national securities exchange, or the
NASDAQ National Market, or, if Common Stock is not quoted or admitted
to trading on such quotation system, on the principal quotation system
on which Common Stock may be listed or admitted to trading or quoted,
or, if not listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the closing
bid and asked prices of Common Stock in the over-the-counter market on
the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or,
if not so available in such manner, as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of
Directors for that purpose or, if not so available in such manner, as
otherwise determined in good faith by the Board of Directors.
"DEBENTURE EVENT OF DEFAULT" means a "Debenture Event of Default" as
defined in the Indenture.
"DEBENTURE REDEMPTION DATE" means, with respect to any Debentures to
be redeemed under the Indenture, the date fixed for redemption thereof
under the Indenture.
"DEBENTURE TRUSTEE" means First Union National Bank, a national
banking association, as trustee under the Indenture.
"DEBENTURES" means all of the Depositor's ___% junior convertible
subordinated debentures, $___________ principal amount, issued
pursuant to the Indenture.
"DELAWARE BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. Section 3801, et. seq., as it may be amended
from time to time.
"DELAWARE TRUSTEE" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust and not in its individual
capacity, or its successor in interest in such capacity, or any
successor Delaware trustee appointed as herein provided.
"DEPOSITOR" has the meaning specified in the preamble to this Trust
Agreement.
"DIRECT ACTION" has the meaning specified in Section 6.8.
"DISTRIBUTION DATE" has the meaning specified in Section 4.1(a).
"DISTRIBUTIONS" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"EARLY DISSOLUTION EVENT" has the meaning specified in Section 9.2.
"EVENT OF DEFAULT" means the occurrence of a Debenture Event of
Default, whatever the reason for such Debenture Event of Default and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
governmental body.
"EXCHANGE NOTICE" has the meaning specified in Section 4.4(b).
"EXPIRATION DATE" has the meaning specified in Section 9.1.
"GUARANTEE" means the Guarantee Agreement executed and delivered by
the Depositor and First Union National Bank, a national banking
association, as guarantee trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the
Holders of the Preferred Securities, as amended from time to time.
"HOLDER" means a Person in whose name a Trust Securities Certificate
representing a Trust Security is registered, such Person being a
beneficial owner within the meaning of the Delaware Business Trust
Act.
"INDENTURE" means the Junior Convertible Subordinated Indenture, dated
as of ___________ ___, 1999 between the Depositor and the Debenture
Trustee, as amended or supplemented from time to time.
"INVESTMENT COMPANY EVENT" means the receipt by the Property Trustee,
on behalf of the Trust, of an Opinion of Counsel, rendered by a law
firm having a national tax and securities practice (which Opinion of
Counsel shall not have been rescinded by such law firm), to the effect
that, as a result of the occurrence of a change in law or regulation
or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an
"investment company" that is required to be registered under the 1940
Act, which Change in 1940 Act Law becomes effective on or after the
date of original issuance of the Preferred Securities under this Trust
Agreement.
"LIEN" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"LIQUIDATION AMOUNT" means an amount with respect to the assets of the
Trust equal to $10 per Trust Security.
"LIQUIDATION DATE" means each date on which Debentures or cash are to
be distributed to Holders of Trust Securities in connection with a
dissolution and liquidation of the Trust pursuant to Section 9.4(a).
"LIQUIDATION DISTRIBUTION" has the meaning specified in Section
9.4(d).
"1940 ACT" means the Investment Company Act of 1940, as amended.
"NOTICE OF CONVERSION" means the notice given by a Holder of Preferred
Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Security for Debentures and to convert such
Debentures into Common Stock on behalf of such holder. Such notice is
substantially in the form set forth in Exhibit D.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the Chairman
of the Board, a Vice Chairman, the President or a Vice President, and
by (ii) the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Depositor, and delivered to the Trustee.
One of the officers signing an Officers' Certificate given pursuant to
Section 8.15 shall be the principal executive, financial or accounting
officer of the Depositor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in
this Trust Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Depositor, and who
may be an employee of any thereof, and who shall be acceptable to the
Property Trustee. Any Opinion of Counsel delivered with respect to
compliance with a condition or covenant provided for in this Trust
Agreement shall include:
(a) a statement that each individual signing the Opinion of
Counsel has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each individual in rendering the
Opinion of Counsel;
(c) a statement that each individual has made such examination or
investigation as is necessary to enable such individual to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
"OPTIONAL REDEMPTION PRICE" means with respect to the Trust
Securities, $10 per Trust Security, plus accumulated and unpaid
Distributions (including any Additional Sums), if any, to the date
fixed for redemption. In the event of a redemption of Trust
Securities upon the occurrence of a Tax Event, Trust Securities shall
be redeemed at the redemption price of $10 per Trust Security and all
accumulated and unpaid Distributions (including any Additional Sums),
if any, to the date fixed for redemption. In the event of a
Provisional Redemption, Trust Securities shall be redeemed at the
redemption price of $10 per Trust Security, plus accumulated and
unpaid Distributions (including any Additional Sums), if any, to the
date fixed for redemption.
"OUTSTANDING," when used with respect to Trust Securities, means, as
of the date of determination, all Trust Securities theretofore
executed and delivered under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Securities
Registrar or delivered to the Securities Registrar for
cancellation or tendered for conversion;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Trust
Securities; provided that, if such Trust Securities are to be
redeemed, notice of such redemption has been duly given pursuant
to this Trust Agreement;
(c) Trust Securities which have been exchanged for Debentures
pursuant to Section 4.4; and
(d) Trust Securities which have been paid or in exchange for or
in lieu of which other Trust Securities have been executed and
delivered pursuant to Section 5.5;
provided, however, that in determining whether the Holders of the
requisite Liquidation Amount of the Outstanding Trust Securities have
given any request, demand, authorization, direction, notice, consent
or waiver hereunder, Trust Securities owned by the Depositor, any
Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in
determining whether any Trustee shall be fully protected in relying
upon any such request, demand, authorization, direction, notice,
consent or waiver, only Trust Securities that a Responsible Officer of
the Property Trustee or the Delaware Trustee, or an individual
Administrative Trustee, as the case may be, actually knows to be so
owned shall be so disregarded and (b) the foregoing shall not apply at
any time when all of the Outstanding Trust Securities are owned by the
Depositor, one or more of the Trustees and/or any such Affiliate.
Trust Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction
of the Securities Registrar the pledgee's right so to act with respect
to such Trust Securities and that the pledgee is not the Depositor or
any Affiliate of the Depositor.
"PAYING AGENT" means any paying agent or co-paying agent appointed
pursuant to Section 5.9.
"PAYMENT ACCOUNT" means a segregated non-interest bearing corporate
trust account maintained by the Property Trustee with the Bank in its
trust department for the benefit of the Security Holders in which all
amounts paid in respect of the Debentures will be held and from which
the Property Trustee shall make payments to the Security Holders in
accordance with Section 4.1.
"PERSON" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation,
unincorporated organization or government or any agency or political
subdivision thereof.
"PREFERRED SECURITIES CERTIFICATE" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached
as Exhibit C, issued in certificated, fully registered form as
provided in Section 5.2.
"PREFERRED SECURITY" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount with respect to the
assets of the Trust of $10 and having the rights provided therefor in
this Trust Agreement, including the right to receive Distributions and
a Liquidation Distribution as provided herein.
"PROPERTY TRUSTEE" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust
Agreement solely in its capacity as Property Trustee of the Trust and
not in its individual capacity, or its successor in interest in such
capacity, or any successor property trustee appointed as herein
provided.
"PROVISIONAL REDEMPTION" has the meaning specified in the Indenture.
"REDEMPTION DATE" means, with respect to any Trust Security to be
redeemed, each Debenture Redemption Date.
"REDEMPTION PRICE" means, with respect to any Trust Security, $10 per
Trust Security, plus accumulated and unpaid Distributions (including
any Additional Sums) to the date of redemption.
"RELEVANT TRUSTEE" has the meaning specified in Section 8.9.
"RESPONSIBLE OFFICER" means any officer assigned to the corporate
trust office, including any managing director, vice president,
assistant vice president, assistant treasurer, assistant secretary or
any other officer of the Property Trustee or the Delaware Trustee
customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of this Trust Agreement, and also, with respect to a
particular matter, any other officer, to whom such matter is referred
because of such officer's knowledge of and familiarity with the
particular subject.
"SECURITIES REGISTER" and "SECURITIES REGISTRAR" have the respective
meanings specified in Section 5.4.
"SECURITY HOLDER" or "HOLDER" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any
such Person shall be deemed to be a beneficial owner within the
meaning of the Delaware Business Trust Act.
"SPECIAL EVENT" means a Tax Event or an Investment Company Event.
"SUCCESSOR PROPERTY TRUSTEE" has the meaning specified in Section 8.9.
"SUCCESSOR DELAWARE TRUSTEE" has the meaning specified in Section 8.9.
"SUCCESSOR SECURITIES" has the meaning specified in Section 9.5.
"SUPER MAJORITY" has the meaning specified in Section 8.2.
"TAX EVENT" means the receipt by the Property Trustee, on behalf of
the Trust, of an Opinion of Counsel, rendered by a law firm having a
national tax and securities practice (which Opinion of Counsel shall
not have been rescinded by such law firm), to the effect that, as a
result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority
thereof or therein affecting taxation, or as a result of any official
administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is
effective or such pronouncement or decision is announced on or after
the date of issuance of the Preferred Securities under this Trust
Agreement and does not pertain to the use of the proceeds of the
issuance of the Debentures, there is more than an insubstantial risk
in each case after the date thereof that (i) the Trust is, or will be
within 90 days after the date thereof, subject to United State Federal
income tax with respect to income received or accrued on the
Debentures, (ii) interest payable by the Depositor on the Debentures
is not, or within 90 days after the date thereof will not be,
deductible, in whole or in part, for United States Federal income tax
purposes or (iii) the Trust is, or will be within 90 days after the
date thereof, subject to more than DE MINIMIS amount of other taxes,
duties, assessments or other governmental charges.
"TRUST" means the Delaware business trust continued hereby and
identified on the cover page of this Trust Agreement.
"TRUST AGREEMENT" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with
the applicable provisions hereof, including all exhibits hereto,
including, for all purposes of this Trust Agreement any such
modification, amendment or supplement, the provisions of the Trust
Indenture Act that are deemed to be a part of and govern this Trust
Agreement and any such modification, amendment or supplement,
respectively.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended
after such date, "Trust Indenture Act" means, to the extent required
by any such amendment, the Trust Indenture Act of 1939 as so amended.
"TRUST PROPERTY" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account and (c) all proceeds and rights in
respect of the foregoing to be held by the Property Trustee pursuant
to the terms of this Trust Agreement for the benefit of the Security
Holders.
"TRUST SECURITY" means any one of the Common Securities or the
Preferred Securities.
"TRUST SECURITIES CERTIFICATE" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"TRUSTEES" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
ARTICLE 2 ESTABLISHMENT OF THE TRUST
SECTION 2.1. NAME. The Trust continued hereby shall be known as "Merry
Land Capital Trust," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may conduct
the business of the Trust, make and execute contracts and other instruments
on behalf of the Trust and sue and be sued.
SECTION 2.2. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS. The address of the Delaware Trustee in the State of Delaware is
c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801, or such other address in the State of
Delaware as the Delaware Trustee may designate by written notice to the
Depositor. The principal executive office of the Trust is 624 Ellis Street,
Augusta, Georgia 30901
SECTION 2.3. ORGANIZATIONAL EXPENSES. The Depositor shall pay
organizational expenses of the Trust as they arise or shall, upon request
of any Trustee, promptly reimburse such Trustee for any such expenses paid
by such Trustee. The Depositor shall make no claim upon the Trust Property
for the payment of such expenses.
SECTION 2.4. ISSUANCE OF THE PREFERRED SECURITIES. Contemporaneously
with the execution and delivery of this Trust Agreement, an Administrative
Trustee, on behalf of the Trust, shall execute in accordance with Section
5.2 and deliver Preferred Securities Certificates to Persons who have
validly subscribed for the Preferred Securities in accordance with rights
distributed to holders of the Common Stock, in an aggregate amount of
______ Preferred Securities having an aggregate Liquidation Amount of
$____,000, against receipt of the aggregate purchase price of such
Preferred Securities of $____,000, which amount the Administrative Trustees
shall promptly deliver to the Property Trustee.
SECTION 2.5. SUBSCRIPTION AND PURCHASE OF DEBENTURES; ISSUANCE OF THE
COMMON SECURITIES. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase Debentures from the Depositor, registered
in the name of the Property Trustee (in its capacity as such) and having an
aggregate principal amount equal to $__________, and, in satisfaction of
the purchase price for such Debentures, the Property Trustee, on behalf of
the Trust, shall deliver to the Depositor the sum of $___________.
Contemporaneously therewith, an Administrative Trustee, on behalf of the
Trust, shall execute in accordance with Section 5.2 and deliver to the
Depositor Common Securities Certificates registered in the name of the
Depositor, in an aggregate amount of __,000 Common Securities having an
aggregate Liquidation Amount of $_,_00,000 against receipt of the aggregate
purchase price of such Common Securities from the Depositor of Debentures,
registered in the name of the Property Trustee (in its capacity as such)
and having an aggregate principal amount equal to $_,_00,000.
SECTION 2.6. DECLARATION OF TRUST. The exclusive purposes and
functions of the Trust are (a) to issue and sell Trust Securities and use
the proceeds from such sale to acquire the Debentures, (b) to distribute
the Trust's income as provided in this Trust Agreement and (c) to engage in
only those other activities necessary or incidental thereto. The Trust
shall not borrow money, issue debt or reinvest proceeds derived from
investments, mortgage or pledge any of its assets or otherwise undertake
(or permit to be undertaken) any activity that would cause the Trust not to
be classified for United States Federal income tax purposes as a grantor
trust. The Depositor hereby appoints the Trustees as trustees of the Trust,
to have all the rights, powers and duties to the extent set forth herein,
and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust Property upon and subject to
the conditions set forth herein for the benefit of the Trust and the
Security Holders. The Administrative Trustees shall have all rights, powers
and duties set forth herein and in accordance with applicable law with
respect to accomplishing the purposes of the Trust. The Delaware Trustee
shall not be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities, of the other Trustees
set forth herein. The Delaware Trustee shall be one of the Trustees of the
Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
SECTION 2.7. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set
forth in Section 2.6 and paragraph (b) of this Section, and in
accordance with the following provisions (i) and (ii), the Trustees
shall have the exclusive power, duty and the authority to cause the
Trust to engage in the following activities:
(i) As among the Trustees, each Administrative Trustee shall have
the power and authority to act on behalf of the Trust with
respect to the following matters:
(A) to issue and sell the Trust Securities; provided,
however, that the Trust may issue no more than one series of
Preferred Securities and no more than one series of Common
Securities; provided, further, that there shall be no
interests in the Trust other than the Trust Securities, and
the issuance of Trust Securities shall be limited to
simultaneous issuance of both Preferred Securities and
Common Securities on the Closing Date, subject to the
issuance of Trust Securities pursuant to Section 5.5 and
Successor Securities pursuant to Section 9.5;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust such agreements
as may be necessary or incidental to the purposes and
function of the Trust;
(C) to assist in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and
under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture
under the Trust Indenture Act;
(D) to assist in the listing of the Preferred Securities
upon such securities exchange or exchanges, if any, as shall
be determined by the Depositor and the registration of the
Preferred Securities under the Securities Exchange Act of
1934, as amended, and the preparation and filing of all
periodic and other reports and other documents pursuant to
the foregoing (only to the extent that such listing or
registration is requested by the Depositor);
(E) to appoint a Paying Agent, a Securities Registrar and an
authenticating agent in accordance with this Trust
Agreement;
(F) to the extent provided in this Trust Agreement, to wind
up the affairs of and liquidate the Trust and prepare,
execute and file the certificate of cancellation with the
Secretary of State of the State of Delaware;
(G) unless otherwise required by the Delaware Business Trust
Act or the Trust Indenture Act, to execute on behalf of the
Trust (either acting alone or together with any other
Administrative Trustees) any documents that the
Administrative Trustees have the power to execute pursuant
to this Trust Agreement; and
(H) to take any action incidental to the foregoing as the
Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Trust
Agreement including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the
1940 Act;
(ii) causing the Trust to be classified for United
States Federal income tax purposes as a grantor trust;
and
(iii) cooperating with the Depositor to ensure that the
Debentures will be treated as indebtedness of the
Depositor for United States Federal income tax
purposes;
provided that such action does not adversely affect in any
material respect the interests of Security Holders except as
otherwise provided in Section 10.2(a).
(ii) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of and taking title to the Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Debentures in the Payment
Account;
(D) the distribution from the Trust Property of amounts owed
to the Security Holders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Debentures;
(F) the sending of notices of default, other notices and
other information regarding the Trust Securities and the
Debentures to the Security Holders in accordance with this
Trust Agreement;
(G) the distribution of the Trust Property in accordance
with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust;
(I) after an Event of Default, the taking of any action
incidental to the foregoing as the Property Trustee may from
time to time determine is necessary or advisable to give
effect to the terms of this Trust Agreement and protect and
conserve the Trust Property for the benefit of the Security
Holders (without consideration of the effect of any such
action on any particular Security Holder);
(J) subject to this Section 2.7(a)(ii), the Property Trustee
shall have none of the duties, liabilities, powers or the
authority of the Administrative Trustees set forth in
Section 2.7(a)(i); and
(K) to act as Paying Agent and/or Securities Registrar to
the extent appointed as such hereunder.
(iii) As among the Trustees, the Delaware Trustee shall have the
power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) file a Certificate of Trust in the form attached as
Exhibit A with the Delaware Secretary of State;
(B) file an amendment to the Certificate of Trust of the
Trust if so requested by the Administrative Trustees; and
(C) forward notices received in his capacity as Delaware
Trustee to the Administrative Trustees.
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided
herein or contemplated hereby. In particular, the Trust shall not, and
the Trustees shall not, cause the Trust to (i) invest any proceeds
received by the Trust from holding the Debentures (rather, the
Trustees shall distribute all such proceeds to the Security Holders
pursuant to the terms of this Trust Agreement and the Trust
Securities), acquire any investments or engage in any activities not
authorized by this Trust Agreement, (ii) sell, assign, transfer,
exchange, mortgage, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Security Holders,
except as expressly provided herein, (iii) take any action that would
cause the Trust to fail or cease to qualify as a "grantor trust" for
United States Federal income tax purposes, (iv) make any loans or
incur any indebtedness for borrowed money or issue any other debt, (v)
take or consent to any action that would result in the placement of a
Lien on any of the Trust Property, (vi) possess any power or otherwise
act in such a way as to vary the Trust assets or the terms of the
Trust Securities in any way whatsoever except as permitted by the
terms of this Trust Agreement, or (vii) issue any securities or other
evidences of beneficial ownership of, or beneficial interest in, the
Trust other than the Trust Securities. The Administrative Trustees
shall defend all claims and demands of all Persons at any time
claiming any Lien on any of the Trust Property adverse to the interest
of the Trust or the Security Holders in their capacity as Security
Holders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following
actions (and any actions taken by the Depositor in furtherance of the
following prior to the date of this Trust Agreement are hereby
ratified and confirmed in all respects):
(i) to file by the Trust with the Commission and to execute on
behalf of the Trust a registration statement on the appropriate
form in relation to the Preferred Securities, including any
amendments thereto;
(ii) to determine the States and foreign jurisdictions in which
to take appropriate action to qualify or register for resale all
or part of the Preferred Securities and to do any and all such
acts, other than actions which must be taken by or on behalf of
the Trust, and advise the Trustees of actions they must take on
behalf of the Trust, and prepare for execution and filing any
documents to be executed and filed by the Trust or on behalf of
the Trust, as the Depositor deems necessary or advisable in order
to comply with the applicable laws of any such States and foreign
jurisdictions;
(iii) to the extent necessary, to prepare for filing by the Trust
with the Commission and to execute on behalf of the Trust a
registration statement on Form 8-A relating to the registration
of the Preferred Securities under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, including any
amendments thereto (it being understood that neither the Trust
nor the Depositor has any obligation under the Indenture or the
Trust Agreement to register any Trust Securities under the
Securities Exchange Act of 1934, as amended or to list any Trust
Securities on any securities exchange);
(iv) any other actions necessary or incidental to carry out any
of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the
affairs of the Trust and to operate the Trust so that the Trust will
not be deemed to be an "investment company" required to be registered
under the 1940 Act, or taxed as a corporation or a partnership for
United States Federal income tax purposes and so that the Debentures
will be treated as indebtedness of the Depositor for United States
Federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this
Trust Agreement, that each of the Depositor and the Administrative
Trustees determines in their discretion to be necessary or desirable
for such purposes, so long as such action does not adversely affect in
any material respect the interests of the Holders of the Preferred
Securities except as otherwise provided in Section 10.2(a).
SECTION 2.8. ASSETS OF TRUST. The assets of the Trust shall consist of
only the Trust Property.
SECTION 2.9. TITLE TO TRUST PROPERTY. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its
capacity as such) and shall be held and administered by the Property
Trustee for the benefit of the Trust and the Security Holders in accordance
with this Trust Agreement. The Security Holders shall not have legal title
to any part of the assets of the Trust, but shall have an undivided
beneficial interest in the assets of the Trust.
ARTICLE 3 PAYMENT ACCOUNT
SECTION 3.1. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of
the Property Trustee shall have exclusive control and sole right of
withdrawal with respect to the Payment Account for the purpose of
making deposits in and withdrawals from the Payment Account in
accordance with this Trust Agreement. All monies and other property
deposited or held from time to time in the Payment Account shall be
held by the Property Trustee in the Payment Account for the exclusive
benefit of the Security Holders and for distribution as herein
provided, including (and subject to) any priority of payments provided
for herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on,
and any other payments or proceeds with respect to, the Debentures.
Amounts held in the Payment Account shall not be invested by the
Property Trustee pending distribution thereof.
ARTICLE 4 DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION
SECTION 4.1. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and
shall accrue from the date of original issuance, or the most recent
Distribution Date (as defined herein) and, except in the event that
the Depositor exercises its right to defer the payment of interest on
the Debentures pursuant to the Indenture, shall be payable quarterly
in arrears on September 30, December 31, March 31, and June 30 of each
year, commencing on December 31, 1999 (which dates correspond to the
interest payment dates on the Debentures), when, as and if available
for payment by the Property Trustee, as further described in paragraph
(c) of this Section 4.1. If any date on which Distributions are
otherwise payable on the Trust Securities is not a Business Day, then
the payment of such Distributions shall be made on the next succeeding
day which is a Business Day (and no interest shall accrue for the
period from and after such date until the next succeeding Business
Day) with the same force and effect as if made on such date (each date
on which Distributions are payable in accordance with this Section
4.1(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests in
the Trust Property, and the Distributions on the Trust Securities
shall be payable at a rate of ___% per annum of the Liquidation Amount
of the Trust Securities; provided, however if the Depositor defers the
payment of interest on the Debentures, the interest rate on the
Debentures will increase to a rate that will yield an annualized
return of ___% compounded quarterly, and the rate of accrual of
distributions on the Trust Securities will be adjusted to the same
extent. No interest will accrue on unpaid interest. Whenever there
is unpaid deferred interest outstanding, the interest rate on the
Debentures (and the rate of accrual of dividends on the Trust
Securities) will be adjusted quarterly to the rate corresponding to
the number of quarters for which interest has been deferred, as
follows:
<TABLE>
<CAPTION>
Quarters of Quarters of
Deferred Interest Adjusted Rate Deferred Interest Adjusted Rate
- ----------------- ------------- ----------------- -------------
<S> <C> <C> <C>
0 9.0000000% 11 11.4957945
1 9.2025000 12 11.7544499
2 9.4095563 13 12.0189250
3 9.6212713 14 12.2893508
4 9.8377499 15 12.5658612
5 10.0590992 16 12.8485931
6 10.2854290 17 13.1376865
7 10.5168511 18 13.4332844
8 10.7534803 19 13.7355333
9 10.9954336 20 14.0445828
10 11.2428308
</TABLE>
The interest rate on the Debentures (and the rate of accrual of
dividends on the Trust Securities) will be effective beginning the
calendar day subsequent to the due date of the interest payment.
Upon payment of all deferred interest on the Debentures, the interest
rate thereon (and the rate of accrual of dividends on the Trust
Securities) will return to _____% per annum, effective on the date
all deferred interest is paid. The amount of Distributions payable
for any period shall be computed on the basis of a 360-day year of
twelve 30-day months. For periods less than a full month,
Distributions shall reflect interest on Debentures computed on the
basis of the actual number of elapsed days based on a 360-day year.
(c) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on
each Distribution Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of
such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they
appear on the Securities Register for the Trust Securities on the
relevant record date, which shall be the date which is the fifteenth
day (whether or not a Business Day) next preceding such Distribution
Date.
SECTION 4.2. REDEMPTION.
(a) Upon an optional redemption (as set forth in the Indenture) of
Debentures, the proceeds from such redemption shall be applied to
redeem Trust Securities having an aggregate Liquidation Amount equal
to the aggregate principal amount of the Debentures so redeemed by
the Depositor, including pursuant to Section 4.4, at the Optional
Redemption Price, and upon a mandatory redemption (as set forth in
the Indenture) of Debentures, the proceeds from such redemption shall
be applied to redeem Trust Securities, having an aggregate
Liquidation Amount equal to the aggregate principal amount of the
Debentures so redeemed by the Depositor, at the Redemption Price. The
Trust may not redeem fewer than all the Outstanding Trust Securities
unless all accrued and unpaid Distributions have been paid on all
Trust Securities for all quarterly Distribution periods terminating
on or prior to the date of redemption.
(b) Notice of redemption (which notice will be irrevocable) shall be
given by the Property Trustee by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption
Date to the Depositor and each Holder of Trust Securities to be
redeemed, at such Holder's address as it appears in the Securities
Register. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or the Optional Redemption Price, as
the case may be;
(iii) the record date for the determination of Holders entitled
to receive payment of the Redemption Price or Optional
Redemption Price, as the case may be, as provided in Section
4.2(d);
(iv) the CUSIP number;
(v) if less than all of the Outstanding Trust Securities are to
be redeemed, the identification and the aggregate Liquidation
Amount of the particular Trust Securities to be redeemed;
(vi) the Conversion Price and that a Holder of Preferred
Securities who desires to convert such Preferred Securities
called for redemption must satisfy the requirements for
conversion contained in Section 4.3 below;
(vii) that on the Redemption Date the Redemption Price or the
Optional Redemption Price, as the case may be, will become due
and payable upon each such Trust Security to be redeemed and
that Distributions thereon will cease to accrue on and after
said date; and
(viii) the place or places where such Trust Securities are to be
surrendered for payment of the Redemption Price or the Optional
Redemption Price, as the case may be.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price or the Optional Redemption Price, as
the case may be, with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall
be made and the Redemption Price or the Optional Redemption Price, as
the case may be, shall be payable on each Redemption Date only to the
extent that the Trust has funds then on hand and available in the
Payment Account for the payment of such Redemption Price or the
Optional Redemption Price, as the case may be.
(d) If the Property Trustee gives a notice of redemption in respect
of any Trust Securities, then, by 12:00 noon, Eastern Standard Time,
on the Redemption Date, subject to Section 4.2(c), the Property
Trustee will irrevocably deposit with the Paying Agent funds
sufficient to pay the applicable Redemption Price or Optional
Redemption Price, as the case may be, on the Trust Securities and
will give the Paying Agent irrevocable instructions and authority to
pay the Redemption Price or the Optional Redemption Price, as the
case may be, to the Holders thereof upon surrender of their Trust
Securities Certificates. Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date for any Trust Securities
called for redemption shall be payable to the Holders of such Trust
Securities as they appear on the Securities Register for the Trust
Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds
deposited as required, then, upon the date of such deposit, all
rights of Security Holders holding Trust Securities so called for
redemption will cease, except (i) the right of such Security Holders
to receive the Redemption Price or the Optional Redemption Price, as
the case may be, but without interest, and (ii) the right to convert
such Preferred Securities into Common Stock in the manner provided in
Section 4.3 through the close of business on the Redemption Date; and
such Trust Securities will cease to be Outstanding. In the event that
any date on which any Redemption Price or the Optional Redemption
Price, as the case may be, is payable is not a Business Day, then
payment of the Redemption Price or the Optional Redemption Price, as
the case may be, payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each
case, with the same force and effect as if made on such date. Payment
of the Redemption Price or the Optional Redemption Price, as the case
may be, shall be made to the Holders of such Trust Securities as they
appear on the Securities Register for the Trust Securities on the
relevant record date, which shall be the date which is the fifteenth
day (whether or not a Business Day) preceding such Redemption Date.
(e) If less than all the Outstanding Trust Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount
of Trust Securities to be redeemed shall be allocated on a PRO RATA
basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities that are to be redeemed. The particular
Preferred Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for
redemption, by lot or by such other method as the Property Trustee
shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $10 or an integral
multiple of $10 in excess thereof) of the Liquidation Amount of the
Preferred Securities. The Property Trustee shall promptly notify the
Securities Registrar and the Conversion Agent in writing of the
Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the Liquidation
Amount thereof to be redeemed. For all purposes of this Trust
Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only
in part, to the portion of the Liquidation Amount of Preferred
Securities which has been or is to be redeemed. In the event of any
redemption in part, the Trust shall not be required to (i) issue,
register the transfer of or exchange any Preferred Security during a
period beginning at the opening of business 15 days before any
selection for redemption of Preferred Securities and ending at the
close of business on the earliest date in which the relevant notice
of redemption is deemed to have been given to all Holders of
Preferred Securities to be so redeemed or (ii) register the transfer
of or exchange of any Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed portion
any Preferred Securities being redeemed in part.
(f) In the event of any redemption, the Trust shall not be required
to issue, register the transfer of or exchange any Preferred Security
during a period beginning at the opening of business 15 days before
any Redemption Date and ending at the close of business on such
Redemption Date.
SECTION 4.3. CONVERSION. The Holders of Trust Securities, subject to
the limitations set forth in this Section, shall have the right, at their
option, to cause the Conversion Agent to convert Trust Securities, on
behalf of the converting Holders, into shares of Common Stock in the
manner described herein on and subject to the following terms and
conditions:
(i) The Trust Securities will be convertible into fully paid and
nonassessable shares of Common Stock pursuant to the Holder's
direction to the Conversion Agent to exchange such Trust Securities
for a portion of the Debentures having a principal amount equal to
the aggregate Liquidation Amount of such Trust Securities, and
immediately convert such amount of Debentures into fully paid and
nonassessable shares of Common Stock at an initial rate of ________
shares of Common Stock for each Trust Security (which is equivalent
to a conversion price of approximately $ _____ per $10 principal
amount of Debentures), subject to all of the adjustments with respect
to the conversion price of the Debentures, as set forth in the
Indenture (as so adjusted, "Conversion Price").
(ii) In order to convert Trust Securities into Common Stock, the
Holder of such Trust Securities shall submit to the Conversion Agent
an irrevocable Notice of Conversion to convert Trust Securities on
behalf of such Holder, together with such certificates. The Notice of
Conversion shall (i) set forth the number of Trust Securities to be
converted and the name or names, if other than the Holder, in which
the shares of Common Stock should be issued and (ii) direct the
Conversion Agent (a) to exchange such Trust Securities for a portion
of the Debentures held by the Property Trustee (at the rate of
exchange specified in the preceding paragraph) and (b) to immediately
convert such Debentures, on behalf of such Holder, into Common Stock
(at the conversion rate specified in the preceding paragraph). The
Conversion Agent shall notify the Property Trustee in writing of the
Holder's election to exchange Trust Securities for a portion of the
Debentures held by the Property Trustee and the Property Trustee
shall, upon receipt of such written notice, deliver to the Conversion
Agent the appropriate principal amount of Debentures for exchange in
accordance with this Section. The Conversion Agent shall thereupon
notify the Depositor of the Holder's election to convert such
Debentures into shares of Common Stock. Holders of Trust Securities
at the close of business on a Distribution payment record date will
be entitled to receive the Distribution paid on such Trust Securities
on the corresponding Distribution Date notwithstanding the conversion
of such Trust Securities on or following such record date but prior
to such Distribution Date. Except as provided above, neither the
Trust nor the Depositor will make, or be required to make, any
payment, allowance or adjustment upon any conversion on account of
any accumulated and unpaid Distributions whether or not in arrears
accrued on the Trust Securities surrendered for conversion, or on
account of any accumulated and unpaid dividends on the shares of
Common Stock issued upon such conversion. Trust Securities submitted
for conversion prior to the expiration of conversion rights as
provided in Section 4.3(iii) shall be deemed to have been converted
immediately prior to the close of business on the day on which an
irrevocable Notice of Conversion relating to such Trust Securities is
received by the Conversion Agent in accordance with the foregoing
provision (the "Conversion Date"). The Person or Persons entitled to
receive the Common Stock issuable upon conversion of the Debentures
shall be treated for all purposes as the record holder or holders of
such Common Stock on the date of conversion. As promptly as
practicable on or after the Conversion Date, the Depositor shall
issue and deliver at the office of the Conversion Agent a certificate
or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons
entitled to receive the same, unless otherwise directed by the Holder
in the notice of conversion and the Conversion Agent shall distribute
such certificate or certificates to such Person or Persons.
(iii) The conversion rights of holders of the Debentures and the
corresponding conversion rights of Holders of Trust Securities shall
expire at the close of business on the date set for redemption of the
Trust Securities upon the mandatory or optional redemption of the
Debentures.
(iv) Each Holder of a Trust Security by its acceptance thereof
initially appoints the Property Trustee, not in its individual
capacity but solely as conversion agent, (the "Conversion Agent") for
the purpose of effecting the conversion of Trust Securities in
accordance with this Section. In effecting the conversion and
transactions described in this Section, the Conversion Agent shall be
acting as agent of the Holders of Trust Securities directing it to
effect such conversion transactions. The Conversion Agent is hereby
authorized (i) to exchange Trust Securities from time to time for
Debentures held by the Trust in connection with the conversion of
such Trust Securities in accordance with this Section and (ii) to
convert all or a portion of the Debentures into Common Stock and
thereupon to deliver such shares of Common Stock in accordance with
the provisions of this Section and to deliver to the Property Trustee
any new Debenture or Debentures for any resulting unconverted
principal amount delivered to the Conversion Agent by the Debenture
Trustee.
(v) No fractional shares of Common Stock will be issued as a result
of conversion, but, in lieu thereof, such fractional interest will be
paid in cash by the Depositor to the Conversion Agent in an amount
equal to the Current Market Price of the fractional share of the
Common Stock, and the Conversion Agent will in turn make such payment
to the Holder or Holders of Trust Securities so converted.
(vi) Nothing in this Section 4.3 shall limit the requirement of the
Trust to withhold taxes pursuant to the terms of the Trust Securities
or as set forth in this Trust Agreement or otherwise required of the
Property Trustee or the Trust to pay any amounts on account of such
withholdings.
SECTION 4.4. SPECIAL EVENT EXCHANGE OR REDEMPTION.
(a) If a Special Event shall occur and be continuing, the Property
Trustee shall direct the Conversion Agent to exchange all Outstanding
Trust Securities for Debentures having a principal amount equal to
the aggregate Liquidation Amount of the Trust Securities to be
exchanged and with accrued interest in an amount equal to any unpaid
Distribution on the Trust Securities; provided, however, that, in the
case of a Tax Event, the Depositor shall have the right to (i) direct
that less than all, or none, as appropriate, of the Trust Securities
be so exchanged if and for so long as the Depositor shall have
elected to pay any Additional Sums (as defined in the Indenture) such
that the amount received by Holders of Trust Securities not so
exchanged in respect of Distributions and other distributions are not
reduced as a result of such Tax Event, and shall not have revoked any
such election or failed to make such payments or (ii) cause the Trust
Securities to be redeemed in the manner set forth below. If a Tax
Event shall occur or be continuing, the Depositor shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem
the Debentures, in whole or in part, for cash within 90 days
following the occurrence of such Tax Event. Promptly following such
redemption, Trust Securities with an aggregate Liquidation Amount
equal to the aggregate principal amount of the Debentures so redeemed
will be redeemed by the Trust at the Optional Redemption Price
applicable in the event of a redemption upon the occurrence of a Tax
Event on a pro rata basis.
(b) Notice of any exchange pursuant to this Section 4.4 (an "Exchange
Notice") of the Trust Securities, which Exchange Notice shall be
irrevocable, will be given by the Property Trustee by first-class
mail to the Depositor and to each record Holder of Trust Securities
to be exchanged not fewer than 30 nor more than 60 days prior to the
date fixed for exchange thereof. For purposes of the calculation of
the date of exchange and the dates on which notices are given
pursuant to this paragraph (b), an Exchange Notice shall be deemed to
be given on the day such notice is first mailed by first-class mail,
postage prepaid, to each Holder. Each Exchange Notice shall be
addressed to each Holder of Trust Securities at the address of such
Holder appearing in the books and records of the Trust. Each Exchange
Notice shall state: (A) the exchange date; (B) the aggregate
Liquidation Amount and any unpaid Distributions on the Trust
Securities to be exchanged and the aggregate principal amount and any
accrued interest on the Debentures to be exchanged therefor; (C) that
on the exchange date the Trust Securities to be so exchanged shall be
exchanged for Debentures and that Distributions on the Trust
Securities so exchanged will cease to accumulate on and after said
date; (D) the record date for the determination of Holders of Trust
Securities to be exchanged as provided in Section 4.4(g); and (E) the
identity of the Conversion Agent, if any, and the place or places
where each Trust Certificate to be exchanged is to be surrendered in
exchange for Debentures. No defect in the Exchange Notice or in the
mailing thereof with respect to any Trust Security shall affect the
validity of the exchange proceedings for any other Trust Security.
(c) In the event that fewer than all the Outstanding Preferred
Securities are to be exchanged, then, on the exchange date, the
particular Preferred Securities to be exchanged will be selected by
the Property Trustee from the Outstanding Preferred Securities not
previously called for redemption or exchange on a pro rata basis.
Any Preferred Securities Certificate that is to be exchanged only in
part shall be surrendered with due endorsement or by a written
instrument of transfer fully executed by the Holder thereof (or its
attorney duly authorized in writing) and the Trust shall prepare and
deliver to such Holder, without service charge, a new Preferred
Securities Certificate or Certificates in aggregate stated
Liquidation Amount equal to, and in exchange for, the unredeemed
portion of the Preferred Securities Certificate so surrendered. The
Common Securities shall be exchanged in a similar manner.
(d) In the event of an exchange pursuant to this Section 4.4, on the
date fixed for any such exchange, the certificates representing the
Preferred Securities to be so exchanged will be deemed to represent
Debentures having a principal amount equal to the aggregate stated
Liquidation Amount of such Preferred Securities until such
certificates are presented to the Conversion Agent for exchange for
definitive certificates representing Debentures and all rights of the
Holders of the Preferred Securities so exchanged will cease, except
for the right of such Holders to receive Debentures. The Common
Securities shall be exchanged in a similar manner.
(e) Each Holder, by becoming a party to this Trust Agreement pursuant
to Section 10.11 of this Trust Agreement, will be deemed to have
agreed to be bound by these exchange provisions in regard to the
exchange of Trust Securities for Debentures pursuant to the terms
described above.
(f) Nothing in this Section 4.4 shall limit the requirement of the
Trust to withhold taxes pursuant to the terms of the Trust Securities
or as set forth in this Trust Agreement or otherwise require the
Property Trustee or the Trust to pay any amounts on account of such
withholdings.
(g) An exchange of Trust Securities for Debentures pursuant to this
Section 4.4 shall be made to Holders of Trust Securities as they
appear on the Securities Register for Trust Securities on the
relevant record date, which shall be the date which is the fifteenth
day (whether or not a Business Day) preceding the exchange date.
SECTION 4.5. SUBORDINATION OF COMMON SECURITIES. Payment of
Distributions on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made PRO RATA based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date an Event of Default shall have occurred and be continuing,
no payment of any Distribution on, or the Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions on all
Outstanding Preferred Securities for all Distribution periods terminating
on or prior thereto, or in the case of payment of the Redemption Price the
full amount of such Redemption Price on all Outstanding Preferred
Securities, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions on, or the Redemption
Price of, Preferred Securities then due and payable.
SECTION 4.6. PAYMENT PROCEDURES. Payments in respect of the Preferred
Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register.
Payments in respect of the Common Securities shall be made in such manner
as shall be mutually agreed between the Property Trustee and the Holder of
the Common Securities.
SECTION 4.7. TAX RETURNS AND REPORTS. The Administrative Trustees
shall prepare (or cause to be prepared), at the Depositor's expense, and
file all United States Federal, State and local tax and information
returns and reports required to be filed by or in respect of the Trust. In
this regard, the Administrative Trustees shall (a) prepare and file (or
cause to be prepared or filed) Form 1041 or the appropriate Internal
Revenue Service form required to be filed in respect of the Trust in each
taxable year of the Trust and (b) prepare and furnish (or cause to be
prepared and furnished) to each Security Holder a Form 1099 or the
appropriate Internal Revenue Service form required to be furnished to such
Security Holder or the information required to be provided on such form.
The Administrative Trustees shall provide the Depositor with a copy of all
such returns, reports and schedules promptly after such filing or
furnishing. The Trustees shall comply with United States Federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Security Holders under the
Trust Securities.
SECTION 4.8. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon
receipt under the Debentures of Additional Sums, the Property Trustee,
upon receipt of written notice from the Depositor or the Administrative
Trustees, shall promptly pay from such Additional Sums any taxes, duties
or governmental charges of whatsoever nature (other than withholding
taxes) imposed on the Trust by the United States or any other taxing
authority.
SECTION 4.9. PAYMENTS UNDER INDENTURE. Any amount payable hereunder
to any Holder of Preferred Securities shall be reduced by the amount of
any corresponding payment such Holder has directly received pursuant to
Section 5.8 of the Indenture in accordance with the terms of Section 6.8
hereof.
ARTICLE 5 TRUST SECURITIES CERTIFICATES
SECTION 5.1. INITIAL OWNERSHIP. Upon the creation of the Trust and
until the issuance of the Trust Securities, and at any time during which
no Trust Securities are Outstanding, the Depositor shall be the sole
beneficial owner of the Trust.
SECTION 5.2. THE TRUST SECURITIES CERTIFICATES. The Preferred
Securities Certificates shall be issued in minimum denominations of $10
Liquidation Amount and integral multiples of $10 in excess thereof, and
the Common Securities Certificates shall be issued in denominations of $10
Liquidation Amount and integral multiples thereof. The consideration
received by the Trust for the issuance of the Trust Securities shall
constitute a contribution to the capital of the Trust and shall not
constitute a loan to the Trust. The Trust Securities will be represented
by one or more certificates in registered, certificated form. The Common
Securities Certificate shall be in the form attached hereto as Exhibit B,
and the Preferred Securities Certificates shall be in the form attached
hereto as Exhibit C. The Trust Securities Certificates shall be executed
on behalf of the Trust by manual or facsimile signature of at least one
Administrative Trustee and authenticated by the Property Trustee. Trust
Securities Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been
affixed, authorized to sign on behalf of the Trust, shall be validly
issued and entitled to the benefit of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to
be so authorized prior to the delivery of such Trust Securities
Certificates or did not hold such offices at the date of delivery of such
Trust Securities Certificates. A transferee of a Trust Securities
Certificate shall become a Security Holder, and shall be entitled to the
rights and subject to the obligations of a Security Holder hereunder, upon
due registration of such Trust Securities Certificate in such transferee's
name pursuant to Section 5.4.
SECTION 5.3. DELIVERY OF TRUST SECURITIES CERTIFICATES. On the
Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections
2.4 and 2.5, to be executed on behalf of the Trust and delivered to or
upon the written order of the Depositor to the respective purchasers
thereof without further corporate action by the Depositor, in authorized
denominations. A Trust Security Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the
Property Trustee. The signature shall be conclusive evidence that the
Trust Security Certificate has been authenticated under this Trust
Agreement. Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Trust Security
Certificates for original issue. The Property Trustee may appoint an
authenticating agent acceptable to the Administrative Trustees to
authenticate Trust Security Certificates. An authenticating agent may
authenticate Trust Security Certificates whenever the Property Trustee may
do so. Each reference in this Trust Agreement to authentication by the
Property Trustee includes authentication by such agent. An authenticating
agent has the same rights as the Property Trustee to deal with the
Depositor or an Affiliate with respect to the authentication of Trust
Securities.
SECTION 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES. The Securities Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 5.8, a Securities
Register in which, subject to such reasonable regulations as it may
prescribe, the Securities Registrar shall provide for the registration of
Preferred Securities Certificates and Common Securities Certificates
(subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Trust
Securities Certificates as herein provided. The Property Trustee shall be
the initial Securities Registrar.
Subject to any provisions of this Trust Agreement regarding
restrictions on transfer, upon surrender for registration of transfer of
any Preferred Security at an office or agency of the Securities Registrar
designated pursuant to Section 5.8 for such purpose, an Administrative
Trustee shall execute on behalf of the Trust by manual or facsimile
signature, and the Property Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new
Preferred Securities of any authorized denominations and of a like
aggregate principal amount and bearing such restrictive legends as may be
required by this Trust Agreement.
At the option of the Holder, and subject to the other provisions of
this Section 5.4, Preferred Securities may be exchanged for other
Preferred Securities of any authorized denomination and of a like
Liquidation Amount, upon surrender of the Preferred Securities to be
exchanged at any such office or agency. Whenever any Preferred Securities
are so surrendered for exchange, an Administrative Trustee shall execute
on behalf of the Trust by manual or facsimile signature, and the Property
Trustee shall authenticate and deliver, the Preferred Securities which the
Holder making the exchange is entitled to receive. All Preferred
Securities issued upon any registration of transfer or exchange of
Preferred Securities shall be entitled to the same benefits under this
Trust Agreement, as the Securities surrendered upon such registration of
transfer or exchange. Every Preferred Security presented or surrendered
for registration of transfer or for exchange shall (if so requested by the
Depositor or the Securities Registrar) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Depositor
and the Securities Registrar duly executed, by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for
any registration of transfer or exchange of Preferred Securities
Certificates, but the Securities Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Preferred Securities
Certificates.
SECTION 5.5. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar
shall receive evidence to its satisfaction of the destruction, loss or
theft of any Trust Securities Certificate and (b) there shall be delivered
to the Securities Registrar and the Administrative Trustees such security
or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Securities Certificate shall
have been acquired by a bona fide purchaser, the Administrative Trustees,
or any one of them, on behalf of the Trust shall execute and make
available for authentication and delivery, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Securities
Certificate, a new Trust Securities Certificate of like denomination. In
connection with the issuance of any new Trust Securities Certificate under
this Section, the Securities Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicative Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive
evidence of an undivided beneficial interest in the assets of the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Trust Securities Certificate shall be found at any time.
SECTION 5.6. PERSONS DEEMED SECURITY HOLDERS. The Property Trustee
and the Securities Registrar shall treat the Person in whose name any
Trust Securities Certificate shall be registered in the Securities
Register as the owner of such Trust Securities Certificate for the purpose
of receiving Distributions and for all other purposes whatsoever, and
neither the Property Trustee nor the Securities Registrar shall be bound
by any notice to the contrary.
SECTION 5.7. ACCESS TO LIST OF SECURITY HOLDERS' NAMES AND ADDRESSES.
The Administrative Trustees or the Depositor shall furnish or cause to be
furnished (unless the Property Trustee is acting as Securities Registrar
with respect to the Trust Securities under the Trust Agreement) a list, in
such form as the Property Trustee may reasonably require, of the names and
addresses of the Security Holders as of the most recent record date (a) to
the Property Trustee, quarterly at least 5 Business Days before each
Distribution Date, and (b) to the Property Trustee, promptly after receipt
by the Depositor of a written request therefor from the Property Trustee
in order to enable the Property Trustee to discharge its obligations under
this Trust Agreement, in each case to the extent such information is in
the possession or control of the Administrative Trustees or the Depositor
and is not identical to a previously supplied list or has not otherwise
been received by the Property Trustee in its capacity as Securities
Registrar. The rights of Security Holders to communicate with other
Security Holders with respect to their rights under this Trust Agreement
or under the Trust Securities, and the corresponding rights of the Trustee
shall be as provided in the Trust Indenture Act, except to the extent
Section 3819 of the Delaware Business Trust Act would require greater
access to such information, in which case the latter shall apply. Each
Holder, by receiving and holding a Trust Securities Certificate, shall be
deemed to have agreed not to hold the Depositor, the Property Trustee or
the Administrative Trustees accountable by reason of the disclosure of its
name and address, regardless of the source from which such information was
derived.
SECTION 5.8. MAINTENANCE OF OFFICE OR AGENCY. The Securities
Registrar shall maintain in the city of Charlotte, North Carolina an
office or offices or agency or agencies where Preferred Securities
Certificates may be surrendered for registration of transfer, exchange or
conversion and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The Securities
Registrar initially designates 1525 West W.T. Harris Boulevard, 3C3,
Charlotte, North Carolina 28299, as its principal corporate trust office
for such purposes. The Securities Registrar shall give prompt written
notice to the Depositor and to the Security Holders of any change in the
location of the Securities Register or any such office or agency.
SECTION 5.9. APPOINTMENT OF PAYING AGENT. The Trust shall maintain in
Charlotte, North Carolina, an office or agency (the "Paying Agent") where
the Preferred Securities may be presented for payment. The Paying Agent
shall make Distributions to Security Holders from the Payment Account and
shall report the amounts of such Distributions to the Property Trustee and
the Administrative Trustees. Any Paying Agent shall have the revocable
power to withdraw funds from the Payment Account for the purpose of making
the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine
in their sole discretion that the Paying Agent shall have failed to
perform its obligations under this Trust Agreement in any material
respect. The Paying Agent shall initially be the Property Trustee, and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Depositor. Any Person acting as Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee and the Depositor. In the event that the
Property Trustee shall no longer be the Paying Agent or a successor Paying
Agent shall resign or its authority to act be revoked, the Administrative
Trustees shall appoint a successor that is acceptable to the Property
Trustee and the Depositor to act as Paying Agent (which shall be a bank or
trust company). Each successor Paying Agent or any additional Paying Agent
shall agree with the Trustees that, as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it
for payment to the Security Holders in trust for the benefit of the
Security Holders entitled thereto until such sums shall be paid to each
Security Holder. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon removal of a Paying Agent such Paying Agent
shall also return all funds in its possession to the Property Trustee. The
provisions of Sections 8.1, 8.3 and 8.6 shall apply to the Property
Trustee also in its role as Paying Agent, for so long as the Property
Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to
the Paying Agent shall include any co-paying agent unless the context
requires otherwise.
SECTION 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date provided for in Section 2.5, the Depositor shall acquire
beneficial and record ownership of the Common Securities. The Depositor
has covenanted in the Indenture to maintain directly or indirectly 100%
ownership of the Common Securities; provided that any permitted successor
of the Company under the Indenture may succeed to the Company's ownership
of the Common Securities. To the fullest extent permitted by law, any
attempted transfer of the Common Securities in violation of that covenant
shall be void. The Administrative Trustees shall cause each Common
Securities Certificate to contain a legend stating, "THIS CERTIFICATE IS
NOT TRANSFERABLE EXCEPT TO AN ENTITY WHOLLY OWNED BY MERRY LAND
PROPERTIES, INC. OR TO CERTAIN SUCCESSORS OF MERRY LAND PROPERTIES, INC."
SECTION 5.11. COMMON SECURITIES CERTIFICATE. A single Common
Securities Certificate representing the Common Securities shall initially
be issued to the Depositor in the form of a definitive Common Securities
Certificate. The Common Securities Certificate shall be in the form
attached hereto as Exhibit B.
SECTION 5.12. RIGHTS OF SECURITY HOLDERS. The legal title to the
Trust Property is vested exclusively in the Property Trustee (in its
capacity as such) in accordance with Section 2.9, and the Security Holders
shall not have any right or title therein other than the undivided
beneficial interest in the assets of the Trust conferred by their Trust
Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described
below. The Trust Securities shall be personal property giving only the
rights specifically set forth therein and in this Trust Agreement. The
Trust Securities shall have no preemptive or similar rights and, when
issued and delivered to Security Holders against payment of the purchase
price therefor, will be fully paid and nonassessable undivided beneficial
interests in the assets of the Trust. The Holders of the Trust Securities,
in their capacities as such, shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of
Delaware.
ARTICLE 6 ACT OF SECURITY HOLDERS; MEETINGS; VOTING
SECTION 6.1. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section, in Section 8.2 and 10.2 and
in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner
otherwise control the administration, operation and management of the
Trust or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Trust Securities
Certificates, be construed so as to constitute the Security Holders
from time to time as partners or members of an association.
(b) Subject to Section 8.2 hereof, if an Event of Default with
respect to the Preferred Securities has occurred and been
subsequently cured, waived or otherwise eliminated, the provisions of
Section 6.1(b)(ii) hereof shall apply. During the period commencing
on the date of the occurrence of an Event of Default with respect to
the Preferred Securities and ending on the date when such Event of
Default is cured, waived or otherwise eliminated, the provisions of
Section 6.1(b)(i) shall apply.
(i) The Holders of a majority in aggregate Liquidation Amount of
the Preferred Securities will have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Property Trustee or to exercise any trust or
power conferred upon the Property Trustee under the Trust
Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the
Debentures but excluding the right to direct the Property
Trustee to consent to an amendment, modification or termination
of the Indenture (which shall be as provided below).
Furthermore, the Holders of a majority in aggregate Liquidation
Amount of the Preferred Securities shall have the exclusive
right to appoint, remove or replace the Property Trustee and the
Delaware Trustee, subject to Article 8 of this Trust Agreement.
So long as any Debentures are held by the Property Trustee, the
Trustees shall not (A) direct the time, method and place of
conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on
the Debenture Trustee with respect to such Debentures, (B) waive
any past default which is waivable under Section 5.13 of the
Indenture, (C) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be
due and payable or (D) consent to any amendment, modification or
termination of the Indenture or the Debentures, where such
consent shall be required, without, in each case, obtaining the
prior approval of the Holders of a majority in aggregate
Liquidation Amount of all Outstanding Preferred Securities
(except in the case of clause (D), which consent, in the event
that no Event of Default shall occur and be continuing, shall be
of the Holders of a majority in aggregate Liquidation Amount of
all Trust Securities, voting together as a single class);
provided, however, that where a consent under the Indenture
would require the consent of each holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee
without the prior written consent of each Holder of Preferred
Securities. The Trustees shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred
Securities, except by a subsequent vote of the Holders of the
Preferred Securities. The Property Trustee shall notify all
Holders of record of the Preferred Securities of any notice of
default received from the Debenture Trustee with respect to the
Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of
the foregoing actions, the Trustees shall, at the expense of the
Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust will not be classified as
an association taxable as a corporation or partnership for
United States Federal income tax purposes on account of such
action.
(ii) Subject to Section 8.2 of this Trust Agreement and only
after the Event of Default with respect to the Preferred
Securities has been cured, waived, or otherwise eliminated the
Holders of a majority in aggregate Liquidation Amount of the
Common Securities will have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the Property Trustee or to exercise any trust or power
conferred upon the Property Trustee under the Trust Agreement,
including the right to direct the Property Trustee to exercise
the remedies available to it as a holder of the Debentures but
excluding the right to direct the Property Trustee to consent to
an amendment, modification or termination of the Indenture
(which shall be as provided below). So long as any Debentures
are held by the Property Trustee, the Trustees shall not (A)
direct the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee, or executing
any trust or power conferred on the Debenture Trustee with
respect to such Debentures, (B) waive any past default which is
waivable under Section 5.13 of the Indenture, (C) exercise any
right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (D) consent to
any amendment, modification or termination of the Indenture or
the Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the Holders of a
majority in aggregate Liquidation Amount of all Common
Securities (except in the case of clause (D), which consent, in
the event that no Event of Default shall occur and be
continuing, shall be of the Holders of a majority in aggregate
Liquidation Amount of all Trust Securities, voting together as a
single class); provided, however, that where a consent under the
Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of
Common Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of
the Common Securities, except by a subsequent vote of the
Holders of the Common Securities. The Property Trustee shall
notify all Holders of record of the Common Securities of any
notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the
foregoing approvals of the Holders of the Common Securities,
prior to taking any of the foregoing actions, the Trustees
shall, at the expense of the Depositor, obtain an Opinion of
Counsel experienced in such matters to the effect that the Trust
will not be classified as an association taxable as a
corporation or partnership for United States Federal income tax
purposes on account of such action.
(iii) The provisions of this Section 6.1(b) and Section 6.1(a)
of this Trust Agreement shall be in lieu of Section 316(a)(1)(A)
of the Trust Indenture Act, and such Section 316(a)(1)(A) is
hereby expressly excluded from this Trust Agreement and the
Preferred Securities, as permitted by the Trust Indenture Act.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect the dissolution, winding-up
or termination of the Trust, other than pursuant to the terms of this
Trust Agreement, then the Holders of Outstanding Preferred Securities
as a class will be entitled to vote on such amendment or proposal and
such amendment or proposal shall not be effective except with the
approval of the Holders of a majority in aggregate Liquidation Amount
of the Outstanding Preferred Securities.
SECTION 6.2. NOTICE OF MEETINGS. Notice of all meetings of the
Holders of the Preferred Securities, stating the time, place and purpose
of the meeting, shall be given by the Property Trustee pursuant to Section
10.8 to each Preferred Security Holder of record, at its registered
address, at least 15 days and not more than 90 days before the meeting. At
any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
SECTION 6.3. MEETINGS OF PREFERRED SECURITY HOLDERS. No annual
meeting of Security Holders is required to be held. The Administrative
Trustees, however, shall call a meeting of Security Holders to vote on any
matter upon the written request of the Preferred Security Holders of
record of 25% of the Preferred Securities (based upon their Liquidation
Amount), and the Administrative Trustees or the Property Trustee may, at
any time in their discretion, call a meeting of the Holders of Preferred
Securities to vote on any matters as to which such Holders are entitled to
vote. Holders of record of 50% of the Preferred Securities (based upon
their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Security Holders. If a quorum is present at a
meeting, an affirmative vote by the Holders of record of Preferred
Securities present, in person or by proxy, holding a majority of the
Preferred Securities (based upon their Liquidation Amount) held by Holders
of record of Preferred Securities present, either in person or by proxy,
at such meeting shall constitute the action of the Security Holders,
unless this Trust Agreement requires a greater number of affirmative
votes.
SECTION 6.4. VOTING RIGHTS. Security Holders shall be entitled to one
vote for each $10 of Liquidation Amount represented by their Trust
Securities in respect of any matter as to which such Security Holders are
entitled to vote. Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described
above, any of the Preferred Securities that are owned at such time by the
Depositor, the Trustees or any affiliate of any Trustee shall, for
purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
SECTION 6.5. PROXIES, ETC. At any meeting of Security Holders, any
Security Holders entitled to vote thereat may vote by proxy; provided that
no proxy shall be voted at any meeting unless it shall have been placed on
file with the Administrative Trustees, or with such other officer or agent
of the Trust as the Administrative Trustees may direct, for verification
prior to the time at which such vote shall be taken. Pursuant to a
resolution of the Property Trustee, proxies may be solicited in the name
of the Property Trustee or one or more officers of the Property Trustee.
Only Security Holders of record shall be entitled to vote. When Trust
Securities are held jointly by several Persons, any one of them may vote
at any meeting in person or represented by proxy in respect of such Trust
Securities, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in
respect of such Trust Securities. A proxy purporting to be executed by or
on behalf of a Security Holder shall be deemed valid unless challenged at
or prior to its exercise, and the burden of proving invalidity shall rest
on the challenger. No proxy shall be valid more than three years after its
date of execution.
SECTION 6.6. SECURITY HOLDER ACTION BY WRITTEN CONSENT. Any action
which may be taken by Security Holders at a meeting may be taken without a
meeting if Security Holders holding a majority of all Outstanding Trust
Securities (based upon their Liquidation Amount) entitled to vote in
respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent
to the action in writing.
SECTION 6.7. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the
purposes of determining the Security Holders who are entitled to notice of
and to vote at any meeting or by written consent, or to participate in any
Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of
any other action, the Property Trustee may from time to time fix a date,
not more than 90 days prior to the date of any meeting of Security Holders
or the payment of Distributions or other action, as the case may be, as a
record date for the determination of the identity of the Security Holders
of record for such purposes.
SECTION 6.8. ACTS OF SECURITY HOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided
or permitted by this Trust Agreement to be given, made or taken by
Security Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Security Holders
in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective
when such instrument or instruments are delivered to an Administrative
Trustee. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of
the Security Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Trust Agreement and (subject
to Section 8.1) conclusive in favor of the Trustees, if made in the manner
provided in this Section. The fact and date of the execution by any
Person of any such instrument or writing may be proved by the affidavit of
a witness of such execution or by a certificate of a notary public or
other officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a
signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be
proved in any other manner which any Trustee receiving the same deems
sufficient. The ownership of Preferred Securities shall be proved by the
Securities Register.
Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Security Holder of any Trust Security shall
bind every future Security Holder of the same Trust Security and the
Security Holder of every Trust Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustees or the Trust
in reliance thereon, whether or not notation of such action is made upon
such Trust Security. Without limiting the foregoing, a Security Holder
entitled hereunder to take any action hereunder with regard to any
particular Trust Security may do so with regard to all or any part of the
Liquidation Amount of such Trust Security or by one or more duly appointed
agents each of which may do so pursuant to such appointment with regard to
all or any part of such Liquidation Amount. If any dispute shall arise
between the Security Holders and the Administrative Trustees or among such
Security Holders or Trustees with respect to the authenticity, validity or
binding nature of any request, demand, authorization, direction, consent,
waiver or other Act of such Security Holder or Trustee under this Article
6, then the determination of such matter by the Property Trustee shall be
conclusive with respect to such matter.
Upon the occurrence and continuation of an Event of Default, the
Holders of Preferred Securities shall rely on the enforcement by the
Property Trustee of its rights as holder of the Debentures against the
Depositor. If the Property Trustee fails to enforce its rights as holder
of the Debentures after a request therefor by a Holder of Preferred
Securities, such holder may, to the extent permitted by applicable law,
proceed to enforce such rights directly against the Depositor.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Depositor
to pay interest or principal on the Debentures on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
Redemption Date), then a Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, for
enforcement of payment to such holder of the principal amount of or
interest on Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder after the
respective due date specified in the Debentures (a "Direct Action"). In
connection with any such Direct Action, the rights of the Depositor will
be subrogated to the rights of any Holder of the Preferred Securities to
the extent of any payment made by the Depositor to such Holder of
Preferred Securities as a result of such Direct Action.
SECTION 6.9. INSPECTION OF RECORDS. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust
shall be open to inspection by Security Holders during normal business
hours for any purpose reasonably related to such Security Holder's
interest as a Security Holder.
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE
AND THE DELAWARE TRUSTEE. The Property Trustee and the Delaware Trustee,
each severally on behalf of and as to itself or himself, hereby represents
and warrants for the benefit of the Depositor and the Security Holders
that (each such representation and warranty made by the Property Trustee
and the Delaware Trustee being made only with respect to itself or
himself):
(a) the Property Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of
the United States;
(b) the Property Trustee has full corporate and trust power,
authority and legal right to execute, deliver and perform its
obligations under this Trust Agreement and has taken all necessary
action to authorize the execution, delivery and performance by it of
this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by each of the Property Trustee and the Delaware Trustee
and constitutes the valid and legally binding agreement of the
Property Trustee and the Delaware Trustee enforceable against it or
him in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles; and
(d) the execution, delivery and performance by the Property Trustee
of this Trust Agreement have been duly authorized by all necessary
corporate or other action on the part of the Property Trustee and do
not require any approval of stockholders of the Property Trustee. The
execution, delivery and performance of this Trust Agreement by the
Property Trustee and the Delaware Trustee will not (i) violate the
Property Trustee's charter or by-laws or (ii) violate any law,
governmental rule or regulation of the United States or the State of
Delaware, as the case may be, governing the banking, corporate, or
trust powers of the Property Trustee or the Delaware Trustee (as
appropriate in context) or any order, judgment or decree applicable
to the Property Trustee or the Delaware Trustee.
SECTION 7.2. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR. The
Depositor hereby represents and warrants for the benefit of the Security
Holders that:
(a) the Trust Securities Certificates issued on the Closing Date on
behalf of the Trust have been duly authorized and will have been duly
and validly executed, issued and delivered by the Trustees pursuant
to the terms and provisions of, and in accordance with the
requirements of, this Trust Agreement and the Security Holders will
be, as of such date, entitled to the benefits of this Trust
Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of
the State of Delaware or any political subdivision thereof in
connection with the execution, delivery and performance by the
Property Trustee or the Delaware Trustee, as the case may be, of this
Trust Agreement.
ARTICLE 8 THE TRUSTEES
SECTION 8.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property
Trustee, by the Trust Indenture Act. The Property Trustee, before the
occurrence of any Event of Default and after the curing or waiving of
all Events of Default that may have occurred, shall undertake to
perform only such duties and obligations as are specifically set
forth in this Trust Agreement and the Trust Indenture Act and no
implied covenants shall be read into this Trust Agreement against the
Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 8.2) of which a
Responsible Officer of the Property Trustee has actual knowledge, the
Property Trustee shall exercise such rights and powers vested in it
by this Trust Agreement and the Trust Indenture Act, and use the same
degree of care and skill in its exercise, as a prudent individual
would exercise or use under the circumstances in the conduct of his
or her own affairs. Notwithstanding the foregoing, no provision of
this Trust Agreement shall require the Trustees to expend or risk
their own funds or otherwise incur any financial liability in the
performance of any of their duties hereunder, or in the exercise of
any of their rights or powers, if they shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of
or affording protection to the Trustees shall be subject to the
provisions of this Section. Nothing in this Trust Agreement shall be
construed to release the Administrative Trustees or Delaware Trustee
from liability for their own grossly negligent action, their own
grossly negligent failure to act, or their own willful misconduct. To
the extent that, at law or in equity, an Administrative Trustee or
Delaware Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to the Security Holders,
such Administrative Trustee or Delaware Trustee shall not be liable
to the Trust or to any Security Holder for such Administrative
Trustee's good faith reliance on the provisions of this Trust
Agreement. The provisions of this Trust Agreement, to the extent that
they restrict the duties and liabilities of the Administrative
Trustees or Delaware Trustee otherwise existing at law or in equity,
are agreed by the Depositor and the Security Holders to replace such
other duties and liabilities of the Administrative Trustees or
Delaware Trustee.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue
and proceeds from the Trust Property and only to the extent that
there shall be sufficient revenue or proceeds from the Trust Property
to enable the Property Trustee or a Paying Agent to make payments in
accordance with the terms hereof. Each Security Holder, by its
acceptance of a Trust Security, agrees that it will look solely to
the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that
the Trustees are not personally liable to it for any amount
distributable in respect of any Trust Security or for any other
liability in respect of any Trust Security. This Section 8.1(b) does
not limit the liability of the Trustees expressly set forth elsewhere
in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
aggregate Liquidation Amount of the Trust Securities relating to
the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this
Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures
and the Payment Account shall be to deal with such property as
fiduciary assets, subject to the protections and limitations on
liability afforded to the Property Trustee under this Trust
Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree
with the Depositor and money held by the Property Trustee need
not be segregated from other funds held by it except in relation
to the Payment Account maintained by the Property Trustee
pursuant to Section 3.1 and except to the extent otherwise
required by law;
(v) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor
with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or
misconduct of the Administrative Trustees or the Depositor; and
(vi) the Property Trustee shall have no duty or liability with
respect to the value, genuineness, existence or sufficiency of
the Debentures or the payment of any taxes or assessments
thereon or in connection therewith.
SECTION 8.2. NOTICE OF DEFAULTS.
(a) Within sixty (60) days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property
Trustee, the Property Trustee shall transmit, in the manner and to
the extent provided in Section 10.8, notice of such Event of Default
to the Holders of Preferred Securities, the Administrative Trustees
and the Depositor, unless such Event of Default shall have been cured
or waived; provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the
Debentures, the Property Trustee shall be fully protected in
withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or
responsible officers of the Property Trustee in good faith determines
that the withholding of such notice is in the interests of the
Holders of the Preferred Securities.
(b) Within ten days after the receipt of notice of the Depositor's
exercise of its right to extend the interest payment period for the
Debentures pursuant to the Indenture, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 10.8,
notice of such exercise to the Security Holders, unless such exercise
shall have been revoked.
(c) The Holders of a majority in Liquidation Amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of
the Preferred Securities and its consequences; provided that, if the
underlying Debenture Event of Default:
(i) is not waivable under the Indenture, the Event of Default
under this Trust Agreement shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures, including the
consent or vote of all such holders, (a "Super Majority") to be
waived under the Indenture, the Event of Default under this
Trust Agreement may only be waived by the vote of the Holders of
the same proportion in Liquidation Amount of the Preferred
Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. The
provisions of Section 6.1(b) and this Section 8.2(c) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such
Section 316(a)(1)(B) of the Trust Indenture Act is hereby
expressly excluded from this Trust Agreement and the Preferred
Securities, as permitted by the Trust Indenture Act. Upon such
waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising
therefrom shall be deemed to have been cured, for every purpose
of this Trust Agreement, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect
to the Preferred Securities or impair any right consequent
thereon. Any waiver by the Holders of the Preferred Securities
of an Event of Default with respect to the Preferred Securities
shall also be deemed to constitute a waiver by the Holders of
the Common Securities of any such Event of Default with respect
to the Common Securities for all purposes of this Trust
Agreement without any further act, vote, or consent of the
Holders of the Common Securities.
(d) The Holders of a majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the
Common Securities, waive any past Event of Default with respect to
the Common Securities and its consequences; provided that, if the
underlying Debenture Event of Default:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such
Event of Default under the Trust Agreement as provided below in
this Section 8.2(d), the Event of Default under this Trust
Agreement shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under this Trust
Agreement as provided below in this Section 8.2(d), the Event of
Default under this Trust Agreement may only be waived by the
vote of the Holders of the same proportion in Liquidation Amount
of the Common Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding; provided further, that each Holder of Common
Securities will be deemed to have waived any such Event of
Default and all Events of Default with respect to the Common
Securities and its consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived or
otherwise eliminated, and until such Events of Default have been
so cured, waived or otherwise eliminated, the Property Trustee
will be deemed to be acting solely on behalf of the Holders of
the Preferred Securities and only the Holders of the Preferred
Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The provisions of
Section 6.1(b) and this Section 8.2(d) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly
excluded from this Trust Agreement and the Preferred Securities,
as permitted by the Trust Indenture Act. Subject to the
foregoing provisions of this Section 8.2(d), upon such waiver,
any such default shall cease to exist and any Event of Default
with respect to the Common Securities arising therefrom shall be
deemed to have been cured for every purpose of this Trust
Agreement, but no such waiver shall extend to any subsequent or
other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(e) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred
Securities, constitutes a waiver of the corresponding Event of
Default under this Trust Agreement. The foregoing provisions of this
Section 8.2(e) shall be in lieu of Section 316(a)(1)(B) of the Trust
Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture
Act is hereby expressly excluded from this Trust Agreement and the
Preferred Securities, as permitted by the Trust Indenture Act.
SECTION 8.3. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 8.1:
(a) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting in good faith upon any
resolution, Opinion of Counsel, certificate, written representation
of a Holder or transferee such as of a certificate presented for
transfer, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if no Event of Default has occurred and is continuing and, (i) in
performing its duties under this Trust Agreement the Property Trustee
is required to decide between alternative courses of action or (ii)
in construing any of the provisions in this Trust Agreement the
Property Trustee finds the same ambiguous or inconsistent with any
other provisions contained herein or (iii) the Property Trustee is
unsure of the application of any provision of this Trust Agreement,
then, except as to any matter as to which the Holders of Preferred
Securities are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the
Depositor requesting written instructions of the Depositor as to the
course of action to be taken and the Property Trustee shall take such
action, or refrain from taking such action, as the Property Trustee
shall be instructed in writing to take, or to refrain from taking, by
the Depositor; provided, however, that if the Property Trustee does
not receive such instructions of the Depositor within ten Business
Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but
shall be under no duty to, take or refrain from taking such action
not inconsistent with this Trust Agreement as it shall deem advisable
and in the best interests of the Security Holders, in which event the
Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently
evidenced by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established
before undertaking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate or an Officers'
Certificate and an Opinion of Counsel which, upon receipt of such
request, shall be promptly delivered by the Depositor or the
Administrative Trustees;
(e) the Property Trustee shall have no duty to accomplish any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or reregistration
thereof;
(f) the Property Trustee may consult with counsel at the Depositor's
expense (which counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees) and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and
in accordance with such advice; and the Property Trustee shall have
the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the
request or direction of any of the Security Holders pursuant to this
Trust Agreement, unless such Security Holders shall have offered to
the Property Trustee reasonable security or indemnity satisfactory to
it against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Property Trustee's agents,
custodians or nominees) and liabilities which might be incurred by it
in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolutions, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, but the Property Trustee may
make such further inquiry or investigation into such facts or
custodian or nominee matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through its agents, custodians or nominees, attorneys or an
Affiliate; provided that the Property Trustee shall not be
responsible for the negligence or recklessness on the part of any
agent, attorney, custodian or nominee appointed by it with due care
hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders of the Trust Securities, which instructions may only be given
by the Holders of the same proportion in Liquidation Amount of the
Trust Securities as would be entitled to direct the Property Trustee
under the terms of the Trust Securities in respect of such remedy,
right or action, (ii) may refrain from enforcing such remedy or right
or taking such other action until such instructions are received, and
(iii) shall be fully protected in conclusively relying on or acting
in accordance with such instructions;
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Trust
Agreement;
(l) the Property Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Trust Agreement; and
(m) in the event that the Property Trustee is also acting as a Paying
Agent, Conversion Agent, and/or Securities Registrar hereunder, the
rights and protections afforded to the Property Trustee pursuant to
this Article 8 shall also be afforded to such Paying Agent,
Conversion Agent, and/or Securities Registrar.
No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it,
in any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable
law, to perform any such act or acts, or to exercise any such right,
power, duty or obligation. No permissive power or authority available to
the Property Trustee shall be construed to be a duty.
SECTION 8.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates
shall not be taken as the statements of the Trustees, and the Trustees do
not assume any responsibility for their correctness. The Trustees shall
not be accountable for the use or application by the Depositor of the
proceeds of the Debentures.
SECTION 8.5. MAY HOLD SECURITIES. Except as provided in the
definition of the term "Outstanding" in Article 1, any Trustee or any
other agent of any Trustee or the Trust, in its individual or any other
capacity, may become the owner or pledgee of Trust Securities and, subject
to Section 8.8 and 8.12, may otherwise deal with the Trust with the same
rights it would have if it were not a Trustee or such other agent.
SECTION 8.6. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay the Trustees from time to time reasonable compensation for
all services rendered by them hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any
provision of this Trust Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith;
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Trustee, (ii) any Affiliate of any
Trustee, (iii) any officer, director, shareholder, employee,
representative or agent of any Trustee, and (iv) any employee or
agent of the Trust or its Affiliates (referred to herein as an
"Indemnified Person") from and against any loss, damage, liability,
tax, penalty, expense or claim of any kind or nature whatsoever
incurred by such Indemnified Person by reason of the creation,
operation, dissolution or termination of the Trust or in connection
with the administration of the Trust or any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to
be within the scope of authority conferred on such Indemnified Person
by this Trust Agreement, except that no Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim
incurred by such Indemnified Person by reason of the negligence or
willful misconduct of such Indemnified Person with respect to such
acts or omissions;
(d) the indemnity provided to a Trustee under this Section 8.6 shall
survive any Trustee's resignation or removal or termination of this
Trust Agreement;
(e) no Trustee may claim any lien or charge on any Trust Property as
a result of any amount due pursuant to this Section 8.6; and
(f) the provisions of this Section 8.6 shall survive termination of
this Trust Agreement or the resignation of removal of any Trustee.
SECTION 8.7. PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as
such and has a combined capital and surplus of at least $50,000,000.
If any such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of its supervising or
examining authority, then for the purposes of this Section, the
combined capital and surplus of such person shall be deemed to be its
combined capital and surplus as set forth in its most recent report
of condition so published. If at any time the Property Trustee with
respect to the Trust Securities shall cease to be eligible in
accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified
in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of
age or a legal entity that shall act through one or more persons
authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a
natural person who is at least 21 years of age and a resident of the
State of Delaware or (ii) a legal entity with its principal place of
business in the State of Delaware and that otherwise meets the
requirements of applicable Delaware law that shall act through one or
more persons authorized to bind such entity.
SECTION 8.8. CONFLICTING INTERESTS. If the Property Trustee has or
shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Property Trustee shall either eliminate such interest
or resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Trust Agreement.
SECTION 8.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) Subject to Sections 8.9(b) and 8.9(c), Trustees (the "Relevant
Trustee") may be appointed or removed without cause at any time:
(i) until the issuance of any Trust Securities, by written
instrument executed by the Depositor; and
(ii) after the issuance of any Securities, by vote of the
Holders of a majority in Liquidation Amount of the Common
Securities voting as a class.
(b) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 8.9(a) until a successor possessing the
qualifications to act as a Property Trustee under Section 8.7 (a
"Successor Property Trustee") has been appointed and has accepted
such appointment by instrument executed by such Successor Property
Trustee and delivered to the Trust, the Depositor and the removed
Property Trustee.
(c) The Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 8.9(a) until a successor possessing the
qualifications to act as Delaware Trustee under Section 8.7 (a
"Successor Delaware Trustee") has been appointed and has accepted
such appointment by instrument executed by such Successor Delaware
Trustee and delivered to the Trust, the Depositor and the removed
Delaware Trustee.
(d) A Trustee appointed to office shall hold office until his, her or
its successor shall have been appointed or until his, her or its
death, removal, resignation, dissolution or liquidation. Any Trustee
may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and
delivered to the Depositor and the Trust, which resignation shall
take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective: (a) until a Successor Property
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee and
delivered to the Trust, the Depositor and the resigning Property
Trustee; or (b) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to
the Holders of the Securities;
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Depositor and the resigning Delaware
Trustee; and
(iii) no appointment of a successor Property Trustee or Delaware
Trustee shall be effective until all fees, charges, and expenses
of the retiring Property Trustee or retiring Delaware Trustee,
as the case may be, have been paid, or the application of this
provision shall have been waived in writing by the retiring
Property Trustee or the retiring Delaware Trustee, as the case
may be.
(e) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Property Trustee or Successor
Delaware Trustee, as the case may be, if the Property Trustee or the
Delaware Trustee delivers an instrument of resignation in accordance
with Section 8.9(d).
(f) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in
this Section 8.9 within 60 days after delivery pursuant to this
Section 8.9 of an instrument of resignation or removal, the Property
Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for
appointment of a Successor Property Trustee or Successor Delaware
Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
(h) The Property Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee
to all Security Holders in the manner provided in Section 10.8 and
shall give notice to the Depositor. Each notice shall include the
name of the successor Relevant Trustee and the address of its
Corporate Trust Office if it is the Property Trustee.
(i) Notwithstanding the foregoing or any other provision of this
Trust Agreement, in the event any Administrative Trustee or a
Delaware Trustee who is a natural person dies or becomes, in the
opinion of the Depositor, incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by
(a) the unanimous act of the remaining Administrative Trustees if
there are at least two of them or (b) otherwise by the Depositor
(with the successor in each case being a Person who satisfies the
eligibility requirement for Administrative Trustees or the Delaware
Trustee, as the case may be, set forth in Section 8.7).
SECTION 8.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Relevant Trustee, the retiring
Relevant Trustee and each successor Relevant Trustee shall execute and
deliver an amendment hereto wherein each successor Relevant Trustee shall
accept such appointment and which (a) shall contain such provisions as
shall be necessary or desirable to transfer and confirm to, and to vest
in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee and (b) shall add to or change any
of the provisions of this Trust Agreement as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than
one Relevant Trustee, it being understood that nothing herein or in such
amendment shall constitute such Relevant Trustees co-trustees and upon the
execution and delivery of such amendment the resignation or removal of the
retiring Relevant Trustee shall become effective to the extent provided
therein and each such successor Relevant Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Relevant Trustee; but, on request of the
Trust or any successor Relevant Trustee, such retiring Relevant Trustee
shall duly assign, transfer and deliver to such successor Relevant Trustee
all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder. Upon request of any such successor Relevant
Trustee, the Trust shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor Relevant Trustee
all such rights, powers and trusts referred to in the first or second
preceding paragraph, as the case may be. No successor Relevant Trustee
shall accept its appointment unless at the time of such acceptance such
successor Relevant Trustee shall be qualified and eligible under this
Article.
SECTION 8.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any Person into which the Property Trustee, the Delaware Trustee
or any Administrative Trustee that is not a natural person may be merged
or converted or with which it may be consolidated, or any Person resulting
from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of such Relevant Trustee,
shall be the successor of such Relevant Trustee hereunder; provided that
such Person shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
SECTION 8.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. If and when the Property Trustee shall be or become a creditor of
the Depositor or the Trust (or any other obligor upon the Debentures or
the Trust Securities), the Property Trustee shall be subject to and shall
take all actions necessary in order to comply with the provisions of the
Trust Indenture Act regarding the collection of claims against the
Depositor or Trust (or any such other obligor).
SECTION 8.13. REPORTS BY PROPERTY TRUSTEE.
(a) To the extent required by the Trust Indenture Act, within 60 days
after December 31 of each year commencing with December 31, 1999, the
Property Trustee shall transmit to all Security Holders in accordance
with Section 10.8 and to the Depositor, a brief report dated as of
such December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to
the best of its knowledge it has continued to be eligible under
said Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with all
of its obligations under this Trust Agreement during the twelve-
month period (or, in the case of the initial report, the period
since the Closing Date) ending on such date or, if the Property
Trustee has not complied in any material respects with such
obligations, a description of such noncompliance;
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any
action taken by the Property Trustee in the performance of its
duties hereunder which it has not previously reported and which
in its opinion materially affects the Trust Securities; and
(iv) such other information as is required by Section 313(a) of
the Trust Indenture Act.
(b) In addition, the Property Trustee shall transmit to Security
Holders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant
thereto.
(c) A copy of such report shall, at the time of such transmissions to
Holders, be filed by the Property Trustee with each national
securities exchange or self-regulatory organization upon which the
Trust Securities are listed, with the Commission and with the
Depositor.
SECTION 8.14. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the
Property Trustee such documents, reports and information as are required
by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 8.15. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each
of the Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be
given in the form of an Officers' Certificate.
SECTION 8.16. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five; provided that the Holder of
all of the Common Securities by written instrument may increase or
decrease the number of Administrative Trustees. Provided that the
Property Trustee meets the applicable requirements, the Property
Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section
8.16(a), or if the number of Trustees is increased pursuant to
Section 8.16(a), a vacancy shall occur.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Trust. Whenever a
vacancy in the number of Administrative Trustees shall occur, until
such vacancy is filled by the appointment of an Administrative
Trustee in accordance with Section 8.9, the Administrative Trustees
in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to
the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 8.17. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 2.7(a), including any registration statement
or amendment thereof filed with the Commission, or making any other
governmental filing.
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of
such things and the execution of such instruments either in the name
of the Trust or the names of the Administrative Trustees or otherwise
as the Administrative Trustees may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the
provisions of the Trust, as set forth herein.
ARTICLE 9 DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. DISSOLUTION UPON EXPIRATION DATE. Unless earlier
dissolved, the Trust shall automatically dissolve on December 31, 2029
(the "Expiration Date").
SECTION 9.2. EARLY DISSOLUTION. The first to occur of any of the
following events is an "Early Dissolution Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the occurrence of a Special Event except in the case of a Tax
Event following which the Depositor has elected (i) to pay any
Additional Sums (in accordance with Section 4.4) such that the net
amount received by Holders of Preferred Securities in respect of
Distributions are not reduced as a result of such Tax Event and the
Depositor has not revoked any such election or failed to make such
payments or (ii) to redeem all or some of the Debentures pursuant to
Section 4.4(a);
(c) the redemption, conversion or exchange of all of the Trust
Securities;
(d) an order for dissolution of the Trust shall have been entered by
a court of competent jurisdiction; and
(e) receipt by the Property Trustee of written notice from the
Depositor at any time (which direction is optional and wholly within
the discretion of the Depositor) of its intention to dissolve the
Trust and distribute the Debentures in exchange for the Preferred
Securities.
SECTION 9.3. DISSOLUTION. The respective obligations and
responsibilities of the Trustees and the Trust created and continued
hereby shall terminate upon the latest to occur of the following: (a) the
distribution by the Property Trustee to Security Holders upon the
liquidation of the Trust pursuant to Section 9.4, or upon the redemption
of all of the Trust Securities pursuant to Section 4.2, of all amounts
required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of all expenses owed by the Trust; (c) the
discharge of all administrative duties of the Administrative Trustees,
including the performance of any tax reporting obligations with respect to
the Trust or the Security Holders and (d) the filing of a certificate of
cancellation by the Trustees in accordance with Section 3810 of the
Delaware Business Trust Act.
SECTION 9.4. LIQUIDATION.
(a) If an Early Dissolution Event specified in clause (a), (b), (d)
or (e) of Section 9.2 occurs or upon the Expiration Date, the Trust
shall be liquidated by the Trustees as expeditiously as the Trustees
determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law,
to each Security Holder an aggregate principal amount of Debentures
equal to the aggregate Liquidation Amount of Trust Securities held by
such Holder, subject to Section 9.4(d). Notice of liquidation shall
be given by the Property Trustee by first-class mail, postage
prepaid, mailed not later than 30 nor more than 60 days prior to the
Liquidation Date to each Holder of Trust Securities at such Holder's
address as it appears in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that, from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will
be deemed to represent an aggregate principal amount of
Debentures equal to the aggregate Liquidation Amount of
Preferred Securities held by such Holder; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 9.4(d) applies, receive a Liquidation
Distribution, as the Administrative Trustees or the Property
Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Security Holders, the Property Trustee shall establish a record date
for such distribution (which shall be not more than 45 days prior to
the Liquidation Date and, unless the Property Trustee determines
otherwise, shall be the date which is the fifteenth day (whether or
not a Business Day) next preceding the Liquidation Date) and, either
itself acting as exchange agent or through the appointment of a
separate exchange agent, shall establish such procedures as it shall
deem appropriate to effect the distribution of Debentures in exchange
for the Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed
to be Outstanding, and (ii) all Trust Securities Certificates will be
deemed to represent an aggregate principal amount of Debentures equal
to the aggregate Liquidation Amount of Trust Securities held by such
Holders, and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid Distributions on such Trust Securities
until such certificates are presented to the Property Trustee for
transfer or reissuance.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the
Debentures in the manner provided herein is determined by the
Property Trustee not to be practicable, the Trust Property shall be
liquidated, and the Trust shall be wound-up or terminated, by the
Property Trustee in such manner as the Property Trustee determines,
and an Administrative Trustee shall prepare, execute and file the
certificate of cancellation with the Secretary of State of the State
of Delaware. In such event, Security Holders will be entitled to
receive out of the assets of the Trust available for distribution to
Security Holders, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, an amount equal to the
Liquidation Amount per Trust Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such winding-up or
termination, the Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust
Securities shall be paid on a PRO RATA basis (based upon Liquidation
Amounts). The Holder of the Common Securities will be entitled to
receive Liquidation Distributions upon any such winding-up or
termination PRO RATA (determined as aforesaid) with Holders of
Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, the Preferred Securities shall have a
priority over the Common Securities.
SECTION 9.5. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
OF THE TRUST. The Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, except pursuant to
this Section 9.5 or Section 9.4. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the
Property Trustee, the Delaware Trustee or the Holders of the Preferred
Securities, the Trust may merge with or into, consolidate, amalgamate, be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws
of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities
(the "Successor Securities") so long as the Successor Securities rank the
same as the Preferred Securities rank in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise,
(ii) the Depositor expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the
holder of the Debentures, (iii) the Successor Securities are listed, or
any Successor Securities will be listed upon notification of issuance, on
any national securities exchange or other organization on which the
Preferred Securities are then listed, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical
rating organization, (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the Holders of the Preferred
Securities (including any Successor Securities) in any material respect,
(vi) such successor entity has a purpose substantially identical to that
of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the Holders of
the Preferred Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the Holder's
interest in the new entity), (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease neither the Trust
nor such successor entity will be required to register as an investment
company under the 1940 Act, and (c) following such merger, consolidation,
amalgamation or replacement, the Trust or such successor entity will be
treated as a grantor trust for United States Federal income tax purposes
and (viii) the Depositor or any permitted successor or assignee owns,
directly or indirectly, all of the common securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the
consent of Holders of 100% in aggregate Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if
such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity to be
classified as other than a grantor trust for United States Federal income
tax purposes.
ARTICLE 10 MISCELLANEOUS PROVISIONS
SECTION 10.1. LIMITATION OF RIGHTS OF SECURITY HOLDERS. Other than as
set forth in Section 9.1, the death, incapacity, dissolution, bankruptcy
or termination of any Person having an interest, beneficial or otherwise,
in Trust Securities shall not operate to dissolve the Trust or terminate
this Trust Agreement, nor entitle the legal representatives or heirs of
such Person or any Security Holder for such Person to claim an accounting,
take any action or bring any proceeding in any court for a partition or
winding-up of the arrangements contemplated hereby, nor otherwise affect
the rights, obligations and liabilities of the parties hereto or any of
them.
SECTION 10.2. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Security
Holders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, which shall not be
inconsistent with the other provisions of this Trust Agreement, (ii)
to modify, eliminate or add to any provisions of this Trust Agreement
to such extent as shall be necessary to ensure that the Trust will be
classified for United States Federal income tax purposes as a grantor
trust at all times that any Trust Securities are Outstanding or to
ensure that the Trust will not be required to register as an
"investment company" under the 1940 Act, or to ensure that the Trust
will not be classified as other than a grantor trust for United
States Federal income tax purposes, or (iii) to comply with the
requirements of the Commission in order to effect or maintain the
qualification of this Trust Agreement under the Trust Indenture Act;
provided, however, that in the case of clause (i), such action shall
not adversely affect in any material respect the interests of any
Security Holder, and any such amendments of this Trust Agreement
shall become effective when notice thereof is given to the Security
Holders.
(b) Except as provided in Section 10.2(c) hereof, any provision of
this Trust Agreement may be amended by the Trustees and the Depositor
with (i) the consent of Holders representing not less than a majority
(based upon Liquidation Amounts) of the Trust Securities then
Outstanding, acting as a single class, and (ii) receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment
or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trustee's status as a grantor
trust for United States Federal income tax purposes or the Trust's
exemption from the status of an "investment company" under the 1940
Act; provided, however, if any amendment or proposal that would
adversely affect the powers, preferences or special rights of the
Trust Securities, whether by way of amendment or otherwise, would
adversely affect only the Preferred Securities or only the Common
Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of a majority in Liquidation
Amount of such class of Trust Securities.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Security Holder
(such consent being obtained in accordance with Section 6.3 or 6.6
hereof), this Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to
be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a Security Holder to institute suit for
the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous
consent of the Security Holders (such consent being obtained in
accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of
this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust
Agreement which would cause the Trust to fail or cease to qualify for
the exemption from the status of an "investment company" under the
1940 Act or be classified as other than a grantor trust for United
States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be
amended in a manner which imposes any additional obligation on the
Depositor.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a
copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which
affects its own rights, duties or immunities under this Trust
Agreement. The Property Trustee shall be entitled to receive an
Opinion of Counsel and an Officers' Certificate stating that any
amendment to this Trust Agreement is in compliance with this Trust
Agreement.
SECTION 10.3. SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.4. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE SECURITY HOLDERS, THE TRUST AND TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT IN THE TRUST SECURITIES SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES AND EXCLUDING SECTIONS
3540 AND 3561 OF TITLE 12 THEREOF.
SECTION 10.5. PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed for
any payment on any Trust Security shall be a day which is not a Business
Day, then such payment need not be made on such date but may be made on
the next succeeding day which is a Business Day (except as otherwise
provided in Section 4.1(a) and Section 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest
shall accrue thereon for the period after such date.
SECTION 10.6. SUCCESSORS. This Trust Agreement shall be binding upon
and shall inure to the benefit of any successor to the Depositor, the
Trust or the Relevant Trustee, including any successor by operation of
law. Except in connection with a transaction that is permitted under
Article 8 of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor
shall not assign its obligations hereunder.
SECTION 10.7. HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust
Agreement.
SECTION 10.8. REPORTS, NOTICES AND DEMANDS. Any report, notice,
demand or other communications which by any provision of this Trust
Agreement is required or permitted to be given or served to or upon any
Security Holder or the Depositor may be given or served in writing by
deposit thereof, first-class postage prepaid, in the United States mail,
hand delivery or facsimile transmission, in each case, addressed, (a) in
the case of a Holder of Preferred Securities, to such Holder as such
Holder's name and address may appear on the Securities Register; and (b)
in the case of the Holder of the Common Securities, to Merry Land
Properties, Inc., 624 Ellis Street, Augusta, Georgia 30901. Any notice,
demand or other communication which by any provision of this Trust
Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is
published by the Trust) as follows: (a) with respect to the Property
Trustee, to First Union National Bank, 999 Peachtree Street, N. E., Suite
110, Atlanta, Georgia 30309, (b) with respect to the Delaware Trustee, to
William J. Reif, The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801, with a copy of any such
notice to the Property Trustee at its address above, and (c) with respect
to the Administrative Trustees, to them at the address for notices to the
Depositor, marked "Attention: Mr. W. Tennent Houston." Such notice, demand
or other communication to or upon the Trust or the Property Trustee shall
be deemed to have been sufficiently given or made only upon actual receipt
of the writing by the Trust or the Property Trustee.
SECTION 10.9. AGREEMENT NOT TO PETITION. Each of the Trustees and the
Depositor agrees for the benefit of the Security Holders that, until at
least one year and one day after the Trust has been dissolved in
accordance with Article 9, it shall not file, or join in the filing of, a
petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the
United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or
otherwise join in the commencement of any proceeding against the Trust
under any Bankruptcy Law. In the event the Depositor takes action in
violation of this Section 10.9, the Property Trustee agrees, for the
benefit of Security Holders, that, at the expense of the Depositor, it
shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or
the commencement of such action and raise the defense that the Depositor
has agreed in writing not to take such action and should be stopped and
precluded therefrom and such other defenses, if any, as counsel for the
Trustee or the Trust may assert. The provisions of this Section 10.9 shall
survive the dissolution of this Trust Agreement.
SECTION 10.10. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE
ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement
and shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is the
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act,
such required provision shall control. If any provision of this Trust
Agreement modifies or excludes any provision of the Trust Indenture
Act which may be so modified or excluded, the latter provision shall
be deemed to apply to this Trust Agreement as so modified or to be
excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Trust Securities as
equity securities representing undivided beneficial interests in the
assets of the Trust.
SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST
THEREIN BY OR ON BEHALF OF A SECURITY HOLDER OR BENEFICIAL OWNER, WITHOUT
ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITY HOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS
OF THIS TRUST AGREEMENT AND AGREEMENT TO SUBORDINATION PROVISIONS AND
OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE
AGREEMENT OF THE TRUST, SUCH SECURITY HOLDER AND SUCH OTHERS THAT THE
TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE
AND EFFECTIVE AS THE AGREEMENT OF THE TRUST AND SUCH SECURITY HOLDER AND
SUCH OTHERS.
SECTION 10.12. COUNTERPARTS. This Trust Agreement may contain more
than one counterpart of the signature page and this Trust Agreement may be
executed by the affixing of the signature of each of the Trustees to one
of such counterpart signature pages. All of such counterpart signature
pages shall be read as though one, and they shall have the same force and
effect as though all of the signers had signed a single signature page.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
MERRY LAND PROPERTIES, INC.,
as Depositor
By:________________________________
Name: Title:
FIRST UNION NATIONAL BANK, as Property Trustee
By:________________________________
Name: Title:
__________________________________
WILLIAM J. REIF,
as Delaware Trustee
__________________________________
W. TENNENT HOUSTON,
as Administrative Trustee
__________________________________
MICHAEL N. THOMPSON,
as Administrative Trustee
__________________________________
DORRIE E. GREEN,
as Administrative Trustee
<PAGE>
EXHIBIT A -- Certificate of Trust of Merry Land Capital Trust
CERTIFICATE OF TRUST
OF
MERRY LAND CAPITAL TRUST
THIS Certificate of Trust of Merry Land Capital Trust (the "Trust"), dated
as of September 20, 1999, is being duly executed and filed by the
undersigned, as trustee, to form a business trust under the Delaware
Business Trust Act (12 DEL. C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is Merry Land
Capital Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware is William
J. Reif, The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon filing.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust, has
executed this Certificate of Trust as of the date first written above.
_____________________________________
William J. Reif, not in his individual
capacity but solely a trustee of the
Trust
<PAGE>
EXHIBIT B -- Form of Common Securities of Merry Land Capital Trust
THE SECURITIES EVIDENCED HEREBY AND THE COMMON STOCK ISSUABLE UPON THEIR
CONVERSION AND THE DEBENTURES THAT MAY BE ISSUED IN EXCHANGE THEREFOR HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE, IN COMPLIANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES
AND OTHER JURISDICTIONS.
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO AN ENTITY WHOLLY OWNED BY
MERRY LAND PROPERTIES, INC. OR TO CERTAIN SUCCESSORS OF MERRY LAND
PROPERTIES, INC.
Certificate Number ____Number of Common Securities _____
Certificate Evidencing Common Securities
of
Merry Land Capital Trust
Common Securities (Liquidation Amount $10 per Common Security)
Merry Land Capital Trust, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Merry
Land Properties, Inc. (the "Holder") is the registered owner of
______________ common securities of the Trust representing undivided
beneficial interests in the assets of the Trust (the "Common Securities").
Except as set forth in Section 5.10 of the Trust Agreement (as defined
below), the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of ______________, 1999, as the same may
be amended from time to time (the "Trust Agreement") including the
designation of the terms of the Common Securities as set forth therein.
The Holder is entitled to the benefits of the Common Securities Guarantee
Agreement entered into by Merry Land Properties, Inc., an Georgia
corporation, and First Union National Bank, as Guarantee Trustee, dated as
of ______________, 1999 (the "Guarantee"), to the extent provided therein.
The Trust will furnish a copy of the Trust Agreement and the Guarantee to
the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ______ day of ________________, 1999.
MERRY LAND CAPITAL TRUST
By:________________________________
Name:___________________________
Title: As Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Common Securities referred to in the within-mentioned
Trust Agreement.
Dated:_______________
FIRST UNION NATIONAL BANK,
as Property Trustee
By:______________________________
Name:___________________________
Title: Authorized Signatory
<PAGE>
EXHIBIT C -- Form of Preferred Securities of Merry Land Capital Trust
<PAGE>
EXHIBIT D -- Notice of Conversion
NOTICE OF CONVERSION
To: First Union National Bank, as Property Trustee of Merry Land Capital
Trust
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Preferred Securities, or the portion
below designated, into Common Shares of Merry Land Properties, Inc. (the
"Common Stock") in accordance with the terms of the Amended and Restated
Trust Agreement (as amended from time to time, the "Trust Agreement"),
dated as of _____________, 1999, by W. Tennent Houston, Michael N.
Thompson, and Dorrie E. Green as Administrative Trustees, William J. Reif,
as Delaware Trustee, First Union National Bank, as Property Trustee, Merry
Land Properties, Inc., as Depositor, and by the Holders, from time to
time, of undivided beneficial interests in the assets of the Trust to be
issued pursuant to the Trust Agreement. Pursuant to the aforementioned
exercise of the option to convert these Preferred Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined
in the Trust Agreement) to (i) exchange such Preferred Securities for a
portion of the Debentures (as that term is defined in the Trust Agreement)
held by the Trust (at the rate of exchange specified in the terms of the
Preferred Securities set forth in the Trust Agreement) and (ii)
immediately convert such Debentures on behalf of the undersigned, into
Common Stock (at the conversion rate specified in the terms of the
Preferred Securities set forth in the Trust Agreement).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check
in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Date:___________________
in whole _____
in part _____
Number of Preferred Securities to be converted:________________________
If a name or names other than the undersigned, please indicate in the
spaces below the name or names in which the shares of Common Stock are to
be issued, along with the address or addresses of such person or persons
________________________Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and
Social Security or Other Identifying Number
________________________Signature Guarantee:*________________________
_______________________*(Signature must be guaranteed by an institution
which is a member of the following recognized Signature Guaranty
Programs:(i) The Securities Transfer Agent Medallion Program (STAMP);
(ii) The New York Stock Exchange Medallion Program (MSP); (iii) The
Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee
programs acceptable to the Trustee.
MERRY LAND PROPERTIES, INC.
TO
FIRST UNION NATIONAL BANK
AS TRUSTEE
JUNIOR CONVERTIBLE SUBORDINATED INDENTURE
DATED AS OF ___________ __, 1999
____ % CONVERTIBLE SUBORDINATED DEBENTURES
DUE ____________, 2029
<PAGE>
Reconciliation and tie between the Trust Indenture Act of
1939(including cross-references to provisions of Sections 310 to and
including 318(a) which, pursuant to Section 318(c) of the Trust Indenture
Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and
govern the Junior Convertible Subordinated Indenture whether or not
physically contained therein) and the Junior Convertible Subordinated
Indenture, dated as of September ___, 1999.
INDENTURE ACT SECTION TRUST INDENTURE
Section 310(a)(1), (2) and (5) ......................................6.9
(a)(3) .................................................Not Applicable
(a)(4) .................................................Not Applicable
(b)..........................................................6.8, 6.10
(c).....................................................Not Applicable
Section 311(a) ......................................................6.13
(b)...............................................................6.13
(b)(2) .........................................................7.3(a)
Section 312(a) .......................................................7.1
(b).....................................................7.2(a), 7.2(b)
(c).............................................................7.2(c)
Section 313(a) ............................................7.3(a), 7.3(b)
(b).............................................................7.3(a)
(c).............................................................7.3(a)
(d).............................................................7.3(c)
Section 314(a)(1), (2),(3) and (4).....................................7.4
(b).....................................................Not Applicable
(c)(1).............................................................1.2
(c)(2).............................................................1.2
(c)(3)..................................................Not Applicable
(d).....................................................Not Applicable
(e)................................................................1.2
(f).....................................................Not Applicable
Section 315(a) ....................................................6.1(a)
(b)................................................................6.2
(c).............................................................6.1(b)
(d).............................................................6.1(c)
(d)(1).......................................................6.1(a)(i)
(d)(2)......................................................6.1(c)(ii)
(d)(3).....................................................6.1(c)(iii)
(e)...............................................................5.14
Section 316(a) ......................................................5.12
(a)(1)(B).........................................................5.13
(a)(2)..................................................Not Applicable
(b)................................................................5.8
(c).............................................................1.4(f)
Section 317(a)(1) .....................................................5.3
(a)(2).............................................................5.4
(b)...............................................................10.3
Section 318(a) .......................................................1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Convertible Subordinated Indenture.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.........1
SECTION 1.1 DEFINITIONS.........................................1
SECTION 1.2 COMPLIANCE CERTIFICATE AND OPINIONS.................9
SECTION 1.3 FORMS OF DOCUMENTS DELIVERED TO TRUSTEE............10
SECTION 1.4 ACTS OF HOLDERS....................................10
SECTION 1.5 NOTICES, ETC. TO TRUSTEE AND COMPANY...............11
SECTION 1.6 NOTICE TO HOLDERS; WAIVER..........................11
SECTION 1.7 CONFLICT WITH TRUST INDENTURE ACT..................12
SECTION 1.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS...........12
SECTION 1.9 SUCCESSORS AND ASSIGNS.............................12
SECTION 1.10 SEPARABILITY CLAUSE...............................12
SECTION 1.11 BENEFITS OF INDENTURE.............................12
SECTION 1.12 GOVERNING LAW.....................................12
SECTION 1.13 NON-BUSINESS DAYS.................................12
ARTICLE 2 DEBENTURE FORM.................................................12
SECTION 2.1 FORMS GENERALLY....................................13
SECTION 2.2 FORM OF FACE OF DEBENTURE..........................13
SECTION 2.3 FORM OF REVERSE OF DEBENTURE.......................14
SECTION 2.4 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION....19
SECTION 2.5 INITIAL ISSUANCE TO PROPERTY TRUSTEE...............20
ARTICLE 3 THE DEBENTURES.................................................20
SECTION 3.1 AMOUNT OF DEBENTURES...............................20
SECTION 3.2 DENOMINATIONS......................................20
SECTION 3.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.....20
SECTION 3.4 TEMPORARY DEBENTURES...............................20
SECTION 3.5 REGISTRATION, TRANSFER AND EXCHANGE................21
SECTION 3.6 MUTILATED, DESTROYED, LOST AND STOLEN DEBENTURES...21
SECTION 3.7 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.....22
SECTION 3.8 PERSONS DEEMED OWNERS..............................23
SECTION 3.9 CANCELLATION.......................................23
SECTION 3.10 COMPUTATION OF INTEREST...........................23
SECTION 3.11 DEFERRALS OF INTEREST PAYMENT DATES...............23
SECTION 3.12 RIGHT OF SET-OFF..................................24
SECTION 3.13 AGREED TAX TREATMENT..............................24
SECTION 3.14 CUSIP NUMBERS.....................................24
SECTION 3.15 DISTRIBUTION OF DEBENTURES........................25
ARTICLE 4 SATISFACTION AND DISCHARGE.....................................25
SECTION 4.1 SATISFACTION AND DISCHARGE OF INDENTURE............25
SECTION 4.2 APPLICATION OF TRUST MONEY.........................26
ARTICLE 5 REMEDIES.......................................................26
SECTION 5.1 DEBENTURE EVENTS OF DEFAULT........................26
SECTION 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.27
SECTION 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.....................................................28
SECTION 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM...................28
SECTION 5.5 TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION OF
DEBENTURES.....................................................29
SECTION 5.6 APPLICATION OF MONEY COLLECTED.....................29
SECTION 5.7 LIMITATION ON SUITS................................29
SECTION 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST. .........................................30
SECTION 5.9 RESTORATION OF RIGHTS AND REMEDIES.................31
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE....................31
SECTION 5.11 DELAY OR OMISSION NOT WAIVER......................31
SECTION 5.12 CONTROL BY HOLDERS................................31
SECTION 5.13 WAIVER OF PAST DEFAULTS...........................32
SECTION 5.14 UNDERTAKING FOR COSTS.............................32
SECTION 5.15 WAIVER OF USURY, STAY, OR EXTENSION LAWS..........33
ARTICLE 6 THE TRUSTEE....................................................33
SECTION 6.1 CERTAIN DUTIES AND RESPONSIBILITIES................33
SECTION 6.2 NOTICE OF DEFAULTS.................................34
SECTION 6.3 CERTAIN RIGHTS OF TRUSTEE..........................34
SECTION 6.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
DEBENTURES.....................................................35
SECTION 6.5 MAY HOLD DEBENTURES................................35
SECTION 6.6 MONEY HELD IN TRUST................................35
SECTION 6.7 COMPENSATION AND REIMBURSEMENT.....................35
SECTION 6.8 DISQUALIFICATION; CONFLICTING INTERESTS............36
SECTION 6.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY............36
SECTION 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR..
...............................................................37
SECTION 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR............38
SECTION 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.......................................................38
SECTION 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..
...............................................................39
SECTION 6.14 APPOINTMENT OF AUTHENTICATING AGENT...............39
ARTICLE 7 HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY...............40
SECTION 7.1 COMPANY TO FURNISH NAMES AND ADDRESSES OF HOLDERS..40
SECTION 7.2 PRESERVATION OF INFORMATION: COMMUNICATIONS TO
HOLDERS........................................................40
SECTION 7.3 REPORTS BY TRUSTEE.................................41
SECTION 7.4 REPORTS BY COMPANY.................................41
ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...........41
SECTION 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
...............................................................41
SECTION 8.2 SUCCESSOR CORPORATION SUBSTITUTED..................42
ARTICLE 9 SUPPLEMENTAL INDENTURES........................................43
SECTION 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS...
...............................................................43
SECTION 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS....43
SECTION 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES...............44
SECTION 9.4 EFFECT OF SUPPLEMENTAL INDENTURES..................45
SECTION 9.5 CONFORMITY WITH TRUST INDENTURE ACT................45
SECTION 9.6 REFERENCE IN DEBENTURES TO SUPPLEMENTAL INDENTURES..
...............................................................45
ARTICLE 10 COVENANTS.....................................................45
SECTION 10.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST........45
SECTION 10.2 MAINTENANCE OF OFFICE OR AGENCY...................45
SECTION 10.3 MONEY FOR DEBENTURE PAYMENTS TO BE HELD IN TRUST...
...............................................................46
SECTION 10.4 PAYMENT OF TAXES AND OTHER CLAIMS.................46
SECTION 10.5 STATEMENT AS TO COMPLIANCE........................47
SECTION 10.6 WAIVER OF CERTAIN COVENANTS.......................47
SECTION 10.7 ADDITIONAL SUMS...................................47
SECTION 10.8 ADDITIONAL COVENANTS..............................47
SECTION 10.9 PAYMENT OF EXPENSES OF THE TRUST..................48
ARTICLE 11 REDEMPTION OR EXCHANGE OF DEBENTURES..........................49
SECTION 11.1 ELECTION TO REDEEM; NOTICE TO TRUSTEE.............49
SECTION 11.2 SELECTION OF DEBENTURES TO BE REDEEMED............49
SECTION 11.3 NOTICE OF REDEMPTION..............................49
SECTION 11.4 DEPOSIT OF REDEMPTION PRICE.......................50
SECTION 11.5 DEBENTURES PAYABLE ON REDEMPTION DATE.............50
SECTION 11.6 DEBENTURES REDEEMED IN PART.......................51
SECTION 11.7 MANDATORY REDEMPTION..............................51
SECTION 11.8 OPTIONAL REDEMPTION...............................51
SECTION 11.9 EXCHANGE OF TRUST SECURITIES FOR DEBENTURES.......52
ARTICLE 12 SUBORDINATION OF DEBENTURES...................................52
SECTION 12.1 DEBENTURES SUBORDINATE TO SENIOR DEBT.............52
SECTION 12.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC....52
SECTION 12.3 PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF
DEBENTURES.....................................................53
SECTION 12.4 NO PAYMENT WHEN SENIOR DEBT IN DEFAULT............54
SECTION 12.5 PAYMENT PERMITTED IF NO DEFAULT...................54
SECTION 12.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT...54
SECTION 12.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.......55
SECTION 12.8 TRUSTEE TO EFFECTUATE SUBORDINATION...............55
SECTION 12.9 NO WAIVER OF SUBORDINATION PROVISIONS.............55
SECTION 12.10 NOTICE TO TRUSTEE................................55
SECTION 12.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT..............................................55
SECTION 12.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT..
...............................................................56
SECTION 12.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS...............................56
SECTION 12.14 ARTICLE APPLICABLE TO PAYING AGENTS..............56
SECTION 12.15 CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT..56
ARTICLE 13 CONVERSION OF DEBENTURES......................................56
SECTION 13.1 CONVERSION RIGHTS.................................56
SECTION 13.2 CONVERSION PROCEDURES.............................57
SECTION 13.3 EXPIRATION OF CONVERSION RIGHTS...................59
SECTION 13.4 CONVERSION PRICE ADJUSTMENTS......................59
SECTION 13.5 FUNDAMENTAL CHANGE................................63
SECTION 13.6 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.........64
SECTION 13.7 PRIOR NOTICE OF CERTAIN EVENTS....................65
SECTION 13.8 CERTAIN ADDITIONAL RIGHTS.........................65
SECTION 13.9 RESTRICTIONS ON COMMON STOCK ISSUABLE UPON
CONVERSION.....................................................66
SECTION 13.10 TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION
PRICE OR ADJUSTMENTS...........................................66
ANNEX A - Form of Trust Agreement of the Trust
ANNEX B - Form of Guaranty Agreement relating to Preferred Securities
<PAGE>
JUNIOR CONVERTIBLE SUBORDINATED INDENTURE, dated as of ___________
___, 1999 between MERRY LAND PROPERTIES, INC., a Georgia corporation (the
"COMPANY") having its principal office at 624 Ellis Street, Augusta,
Georgia 30901, and FIRST UNION NATIONAL BANK, a national banking
association ("BANK"), as Trustee (the "TRUSTEE").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its ____ % Convertible
Subordinated Debentures (the "DEBENTURES") of substantially the tenor
hereinafter provided which evidence loans made to the Company of the
proceeds from the issuance by Merry Land Capital Trust, a Delaware business
trust (the "TRUST"), of preferred trust interests in the Trust (the
"PREFERRED SECURITIES") and common interests in the Trust (the "COMMON
SECURITIES"), and to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered.
All things necessary to make the Debentures, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms,
have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Debentures by the Holders thereof, it
is mutually covenanted and agreed, for the equal and proportionate benefit
of all Holders of the Debentures, as follows:
ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS. For all purpose of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and the term "GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES" with respect to any computation required
or permitted hereunder shall mean such accounting principles
which are generally accepted at the date or time of such
computation; and
(d) the words "HEREIN" and "HEREUNDER" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"ACT," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"ADDITIONAL SUMS" has the meaning specified in Section 10.7.
"ADDITIONAL TAXES" means the sum of any additional taxes, duties and
other governmental charges to which the Trust has become subject from time
to time as a result of a Tax Event.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; PROVIDED, HOWEVER, that an Affiliate of
the Company shall be deemed not to include the Trust to which Debentures
have been issued. For the purposes of this definition, "CONTROL" when used
with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and
the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"APPLICABLE PRICE" means (c) in the case of a Non-Stock Fundamental
Change in which the holders of Common Stock receive only cash, the amount
of cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the Closing Prices for Common Stock
during the ten trading days prior to and including the record date for the
determination of the holders of Common Stock entitled to receive such
securities, cash, or other property in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change or, if there is no
such record date, the date upon which the holders of Common Stock shall
have the right to receive such securities, cash, or other property, in each
case as adjusted in good faith by the Company to appropriately reflect any
of the events referred to in Section 13.4.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Debentures.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or any committee of that board duly authorized to act hereunder.
"BOARD RESOLUTION" means a copy of the resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, or such committee of the Board of
Directors or officers of the Company to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the
Property Trustee under the Trust Agreement, is closed for business.
"CLOSING PRICE" means on any day the reported last sale price on such
day or, in case no sale takes place on such day, the average of the
reported closing bid and asked prices in each case on the NYSE Consolidated
Transactions Tape, the Nasdaq National Market or, if the stock is not
listed or admitted to trading on such Exchanges, on any other principal
national securities exchange on which such stock is listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by
any NYSE member firm, selected by the Board of Directors for that purpose.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of
1934, or if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties on such
date.
"COMMON SECURITIES" has the meaning specified in the first recital of
this Indenture.
"COMMON STOCK" means the Common Shares, without par value, of the
Company.
"COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board
of Directors) of the consideration received by holders of Common Stock
consists of common stock that for each of the ten consecutive trading days
prior to the record date for the determination of the holders of Common
Stock entitled to receive such common stock or, if there is no such record
date, the date on which the holders of Common Stock shall have the right to
receive such common stock, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the Nasdaq National Market; PROVIDED, HOWEVER, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change
and the outstanding Preferred Securities continue to exist as outstanding
Preferred Securities or (ii) not later than the occurrence of such
Fundamental Change, the outstanding Preferred Securities are converted into
or exchanged for shares of convertible preferred stock of an entity
succeeding to the business of the Company or a subsidiary thereof, which
convertible preferred stock has powers, preferences, and relative,
participating, optional, or other rights, and qualifications, limitations,
and restrictions, substantially similar to those of the Preferred
Securities.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"COMPANY REQUEST" and "COMPANY ORDER" means, respectively, the written
request or order signed in the name of the Company by its Chairman of the
Board, its Vice Chairman, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Controller, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"CONVERSION AGENT" has the meaning specified in Section 13.2.
"CONVERSION DATE" has the meaning specified in Section 13.2.
"CONVERSION PRICE" has the meaning specified in Section 13.1.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its duties and responsibilities as trustee hereunder
are to be administered, which office at the date hereof is located at 1525
West W. T. Harris Boulevard, 3C3, Charlotte, NC 28288.
"CURRENT MARKET PRICE" means for any day the last reported sale price,
regular way, on such day of Common Stock, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the NYSE Consolidated
Transactions Tape, or, if Common Stock is not listed or admitted to trading
on the NYSE on such day, on the principal national securities exchange on
which Common Stock is listed or admitted to trading, if Common Stock is
listed on a national securities exchange, or the NASDAQ National Market,
or, if Common Stock is not quoted or admitted to trading on such quotation
system, on the principal quotation system on which Common Stock may be
listed or admitted to trading or quoted, or, if not listed or admitted to
trading or quoted on any national securities exchange or quotation system,
the average of the closing bid and asked prices of Common Stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available in such manner, as furnished by any NYSE
member firm selected from time to time by the Board of Directors for that
purpose or, if not so available in such manner, as otherwise determined in
good faith by the Board of Directors.
"DEBENTURES" OR "DEBENTURE" means any debt securities or debt
security, as the case may be, authenticated and delivered under this
Indenture.
"DEBT" means, with respect to any Person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent,
(i) every obligation of such Person for money borrowed; (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person;
(iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business);
(v) every capital lease obligation of such Person, and (vi) every
obligation of the type referred to in clauses (i) through (v) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has guaranteed or is responsible for or liable, directly
or indirectly, as obligor or otherwise.
"DEFAULTED INTEREST" has the meaning specified in Section 3.7.
"DOLLAR" means the currency of the United States of America as at the
time of payment is legal tender for the payment of public and private
debts.
"DEBENTURE EVENTS OF DEFAULT" has the meaning specified in Article 5.
"EXPIRATION TIME" has the meaning specified in Section 13.4(e).
"EXTENSION PERIOD" has the meaning specified in Section 3.11.
"FUNDAMENTAL CHANGE" means the occurrence of any Transaction or event
in connection with a plan pursuant to which all or substantially all of
Common Stock shall be exchanged for, converted into, acquired for, or
constitute solely the right to receive securities, cash, or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise); PROVIDED, HOWEVER, in the case of a plan involving more than
one such Transaction or event, for purposes of adjustment of the conversion
price, such Fundamental Change shall be deemed to have occurred when
substantially all of Common Stock shall be exchanged for, converted into,
or acquired for or constitute solely the right to receive securities, cash,
or other property, but the adjustment shall be based upon consideration
that a holder of Common Stock received in such Transaction or event as a
result of which more than 50% of Common Stock shall have been exchanged
for, converted into, or acquired for or constitute solely the right to
receive securities, cash, or other property.
"GUARANTEE" means the guarantee by the Company of distributions on the
Preferred Securities of the Trust to the extent provided in the Guarantee
Agreement, substantially in the form attached hereto as Annex B, as amended
from time to time.
"HOLDER" means a Person in whose name a Debenture is registered in the
Securities Register.
"INDENTURE" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof.
"INTEREST PAYMENT DATE" means as to the Debentures the Stated Maturity
of an installment of interest on such Debentures.
"INTEREST RATE" means the rate of interest specified or determined as
specified in each Debenture as being the rate of interest payable on such
Debenture.
"INVESTMENT COMPANY EVENT" means, in respect of the Trust, the receipt
by the Property Trustee on behalf of the Trust of an Opinion of Counsel,
rendered by a law firm having a national tax and securities practice (which
opinion shall not have been rescinded by such law firm), to the effect
that, as a result of the occurrence of a change in law or regulation or a
change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a
"CHANGE IN 1940 ACT LAW"), there is more than an insubstantial risk that
the Trust is or will be considered an "investment company" that is required
to be registered under the 1940 Act, which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the Preferred
Securities of the Trust.
"JUNIOR SUBORDINATED PAYMENT" has the meaning specified in Section
12.2.
"MATURITY" when used with respect to the Debentures, means the date on
which the principal of the Debentures become due and payable as herein
provided, whether at the Stated Maturity or by declaration of acceleration,
call or redemption or otherwise.
"1940 ACT" means the Investment Company Act of 1940, as amended.
"NON-STOCK FUNDAMENTAL CHANGE" means any Fundamental Change other than
a Common Stock Fundamental Change.
"NOTICE OF CONVERSION" means the notice given by a Holder of Preferred
Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Securities for Debentures and to convert such
Debentures into Common Stock on behalf of such holder.
"NOTICE OF DEFAULT" has the meaning specified in Section 5.1(c).
"NYSE" means the New York Stock Exchange.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the
Chairman, Chief Executive Officer, President or a Vice President, and by
(ii) the Treasurer, an Assistant Treasurer, the Controller, the Secretary
or an Assistant Secretary of the Company, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Company, the Trust, or the Trustee, but who may not be an
employee thereof, and who shall be reasonably acceptable to the Trustee.
"OUTSTANDING" means, as of the date of determination, all Debentures
theretofore authenticated and delivered under this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Debentures for whose payment money in the necessary amount
has been theretofore irrevocably deposited with the Trustee or
any Paying Agent in trust for the Holders of such Debentures; and
(iii) Debentures in substitution for or in lieu of which other
Debentures have been authenticated and delivered or which have
been paid pursuant to Section 3.6, or which have been converted
into Common Stock pursuant to Section 13.1, unless proof
satisfactory to the Trustee is presented that any Debentures are
held by Holders in whose hands such Debentures are valid, binding
and legal obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Debentures have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debentures
owned by the Company or any other obligor upon the Debentures or any
Affiliate of the Company or such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the
Trustee shall be fully protected in conclusively relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Debentures which a Responsible Officer of the Trustee actually knows to be
so owned shall be so disregarded. Debentures so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Debentures and that the pledgee is not the Company
or any other obligor upon the Debentures or any Affiliate of the Company or
such other obligor. Upon request of the Trustee, the Company shall furnish
to the Trustee promptly an Officers' Certificate listing and identifying
all Debentures, if any, known by the Company to be owned or held by or for
the account of the Company, or any other obligor on the Debentures or any
Affiliate of the Company or such obligor, and, subject to the provisions of
Section 6.1, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of
the fact that all Debentures not listed therein are Outstanding for the
purpose of any such determination.
"PAYING AGENT" means the Trustee or any Person authorized by the
Company to pay the principal of or interest on any Debentures on behalf of
the Company.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PREDECESSOR DEBENTURE" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture, and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 3.6 in
lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence
the same debt as the lost, destroyed or stolen Debenture.
"PREFERRED SECURITIES" has the meaning specified in the first recital
of this Indenture.
"PROCEEDING" has the meaning specified in Section 12.2.
"PROPERTY TRUSTEE" means, in respect of the Trust, the commercial bank
or trust company identified as the "Property Trustee" in the Trust
Agreement, solely in its capacity as Property Trustee of the Trust under
the Trust Agreement and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
therein provided.
"PROVISIONAL REDEMPTION" has the meaning specified in Section 11.8.
"PURCHASED SHARES" has the meaning specified in Section 13.4(e).
"PURCHASER STOCK PRICE" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for common stock
received in such Common Stock Fundamental Change for the ten consecutive
trading days prior to and including the record date for the determination
of the holders of common stock entitled to receive such common stock or if
there is no such record date, the date on which the holders of common stock
shall have the right to receive such common stock, as adjusted in good
faith by the Company to appropriately reflect any of the events referred to
in Section 13.4.
"REDEMPTION DATE," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE" has the meaning specified in Section 11.3(b).
"REFERENCE DATE" has the meaning specified in Section 13.4(c).
"REFERENCE MARKET PRICE" initially means $______ (which is an amount
equal to _____% of the reported last sale price for Common Stock on
____________, 1999), and in the event of any adjustment of the Conversion
Price other than as a result of a Non-Stock Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of the initial
Reference Market Price to the initial Conversion Price of the Debentures.
"REGULAR RECORD DATE" means for the interest payable on any Interest
Payment Date the fifteenth day (whether or not a Business Day) next
preceding such Interest Payment Date.
"RESPONSIBLE OFFICER" when used with respect to the Trustee means any
officer assigned to the Trustee's Corporate Trust Office, including any
managing director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and having direct responsibility for the
administration of this Indenture, and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"RIGHTS" has the meaning specified in Section 13.2(f).
"SECURITIES REGISTER" AND "SECURITIES REGISTRAR" have the respective
meanings specified in Section 3.5.
"SENIOR DEBT" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of the Company, whether incurred on or prior to the
date of this Indenture or thereafter incurred, unless, in the instrument
creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right
of payment to the Debentures or to other Debt which is PARI PASSU with, or
subordinated to, the Debentures, PROVIDED, HOWEVER, that Senior Debt shall
not be deemed to include (a) any Debt of the Company which when incurred,
and without respect to any election under Section 1111(b) of the Bankruptcy
Reform Act of 1978, was without recourse to the Company, (b) any Debt of
the Company to any of its Subsidiaries, (c) Debt to any employee of the
Company, (d) any liability for taxes, (e) Debt or other monetary
obligations to trade creditors created or assumed by the Company or any of
its Subsidiaries in the ordinary course of business in connection with the
obtaining of goods, materials or services and (f) the Debentures.
"SPECIAL EVENT" means a Tax Event or an Investment Company Event.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"STATED MATURITY" when used with respect to the Debentures or any
installment of principal thereof or interest thereon means the date
specified in the Debentures as the fixed date on which the principal of the
Debentures or such installment of interest is due and payable.
"SUBSIDIARY" means any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly more than 50% of the outstanding shares of voting
stock. For purposes of this definition, "VOTING STOCK" means stock which
has voting power for the election of directors, whether at all times or
only so long as no senior class of stock has such voting power by reason of
any contingency.
"TAX EVENT" means the receipt by the Property Trustee on behalf of the
Trust of an Opinion of Counsel, rendered by a law firm having a national
tax and securities practice (which opinion shall not have been rescinded by
such law firm), to the effect that, as a result of any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein affecting taxation, or as a result
of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement or decision is announced on or
after the date of issuance of the Preferred Securities of the Trust and
does not pertain to the use of the proceeds of the issuance of the
Debentures, there is more than an insubstantial risk that (i) the Trust is,
or will be within 90 days of the date thereof, subject to United States
Federal income tax with respect to income received or accrued on the
Debentures, (ii) interest payable by the Company on the Debentures is not,
or within 90 days of the date thereof will not be, deductible, in whole or
in part, for United States Federal income tax purposes or (iii) the Trust
is, or will be within 90 days of the date thereof, subject to more than a
DEMINIMIS amount of other taxes, duties or other governmental charges.
"TRADING DAY" means (i) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
security exchange, a day on which the New York Stock Exchange or such other
national security exchange is open for business, or (ii) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may
be made thereon, or (iii) if the applicable security is not so listed,
admitted for trading or quoted, any day other than a Saturday or Sunday or
day on which banks in the City of New York, New York are authorized or
obligated by law or executive order to close.
"TRANSACTION" has the meaning specified in Section 13.5(a).
"TRUST" has the meaning specified in the first recital of this
Indenture.
"TRUST AGREEMENT" means the Trust Agreement substantially in the form
attached hereto as Annex A.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder if at any time there is more than one such Person.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as amended and as in effect on the date as of this
Indenture.
"TRUST SECURITIES" means the Common Securities and Preferred
Securities.
"VICE PRESIDENT" when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added
before or after the title "VICE PRESIDENT."
SECTION 1.2 COMPLIANCE CERTIFICATE AND OPINIONS. Upon any application
or request by the Company to the Trustee to take any action under any
provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent (including
covenants, compliance with which constitutes a condition precedent), if
any, provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent (including covenants compliance
with which constitute a condition precedent), if any, have been complied
with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished. Every
certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates
provided pursuant to Section 10.5) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3 FORMS OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents. Any
certificate or opinion of an officer of the Company may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate
or opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Where any
Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
SECTION 1.4 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to
or taken by Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such
Holders in person or by an agent duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein
sometimes referred to as the "ACT" of the Holders signing such
instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company
and any agent of the Trustee or the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness
of such execution or by the certificate of any notary public or
other officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution
is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof
of his authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing
the same, may also be proved in any other manner which the
Trustee deems sufficient and in accordance with such reasonable
rules as the Trustee may determine.
(d) The ownership of Debentures shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Debenture shall bind
every future Holder of the same Debenture and the Holder of every
Debenture issued upon the transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or
suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such
Debenture.
(f) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to take any
action under this Indenture by vote or consent. Except as
otherwise provided herein, such record date shall be the later of
30 days prior to the first solicitation of such consent or vote
or the date of the most recent list of Holders furnished to the
Trustee pursuant to Section 7.1 prior to such solicitation. If a
record date is fixed, those persons who were Holders at such
record date (or their duly designated proxies), and only those
persons, shall be entitled to take such action by vote or consent
or to revoke any vote or consent previously given, whether or not
such persons continue to be Holders after such record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to
give or take any such action with regard to any particular
Debenture may do so with regard to all or any part of the
principal amount of such Debenture or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such
principal amount.
SECTION 1.5 NOTICES, ETC. TO TRUSTEE AND COMPANY. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon,
given or furnished to, or filed with
(a) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, or
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise provided in Section 5.1
hereof) hereunder if in writing and mailed, first class, postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this
instrument or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 1.6 NOTICE TO HOLDERS; WAIVER. Where this Indenture provides
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first class postage prepaid, to each Holder affected by such event, at the
address of such Holder as it appears in the Securities Register on the date
such notice is mailed, which shall be not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect
to other Holders. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver. In case by
reason of the suspension of regular mail service or by reason of any other
cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7 CONFLICT WITH TRUST INDENTURE ACT. If any provision of
this Indenture limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under such act to be a part of and govern
this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture
Act that may be so modified or excluded, the former provision shall be
deemed to apply.
SECTION 1.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.9 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 1.10 SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Debentures shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
SECTION 1.11 BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Debentures, express or implied, shall give to any Person, other than
the parties thereto, any Paying Agent and their successors and assigns and
the Holders of the Debentures, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.12 GOVERNING LAW. This Indenture and the Debentures shall be
governed by and construed in accordance with the laws of the State of
Georgia without regard to its principles of conflicts of laws.
SECTION 1.13 NON-BUSINESS DAYS. Except as otherwise provided in
Section 11.8, in any case where any Interest Payment Date, Redemption Date,
or Stated Maturity of any Debenture shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or the Debentures)
payment of interest or principal payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) with the same force and effect
as if made on the Interest Payment Date or Redemption Date or at the Stated
Maturity, PROVIDED, HOWEVER, that no interest shall accrue for the period
from and after such Interest Payment Date or Redemption Date or Stated
Maturity.
ARTICLE 2 DEBENTURE FORM
SECTION 2.1 FORMS GENERALLY. The Debentures and the Trustee's
certificate of authentication shall be in substantially the forms sets
forth in this Article and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with applicable tax laws or the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Debentures, as evidenced by their execution of the
Debentures.
The definitive Debentures shall be typewritten, printed, lithographed
or engraved or produced by any combination of these methods, if required by
any securities exchange on which the Debentures may be listed, on a steel
engraved border or steel engraved borders or may be produced in any other
manner permitted by the rules of any securities exchange on which the
Debentures may be listed, all as determined by the officers executing such
Debentures, as evidenced by their execution of such Debentures.
SECTION 2.2 FORM OF FACE OF DEBENTURE.
____ % Convertible Subordinated Debenture due __________ __, 2029
No. 1
$__________
Merry Land Properties, Inc., a corporation organized and existing
under the laws of Georgia (the "COMPANY," which term includes any successor
corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _____________________, or registered
assigns, the principal sum of _______________ on __________ __, 2029 and
to pay interest on said principal sum from __________ __, 1999 or from the
most recent interest payment date (each such date, an "INTEREST PAYMENT
DATE") on which interest has been paid or duly provided for, quarterly
until the principal hereof is paid or duly provided for or made available
for payment subject to deferral as set forth herein in arrears on September
30, December 31, March 31, and June 30 of each year, commencing December
31, 1999 at the rate of ____ % per annum, until the principal hereof shall
have become due and payable. Whenever there is unpaid deferred interest
outstanding, the interest rate on the Debentures will be adjusted quarterly
to the rate corresponding to the number of quarters for which interest has
been deferred, as follows:
<TABLE>
<CAPTION>
Quarters of Quarters of
Deferred Interest Adjusted Rate Deferred Interest Adjusted Rate
----------------- ------------- ----------------- -------------
<S> <C> <C> <C>
0 9.000000% 11 11.4957945
1 9.2025000 12 11.7544499
2 9.4095563 13 12.0189250
3 9.6212713 14 12.2893508
4 9.8377499 15 12.5658612
5 10.0590992 16 12.8485931
6 10.2864290 17 13.1376865
7 10.5168511 18 13.4332844
8 10.7534803 19 13.7355333
9 10.9954336 20 14.0445828
10 11.248308
</TABLE>
The interest rate change on the Debentures will be effective beginning
the calendar day subsequent to the relevant Interest Payment Date. Upon
payment of all deferred interest on the Debentures, the interest rate
thereon will return to ____ % per annum, effective on the date all deferred
interest is paid
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, which further provisions shall for all
purpose have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Debenture shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:_____________ MERRY LAND PROPERTIES, INC.
By:_________________________
Name:______________________
Title:_______________________
SECTION 2.3 FORM OF REVERSE OF DEBENTURE. This Debenture is one of a
duly authorized issue of Debentures of the Company (the "DEBENTURES")
limited to the aggregate principal amount of $_____________, issued and to
be issued under a Junior Convertible Subordinated Indenture, dated as of
____________, 1999 (the "INDENTURE"), between the Company and First Union
National Bank, as Trustee (herein called the "TRUSTEE," which term includes
any successor trustee under the Indenture), to which the Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities
thereunder of the Trustee, the Company and the Holders of the Debentures,
and of the terms upon which the Debentures are, and are to be,
authenticated and delivered. All terms used in this Debenture that are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. For periods less than a
full month, interest shall be computed on the actual number of elapsed
days over 360 days. In the event that any date on which interest is payable
on this Debenture is not a Business Day, then payment of the interest on
such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay)
with the same force and effect as if made on the date the payment was
originally payable. The interest installment so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided
in the Indenture, be paid to the Person in whose name this Debenture (or
one or more Predecessor Debentures, as defined in the Indenture) is
registered at the close of business on the Regular Record Date, for such
interest installment which shall be the date which is the Business Day
next preceding such Interest Payment Date. Any such interest installment
not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Debentures not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as may
be required by such exchange, all as more fully provided in the Indenture.
The Company shall have the right at any time during the term of this
Debenture, from time to time, to extend the interest payment period of such
Debenture for up to 20 consecutive quarters with respect to each deferral
period (each such deferral period, an "EXTENSION PERIOD"), during which
periods the Company shall have the right not to make payments of interest
on any Interest Payment Date, and at the end of which the Company shall pay
all interest then accrued and unpaid; PROVIDED that during any such
Extension Period, the Company will not, and will not permit any Subsidiary
to (a) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any shares
of the Company's capital stock or (b) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees of indebtedness for money borrowed) of the
Company that rank PARI PASSU with or junior to the Debentures (other than
(i) any dividend, redemption, liquidation, interest, principal or guarantee
payment by the Company where the payment is made by way of securities
(including capital stock) that rank PARI PASSU with or junior to the
securities on which such dividend, redemption, interest, principal or
guarantee payment is being made, (ii) redemptions or purchases of any
rights pursuant to a stockholder rights agreement and the declaration of a
dividend of such rights or the issuance of preferred stock under such plan
in the future, (iii) payments under the Guarantee, (iv) purchases of Common
Stock related to the issuance of Common Stock under any of the Company's
benefit plans for its directors, officers or employees, (v) as a result of
a reclassification of the Company's capital stock or the exchange or
conversion of one series or class of the Company's capital stock for
another series or class of the Company's capital stock and (vi) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged). Prior to the termination of any
such Extension Period, the Company may further extend the interest payment
period, PROVIDED that no Extension Period shall exceed 20 consecutive
quarters or extend beyond the Stated Maturity of this Debenture. Upon the
termination of any such Extension Period and upon the payment of all
accrued and unpaid interest and, the Company may elect to begin a new
Extension Period, subject to the above requirements. No interest shall be
due and payable during an Extension Period except at the end thereof. The
Company shall give the Trustee, the Property Trustee and the Administrative
Trustees notice of its selection of an Extension Period at least one
Business Day prior to the earlier of (i) the record date for the date the
distributions on the Preferred Securities (or if no Preferred Securities
are outstanding, for the date interest on the Debentures) would have been
payable except for the election to begin such Extension Period or (ii) the
date the Property Trustee of the Trust is (or if no Preferred Securities
are outstanding, the Debenture Trustee is) required to give notice to NYSE
or other applicable self-regulatory organizations or to holders of such
Preferred Securities (or, if no Preferred Securities are outstanding, to
the Holders of such Debentures) of the record date.
Payment of the principal of and interest on this Debenture will be
made to the Trustee or its nominee and in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts; PROVIDED, HOWEVER, that at the option
of the Company payment of interest may be made (a) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Securities Register or (b) by wire transfer in immediately available funds
at such place and to such account as may be designated by the Person
entitled thereto as specified in the Securities Register.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and subject in right of payments to
the prior payment in full of all Senior Debt (as defined in the Indenture),
and this Debenture is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Debenture, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such actions as may be necessary
or appropriate to effectuate the subordination so provided and (c) appoints
the Trustee his attorney-in-fact for any and all such purposes. Each Holder
hereof, by his acceptance hereof, waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Debt, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
At any time on or after ___________ __, 2004, the Company may, at its
option, subject to the terms and conditions of Article 11 of the Indenture,
redeem this Debenture in whole at any time or in part from time to time, at
a Redemption Price equal to the principal amount of this Debenture plus any
accrued and unpaid interest, to the date fixed for such redemption. The
Company also may redeem this Debenture, in whole or in part, subject to the
terms and conditions of Article 11 of the Indenture, at any time, at a
Redemption Price equal to the principal amount of this Debenture being
redeemed, plus any accrued and unpaid interest, if the Current Market Price
of the Common Stock shall have exceeded 150% of the Conversion Price then
in effect for at least 20 Trading Days within any period of 30 consecutive
Trading Days ending not more than five Trading Days prior to the date of
mailing of the notice given as set forth in Section 11.3 of the Indenture.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof. If a Special
Event shall occur and be continuing, this Debenture shall be exchangeable
for Preferred Securities in accordance with Section 11.9 of the Indenture
or, in certain circumstances, redeemable by the Company in accordance with
Section 11.8 of the Indenture. Subject to the terms and conditions set
forth in Article 13 of the Indenture, this Debenture is convertible, at the
option of the Holder hereof, into shares of Common Stock.
If a Debenture Event of Default shall occur and be continuing, the
principal of the Debentures may be declared due and payable in the manner,
with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for satisfaction, discharge and
defeasance of the entire indebtedness of this Debenture upon compliance by
the Company with certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Debentures to be affected
under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Debentures.
The Indenture also contains provisions permitting Holders of specified
percentages in principal amount of the Debentures at the time Outstanding,
on behalf of the Holders of all Debentures, to waive compliance by the
Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver
shall be conclusive and binding upon the Holder of this Debenture and upon
all future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this
Debenture.
As provided in and subject to the provisions of the Indenture, if a
Debenture Event of Default shall occur and be continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Debentures may declare the principal amount of
all the Debentures to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), PROVIDED
that, if a Debenture Event of Default shall occur and be continuing and the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall fail to declare the principal of all the
Debentures to be immediately due and payable, the holders of at least 25%
in aggregate liquidation amount of the Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and
the Trustee; and upon any such declaration such principal amount (or
specified amount) of and the accrued interest on all the Debentures shall
become immediately due and payable, PROVIDED that the payment of principal
and interest on such Debentures shall remain subordinated to the extent
provided in Article 12 of the Indenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Debenture is registrable in the
Securities Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company maintained under Section
10.2 of the Indenture duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the
Securities Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Debentures, of
authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees. No service charge
shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Debenture is registered as
the owner hereof for all purposes, whether or not this Debenture be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Debentures are issuable only in registered form without coupons in
denominations of $10 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Debentures
are exchangeable for a like aggregate principal amount of Debentures of a
different authorized denomination, as requested by the Holder surrendering
the same.
The Company and, by its acceptance of this Debenture or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Debenture agree that for United States Federal, state and
local tax purposes it is intended that this Debenture constitute
indebtedness.
THE INDENTURE AND THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
(I) or (we) assign and transfer this Security to
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________as agent to
transfer this Debenture on the books of the Company. The agent may
substitute another to act for him.
Your Signature:____________________________________ (Sign exactly as
your name appears on the other side of this Security)
Date:_____________________
Signature Guarantee: *_______________________________________________
Signature must be guaranteed by an institution which is a member of
one of the following recognized signature Guaranty Programs:
(i) The Securities Transfer Agent Medallion Program (STAMP);
(ii) The New York Stock Exchange Medallion Program (MSP);
(iii) The Stock Exchange Medallion Program (SEMP); or
(iv) in such other guarantee programs acceptable to the Trustee.
NOTICE OF CONVERSION
To: Merry Land Properties
The undersigned owner of this Debenture hereby irrevocably exercises
the option to convert this Debenture, or the portion below designated, into
Common Shares of MERRY LAND PROPERTIES, INC. in accordance with the terms
of the Indenture referred to in this Debenture, and directs that the shares
issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to
the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Date:________________, ____ in whole -- Portions of Debenture to be in part
converted ($10 or integral multiples -- thereof): $____________________
_______________________________
Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number
__________________________
__________________________
__________________________
Signature Guarantee:*__________________________________
Signature must be guaranteed by an institution which is a member of
one of the following recognized Signature Guaranty Programs:
(i) The Securities Transfer Agent Medallion Program (STAMP);
(ii) The New York Stock Exchange Medallion Program (MSP);
(iii) The Stock Exchange Medallion Program (SEMP); or
(iv) in such other guarantee programs acceptable to the Trustee.
AUTHENTICATION
This is one of the Debentures referred to in the within mentioned
Indenture.
_________________________, as Trustee
By:_______________________________
Authorized Signatory
Dated:_____________________
SECTION 2.4 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The form
of Trustee's Certificate of Authentication shall be as follows:*
This is one of the Debentures referred to in the within mentioned
Indenture.
_________________________, as Trustee
By:__________________________________
Authorized Signatory
Dated:_____________________"
*Or in the form provided in Section 6.14 in the event that a separate
Authenticating Agent is appointed pursuant thereto.
SECTION 2.5 INITIAL ISSUANCE TO PROPERTY TRUSTEE. The Debentures
initially issued to the Property Trustee of the Trust shall be in the form
of one or more individual certificates in definitive, fully registered form
without coupons.
ARTICLE 3 THE DEBENTURES
SECTION 3.1 AMOUNT OF DEBENTURES. The aggregate principal amount of
Debentures which may be authenticated and delivered under this Indenture is
$___________ , except for Debentures authenticated and delivered upon
registration of, transfer of, or in exchange for, or in lieu of, other
Debentures pursuant to Sections 3.4, 3.5 or 3.6.
SECTION 3.2 DENOMINATIONS. The Debentures shall be in registered form
without coupons and shall be issuable in denominations of $10 and any
integral multiple thereof.
SECTION 3.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The
Debentures shall be executed on behalf of the Company by its President or
one of its Vice Presidents under its corporate seal reproduced or impressed
thereon and attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Debentures may be manual or
facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Debentures or did not hold such offices at the date of such Debentures.
Upon the execution and delivery of this Indenture, or from time to time
thereafter, Debentures may be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate
and deliver said Debentures to or upon Company Order without any further
action by the Company. Debentures may be authenticated on original issuance
from time to time and delivered pursuant to such procedures acceptable to
the Trustee ("PROCEDURES") as may be specified from time to time by Company
Order. Procedures may authorize authentication and delivery pursuant to
instructions of the Company or a duly authorized agent, which instructions
shall be promptly confirmed in writing. Each Debenture shall be dated the
date of its authentication.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such
Debenture a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one
of its authorized officers, and such certificate upon any Debenture shall
be conclusive evidence, and the only evidence, that such Debenture has been
duly authenticated and delivered hereunder.
SECTION 3.4 TEMPORARY DEBENTURES. Pending the preparation of
definitive Debentures, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Debentures which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in
any denomination, substantially of the tenor of the definitive Debentures
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing
such Debentures may determine, as evidenced by their execution of such
Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation
of definitive Debentures, the temporary Debentures shall be exchangeable
for definitive Debentures upon surrender of the temporary Debentures at the
office or agency of the Company designated for the purpose without charge
to the Holder. Upon surrender for cancellation of any one or more temporary
Debentures, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive
Debentures of authorized denominations. Until so exchanged, the temporary
Debentures shall in all respects be entitled to the same benefits under
this Indenture as definitive Debentures.
SECTION 3.5 REGISTRATION, TRANSFER AND EXCHANGE. The Company shall
cause to be kept at the Corporate Trust Office of the Trustee a register in
which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of Debentures and of transfers
of Debentures. Such register is herein sometimes referred to as the
"SECURITIES REGISTER." The Trustee is hereby appointed "SECURITIES
REGISTRAR" for the purpose of registering Debentures and transfers of
Debentures as herein provided. Upon surrender for registration or transfer
of any Debenture at the office or agency of the Company designated for that
purpose the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or
more new Debentures of any authorized denominations, of a like aggregate
principal amount. At the option of the Holder, Debentures may be exchanged
for other Debentures of any authorized denominations, of a like aggregate
principal amount, upon surrender of the Debentures to be exchanged at such
office or agency. Whenever any Debentures are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver,
the Debentures which the Holder making the exchange is entitled to receive.
All Debentures issued upon any transfer or exchange of Debentures shall be
the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such transfer or exchange. Every Debenture presented or
surrendered for transfer or exchange shall (if so required by the Company
or the Securities Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Securities Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing. No service charge shall be made to a Holder
for any transfer or exchange of Debentures, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any transfer or exchange of
Debentures.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any
Debenture during a period beginning at the opening of business 15 days
before the day of selection for redemption of Debentures pursuant to
Article 11 and ending at the close of business on the day of mailing of
notice of redemption or (b) to transfer or exchange any Debenture so
selected for redemption in whole or in part, except, in the case of any
Debenture to be redeemed in part, any portion thereof not to be redeemed.
Upon any distribution of the Debentures to the holders of the
Preferred Securities in accordance with the Trust Agreement, the Company
and the Trustee shall enter into a supplemental indenture pursuant to
Section 9.1(h) to provide for transfer procedures with respect to the
Debentures substantially similar to those contained in the Trust Agreement
to the extent applicable in the circumstances existing at the time of such
distribution.
SECTION 3.6 MUTILATED, DESTROYED, LOST AND STOLEN DEBENTURES. If any
mutilated Debenture is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Debenture and bearing a
number not contemporaneously outstanding. If there shall be delivered to
the Company and to the Trustee (a) evidence to their satisfaction of the
destruction, loss or theft of any Debenture, and (b) such security or
indemnity as may be required by them to save each of them harmless, then,
in the absence of actual notice to the Company or the Trustee that such
Debenture has been acquired by a bona fide purchaser, the Company shall
execute and upon the receipt of a Company Order requesting authentication
its request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Debenture, a new Debenture bearing a number not
contemporaneously outstanding. In case any such mutilated, destroyed, lost
or stolen Debenture has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Debenture, pay such
Debenture. Upon the issuance of any new Debenture under this Section, the
Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. Every new Debenture issued pursuant to this Section in lieu of
any destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Debenture shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Debentures duly issued
hereunder. The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 3.7 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest
on any Debenture which is payable, and is punctually paid or duly provided
for, on any Interest Payment Date, shall be paid to the Person in whose
name that Debenture (or one or more Predecessor Debentures) is registered
at the close of business on the Regular Record Date, except that interest
payable on the Stated Maturity of the Debentures shall be paid to the
Person to whom principal is paid. Any interest on the Debentures which is
payable, but is not timely paid or duly provided for, on an Interest
Payment Date ("DEFAULTED INTEREST"), shall forthwith cease to be payable to
the registered Holder on the Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Debentures (or their respective
Predecessors Debentures) are registered at the close of business
on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on the Debentures and the
date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first class, postage
prepaid, to each Holder of the Debentures at the address of such
Holder as it appears in the Securities Register not less than 10
days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Debentures (or
their respective Predecessor Debentures) are registered on such
Special Record Date and shall no longer be payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed and,
upon such notice as may be required by such exchange (or by the
Trustee if the Debentures are not listed), if, after notice given
by the Company to the Trustee of the proposed payment pursuant to
this Clause, such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon transfer of or in exchange for or in
lieu of any other Debenture shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Debenture.
SECTION 3.8 PERSONS DEEMED OWNERS. The Company, the Trustee, the
Paying Agent and any agent of the Company or the Trustee or the Paying
Agent may treat the Person in whose name any Debenture is registered as the
owner of such Debenture for the purpose of receiving payment of principal
of and (subject to Section 3.7) interest or premium on such Debenture and
for all other purposes whatsoever, whether or not such Debenture be
overdue, and neither the Company, the Trustee nor any agent of the Company
or the Trustee shall be affected by notice to the contrary.
SECTION 3.9 CANCELLATION. All Debentures surrendered for payment,
redemption, conversion transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee, and any such
Debentures and Debentures surrendered directly to the Trustee for any such
purpose shall be promptly canceled by it. The Company may at any time
deliver or cause to be delivered to the Trustee for cancellation any
Debentures previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and all Debentures so
delivered shall be promptly canceled by the Trustee. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures canceled as
provided in this Section, except as expressly permitted by this Indenture.
All canceled Debentures shall be destroyed by the Trustee and upon written
request, the Trustee shall deliver to the Company a certificate of such
destruction.
SECTION 3.10 COMPUTATION OF INTEREST. Interest on the Debentures shall
be computed on the basis of a 360-day year of twelve 30-day months. For
periods less than a full month, interest on Debentures shall be computed on
the basis of the actual number of elapsed days based on a 360-day year.
SECTION 3.11 DEFERRALS OF INTEREST PAYMENT DATES. The Company shall
have the right, at any time during the term of the Debentures, so long as
no Debenture Event of Default has occurred and is continuing, from time to
time to extend the interest payment period for the Debentures for up to 20
consecutive quarters with respect to each deferral period (each, an
"EXTENSION PERIOD") during which periods the Company shall have the right
to not make payments of interest on any Interest Payment Date, and at the
end of such Extension Period the Company shall pay all interest then
accrued and unpaid thereon, PROVIDED, HOWEVER, that during any such
Extension Period, the Company shall not, and shall cause any Subsidiary not
to, (a) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any shares
of the Company's capital stock or (b) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees of indebtedness for money borrowed) of the
Company that rank PARI PASSU with or junior to the Debentures (other than
(i) any dividend, redemption, liquidation, interest, principal or guarantee
payment by the Company where the payment is made by way of securities
(including capital stock) that rank PARI PASSU with or junior to the
securities on which such dividend, redemption, interest, principal or
guarantee payment is being made, (ii) redemptions or purchases of any
rights pursuant to a stockholder rights agreement and the declaration of a
dividend of such rights or the issuance of preferred stock under such
stockholder rights agreement in the future, (iii) payments under the
Guarantee, (iv) purchases of Common Stock related to the issuance of Common
Stock under any of the Company's benefit plans for its directors, officers
or employees, (v) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one series or class of the
Company's capital stock for another series or class of the Company's
capital stock and (vi) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or
exchanged). Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period, PROVIDED that no
such Extension Period shall exceed 20 consecutive quarters or extend beyond
the Stated Maturity of the Debentures. Upon termination of any Extension
Period and upon the payment of all accrued and unpaid interest then due,
the Company may select a new Extension Period, subject to the above
requirements. No interest, shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Trustee and
the Property Trustee written notice of its selection of such Extension
Period at least one Business Day prior to the earlier of (i) the record
date for the date the distributions on the Preferred Securities of the
Trust (or, if no Preferred Securities are outstanding, for the date
interest on the Debentures) would have been payable except for the election
to begin such Extension Period and (ii) the date the Property Trustee (or,
if no Preferred Securities are outstanding, the Trustee) is required to
give notice to NYSE or other applicable self-regulatory organization or to
holders of such Preferred Securities (or, if no Preferred Securities are
outstanding, to the Holders of such Debentures) of such record date, but in
any event not less than one Business Day prior to such record date. Such
notice shall specify the period selected. The Trustee shall promptly give
notice of the Company's selection of such Extension Period to the Holders
of the outstanding Debentures and Preferred Securities.
SECTION 3.12 RIGHT OF SET-OFF. Notwithstanding anything to the
contrary in the Indenture, the Company shall have the right to set-off any
payment it is otherwise required to make thereunder in respect of the
Debenture to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment relating to the
Debentures under the Guarantee.
SECTION 3.13 AGREED TAX TREATMENT. Each Debenture issued hereunder
shall provide that the Company and, by its acceptance of a Debenture or a
beneficial interest therein, the Holder of, and any Person that acquires a
beneficial interest in, such Debenture agree that for United States
Federal, state and local tax purposes it is intended that such Debenture
constitute indebtedness.
SECTION 3.14 CUSIP NUMBERS. The Company in issuing the Debentures may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use such "CUSIP" number in notices of redemption as a convenience to
Holders; PROVIDED that any such notice may state that no representation is
made as to the correctness of such number either as printed on the
Debentures or as contained in any notice of a redemption and that reliance
may be placed only on the other identification numbers printed on the
Debentures, and any such redemption shall not be affected by any defect in
or omission of such numbers.
SECTION 3.15 DISTRIBUTION OF DEBENTURES.
(a) In connection with distribution of Debentures to holders of the
Preferred Securities in connection with the involuntary or voluntary
dissolution of the Trust, including a dissolution following the occurrence
of a Special Event, the Debentures in certificated form may be presented
to the Trustee by the Property Trustee and any Preferred Security
certificate which represents Preferred Securities will be deemed to
represent beneficial interests in Debentures presented to the Trustee by
the Property Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Preferred Securities until such
Preferred Security certificates are presented to the Securities Registrar
for transfer or reissuance at which time such Preferred Security
certificates will be canceled and a Debenture, registered in the name of
the holder of the Preferred Security certificate or the transferee of the
holder of such Preferred Security certificate, as the case may be, with an
aggregate principal amount equal to the aggregate liquidation amount of the
Preferred Security certificate canceled, will be executed by the Company
and delivered to the Trustee for authentication and delivery in accordance
with this Indenture. On issue of such Debentures, Debentures with an
equivalent aggregate principal amount that were presented by the Property
Trustee to the Trustee will be deemed to have been canceled.
ARTICLE 4 SATISFACTION AND DISCHARGE
SECTION 4.1 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect (except as to (i) any surviving rights
of conversion, transfer, substitution and exchange of Debentures, (ii)
rights hereunder of Holders to receive payments of principal of and
interest on the Debentures and other rights, duties and obligations of the
Holders as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights and obligations of the
Trustee hereunder), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either (i) all Debentures theretofore authenticated and
delivered [other than (x) Debentures which have been destroyed,
lost or stolen and which have been replaced or paid as provided
in Section 3.6 and (y) Debentures for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.3] have
been delivered to the Trustee for cancellation; or (ii) all such
Debentures not theretofore delivered to the Trustee for
cancellation have become due and payable or have been redeemed or
tendered for conversion; and
(b) the Company has deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose an amount in the
currency or currencies in which the Debentures are payable
sufficient (without regard to investment of such amount
deposited) to pay and discharge the entire indebtedness on the
Debentures not theretofore delivered to the Trustee for
cancellation, for principal and interest to the date of such
deposit or to the Stated Maturity; and
(c) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(d) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7 and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of
clause (a) of this Section, the obligations of the Trustee under Section
4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2 APPLICATION OF TRUST MONEY. Subject to the provisions of
the last paragraph of Section 10.3, all money deposited with the Trustee
pursuant to Section 4.1 shall be held in trust and applied by it, in
accordance with the provisions of the Debentures and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal and interest for whose payment
such money or obligations have been deposited with or received by the
Trustee; PROVIDED, HOWEVER, such moneys need not be segregated from other
funds except to the extent required by law.
ARTICLE 5 REMEDIES
SECTION 5.1 DEBENTURE EVENTS OF DEFAULT. The term "DEBENTURE EVENT OF
DEFAULT," wherever used herein with respect to the Debentures, means any
one of the following events that has occurred and is continuing (whatever
the reason for such Debenture Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) default in the payment of any interest upon the Debentures, when
it becomes due and payable, and continuance of such default for a
period of 30 days (subject to the deferral of any due date in the
case of an Extension Period);
(b) default in the payment of the principal of the Debentures when
due whether at Stated Maturity, upon redemption by declaration or
otherwise;
(c) failure on the part of the Company duly to observe or perform in
any material respect any other of the covenants or agreements on
the part of the Company contained in the Debentures or contained
in this Indenture (other than a covenant or agreement which has
been expressly included in this Indenture solely for the benefit
of the Company) and continuance for such failure for a period of
90 days after the date on which written notice of such failure,
requiring the same to be remedied and stating that such notice is
a "NOTICE OF DEFAULT" hereunder, shall have been given to the
Company by the Trustee, by registered or certified mail, or to
the Company and the Trustee by a Holder or Holders of at least
25% in aggregate principal amount of the Debentures at the time
Outstanding or the holder or holders of at least 25% in aggregate
liquidation amount of the Preferred Securities;
(d) failure by the Company to issue Common Stock upon an appropriate
election by the Holder or Holders of the Debentures to convert
the Debentures into shares of Common Stock;
(e) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjudication or composition of or in respect of the
Company under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of
its property or ordering he winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(f) the institution by the Company of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by it to the institution
of bankruptcy or insolvency proceedings against it, or the filing
by it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law, or the consent
by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of
its property or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due and its willingness
to be adjudicated as bankrupt, or the taking of corporate action
by the Company in furtherance of any such action.
SECTION 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If a
Debenture Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Debentures may declare the principal amount of
all the Debentures to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), PROVIDED
that, if a Debenture Event of Default occurs and is continuing and the
Trustee or the Holders of not less than 25% in aggregate principal amount
of the Outstanding Debentures shall fail to declare the principal of all
the Debentures to be immediately due and payable, the holders of at least
25% in aggregate liquidation amount of the Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and
the Trustee, and upon any such declaration such principal amount (or
specified amount) of and the accrued interest on all the Debentures shall
become immediately due and payable, PROVIDED that the payment of principal
and interest on the Debentures shall remain subordinated to the extent
provided in Article 12.
At any time after such a declaration of acceleration with respect to
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in aggregate principal amount of the
Outstanding Debentures, by written notice to the Company and the Trustee
may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all overdue installments of interest on the Debentures;
(ii) the principal of the Debentures which have become due
otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Debentures;
(iii)to the extent that payment of such interest is lawful,
interest upon overdue installments to the extent necessary
to yield the Holders an annualized return of ___% on the
principal amount of the Debentures, compounded quarterly;
and
(iv) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; or
(b) all Debenture Events of Default that shall have occurred and been
continuing with respect to Debentures, other than the non-payment of the
principal of the Debentures which has become due solely by such
acceleration, have been cured or waived as provided in Section 5.13. If the
holders of a majority in aggregate principal amount of the Outstanding
Debentures fail to rescind and annul such declaration and its consequences,
the holders of a majority in liquidation amount of the Preferred Securities
then outstanding shall have such right.
SECTION 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Company covenants that if:
(a) default is made in the payment of any installment of interest on
the Debentures when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of the Debentures
whether at the Stated Maturity thereof upon redemption by
declaration or otherwise, the Company will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of the
Debentures, the whole amount then due and payable on the
Debentures for principal and interest, including, to the extent
that payment of such interest shall be lawful, interest on any
overdue principal and on any overdue installments of interest at
the rate borne by the Debentures, and, in addition thereto, all
amounts owing the Trustee under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgement or final decree, and
may enforce the same against the Company or any other obligor upon the
Debentures and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon the Debentures, wherever situated.
If a Debenture Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the
rights of the Holders of the Debentures by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce
any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative
to the Company or any other obligor upon the Debentures or the property of
the Company or of such other obligor or their creditors:
(a) the Trustee (irrespective of whether the principal of the
Debentures shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal (or
premium, if any) or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise, (i) to file and prove a
claim (including a claim for reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) for the
whole amount of principal and interest owing and unpaid in respect to the
Debentures and to file such other papers or documents as may be necessary
or advisable and to take any and all actions as are authorized under the
Trust Indenture Act in order to have the claims of the Holders and any
predecessor to the Trustee under Section 6.7 and, of the Holders allowed in
any such judicial proceedings; and (ii) in particular, to collect and
receive any moneys or other property payable or deliverable on any such
claims and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor
Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding;
PROVIDED, HOWEVER, that the Trustee may, on behalf of the Holders, vote for
the election of a trustee in bankruptcy or similar official and be a member
of a creditors' or other similar committee.
SECTION 5.5 TRUSTEE MAY ENFORCE CLAIM WITHOUT POSSESSION OF
DEBENTURES. All rights of action and claims under this Indenture or the
Debentures may be prosecuted and enforced by the Trustee without the
possession of any of the Debentures or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgement shall, after provision for the payment of all
the amounts owing the Trustee and any predecessor Trustee under Section
6.7, its agents and counsel, be for the ratable benefit of the Holders of
the Debentures in respect of which such judgement has been recovered.
SECTION 5.6 APPLICATION OF MONEY COLLECTED. Any money or property
collected or to be applied by the Trustee with respect to the Debentures
pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money or property on account of principal or interest, upon presentation of
the Debentures and the notation thereon of the payment if only partially
paid and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.7,
SECOND: to the payment of the amounts then due and unpaid upon
the Debentures for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Debentures for principal and interest, respectively; and
THIRD: the balance, if any, to the Person or Persons entitled
thereto.
SECTION 5.7 LIMITATION ON SUITS. No Holder of the Debentures,
including a holder of Preferred Securities acting to enforce the rights of
the Property Trustee as a Holder of the Debentures pursuant to the Trust
Agreement, shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture or for the appointment of a
receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee of
a continuing Debenture Event of Default;
(b) if the Trust is not the sole holder of the Outstanding
Debentures, the Holders of not less than 25% in principal amount
of the Outstanding Debentures shall have made written request to
the Trustee to institute proceedings in respect of such Debenture
Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of
a majority in principal amount of the Outstanding Debentures; it
being understood and intended that no one or more of such Holders
shall have any right in any manner whatever by virtue of, or by
availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders of the Debentures, or
to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all such Holders.
SECTION 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST. Notwithstanding any other provision in this
Indenture, the Holder of any Debenture shall have the right which is
absolute and unconditional to receive payment of the principal of and
(subject to Section 3.7) interest on such Debenture on the Maturity or to
convert such Debenture in accordance with Article 13 and to institute suit
for the enforcement of any such payment and right to convert, and such
right shall not be impaired without the consent of such Holder. For so long
as any Preferred Securities remain Outstanding, to the fullest extent
permitted by law and subject to the terms of this Indenture and the Trust
Agreement, upon a Debenture Event of Default that has occurred and is
continuing specified in Sections 5.1(a) or 5.1(b), any holder of Preferred
Securities shall have the right to institute a proceeding directly against
the Company, for enforcement of payment to such holder of the principal
amount of or interest on Debentures having a principal amount equal to the
liquidation amount of the Preferred Securities of such holder (a "DIRECT
ACTION"). Notwithstanding any payment made to such holder of Preferred
Securities by the Company in connection with a Direct Action, the Company
shall remain obligated to pay the principal of or interest on the
Debentures held by the Trust or the Property Trustee. In connection with
any such Direct Action, the rights of the Company will be subrogated to the
rights of any holder of the Preferred Securities to the extent of any
payment made by the Company to such holder of Preferred Securities as a
result of such Direct Action. Except as set forth in this Section, the
holders of Preferred Securities shall have no right to execute any right or
remedy available to the Holders of, or in respect of, the Debentures.
SECTION 5.9 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such
Holder, then and in every such case the Company, the Trustee and the Holder
shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided in the last paragraph of Section 3.6, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to
be exclusive of any other right or remedy, and every right and remedy
shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11 DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of the Debentures to exercise any right or remedy
accruing upon any Debenture Event of Default that shall have occurred and
be continuing shall impair any such right or remedy, or constitute a waiver
of any such Debenture Event of Default or an acquiescence therein. Every
right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12 CONTROL BY HOLDERS. The Holders of a majority in
aggregate principal amount of the Outstanding Debentures shall have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee, with respect to the Debentures, PROVIDED that:
(a) such direction shall not be in conflict with any rule of law
or with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.1, the Trustee shall
have the right to decline to follow such direction if the
Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee, determine that the proceeding so
directed would be unjustly prejudicial to the Holders not
joining in any such direction or would involve the Trustee
in personal liability.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such
trust or power, with respect to the Debentures, a record date shall be
established for determining Holders of Outstanding Debentures entitled to
join in such notice, which record date shall be at the close of business on
the day the Trustee receives such notice. The Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled
to join in such notice, whether or not such Holders remain Holders after
such record date, PROVIDED, that, unless the Holders of a majority in
principal amount of the Outstanding Debentures shall have joined in such
notice prior to the day which is 90 days after such record date, such
notice shall automatically and without further action by any Holder be
canceled and of no further effect. Nothing in this paragraph shall prevent
a Holder, or a proxy of a Holder, from giving, after expiration of such
90-day period, a new notice identical to a notice which has been canceled
pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section
5.12.
SECTION 5.13 WAIVER OF PAST DEFAULTS. Subject to Section 9.2 hereof,
the Holders of not less than a majority in aggregate principal amount of
the Outstanding Debentures affected by any past default may on behalf of
the Holders of all the Debentures waive any past default hereunder with
respect to Debentures and its consequences, except a default:
(a) in the payment of the principal of or interest on the Debentures
(unless such default has been cured or waived and a sum
sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited
with the Trustee), or
(b) in respect of a covenant or provision hereof which under Article
9 cannot be modified or amended without the consent of the Holder
of each Outstanding Debenture;
PROVIDED, HOWEVER, that if the Debentures are held by the Trust or a
trustee of the Trust, such waiver shall not be effective until the holders
of a majority in liquidation amount of Trust Securities shall have
consented to such waiver; PROVIDED, FURTHER, that if the consent of the
Holder of each outstanding Debenture is required, such waiver shall not be
effective until each holder of the Trust Securities shall have consented to
such waiver.
Upon any such waiver, such default shall cease to exist, and any
Debenture Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture, but no such waiver shall extend
to any subsequent or other default or impair any right consequent thereon.
If the Holders of a majority in aggregate principal amount of the
Outstanding Debentures fail to waive such Debenture Event of Default, the
holders of a majority in aggregate liquidation amount of Preferred
Securities shall have such right. No such rescission shall affect any
subsequent default or impair any right consequent thereon. The provisions
of this Section 5.13 shall be in lieu of Section 316(a)(1)(B) of the Trust
Indenture Act, and such Section 316(a)(1)(B) of the Trust Indenture Act is
hereby expressly excluded from this Indenture and the Debentures, as
permitted by the Trust Indenture Act.
SECTION 5.14 UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 10% in principal amount of the
Outstanding Debentures, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of or interest on the
Debentures on or after the Maturity of the Debentures or to convert a
Debenture in accordance with Article 13. The provisions of this Section
5.14 shall be in lieu of Section 315(e) of the Trust Indenture Act, and
such Section 315(e) of the Trust Indenture Act is hereby expressly
excluded from this Indenture and the Debentures, as permitted by the Trust
Indenture Act.
SECTION 5.15 WAIVER OF USURY, STAY, OR EXTENSION LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE 6 THE TRUSTEE
SECTION 6.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of a Debenture Event of Default,
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture, but in the
case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case a Debenture Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own
affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct except
that:
(i) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall
be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii)the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in
accordance with the direction of Holders pursuant to Section
5.12 relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under this Indenture.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if there shall be
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the
provisions of this Section.
SECTION 6.2 NOTICE OF DEFAULTS. Within 90 days after actual knowledge
by a Responsible Officer of the Trustee of the occurrence of any default
hereunder, the Trustee shall transmit by mail to all Holders of Debentures,
as their names and addresses appear in the Securities Register, notice of
such default hereunder known to the Trustee, unless such default shall have
been cured or waived; PROVIDED, HOWEVER, that, except in the case of a
default in the payment of the principal of or interest on Debenture, the
Trustee shall be fully protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of Debentures; and PROVIDED, FURTHER, that, except in the case of
any default of the character specified in Section 5.1(c), no such notice to
Holders of the Debentures shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "DEFAULT"
means any event which is, or after notice or lapse of time or both would
become, a Debenture Event of Default.
SECTION 6.3 CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of
Section 6.1:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, Debenture or
other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, conclusively rely
upon an Officers' Certificate or an Officer's certificate and an
Opinion of Counsel;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance
of its duties if the Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it;
(g) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, indenture, Debenture or other
paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by
agent or attorney;
(h) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and the Trustee shall
not be responsible for any misconduct or negligence on any part
of any agent, custodian, nominee or attorney appointed with due
care by it hereunder; and
(i) in the event that the Trustee is also acting as a Paying Agent,
Authenticating Agent, Conversion Agent, and/or Securities
Registrar hereunder, the rights and protections afforded to the
Trustee pursuant to this Article 6 shall also be afforded to such
Paying Agent, Authenticating Agent, Conversion Agent, and/or
Securities Registrar.
SECTION 6.4 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBENTURES.
The recitals contained herein and in the Debentures, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Debentures. The Trustee shall not be accountable
for the use or application by the Company of the Debentures or the proceeds
thereof.
SECTION 6.5 MAY HOLD DEBENTURES. The Trustee, any Paying Agent,
Securities Registrar or any other agent of the Company, in its individual
or any other capacity, may become the owner or pledgee of Debentures and,
subject to Sections 6.8 and 6.13, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying Agent,
Securities Registrar or such other agent.
SECTION 6.6 MONEY HELD IN TRUST. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability of interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 6.7 COMPENSATION AND REIMBURSEMENT. The Company agrees:
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder in such amounts as the
Company and the Trustee shall agree from time to time (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel); and
(c) to indemnify the Trustee and its officers, directors and
employees for, and to hold it harmless against, any loss,
liability or expense (including the reasonable compensation and
the expenses and disbursements of its agents and counsel)
incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this
trust or the performance of its duties hereunder, including the
costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any
of its powers or duties hereunder. This Indemnification shall
survive the termination of this Agreement or the earlier
resignation or removal of the Trustee.
To secure the Company's payment obligations in this Section, the
Company and the Holders agree that the Trustee shall have a lien prior to
the Debentures on all money or property held or collected by the Trustee
except assets held in trust to pay principal or interest on particular
Debentures pursuant to Section 4.1, or pursuant to any redemption pursuant
to Article 11 hereof if monies have been deposited for such redemption and
notice has been given and the Redemption Date has passed. Such lien shall
survive the satisfaction and discharge of this Indenture or the earlier
resignation or removal of the Trustee. When the Trustee incurs expenses or
renders services after a Debenture Event of Default specified in Section
5.1(e) or (f) occurs, the expenses and the compensation for the services
are intended to constitute expenses of administration under any Bankruptcy
Reform Act of 1978 or a successor statute.
SECTION 6.8 DISQUALIFICATION; CONFLICTING INTERESTS. The Trustee shall
be subject to the provisions of Section 310(b) of the Trust Indenture Act.
Nothing herein shall prevent the Trustee from filing with the Commission
the application referred to in the second to last paragraph of Section
310(b) of the Trust Indenture Act. The Trust Agreement and the Guarantee
shall be deemed to be specifically described in this Indenture for the
purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
SECTION 6.9 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at
all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under the laws of the
United States of America or of any State, Territory or the
District of Columbia, authorized under such laws to exercise
corporate trust powers and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority,
or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as
Trustee pursuant to a rule, regulation or order of the
Commission, authorized under such laws to exercise corporate
trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision
thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
in either case having a combined capital and surplus of at least
$50,000,000, subject to supervision or examination by Federal or
State authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority,
then, to the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect
hereinafter specified in this Article. Neither the Company nor
any Person directly or indirectly controlling, controlled by or
under common control with the Company shall serve as Trustee
hereunder.
SECTION 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee
under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Debentures,
delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Debenture for at least six
months, or
(ii) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the
Company or by any such Holder, or
(iii)the Trustee shall become incapable of acting or shall be
adjudged as bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case,
(A) the Company by Board Resolution may remove the Trustee,
or
(B) subject to Section 5.14, any Holder who has been a bona
fide Holder of a Debenture for at least six months may,
on behalf of himself and all other similarly situated
Holders, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for
any cause with respect to the Debentures, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability,
or the occurrence of such vacancy, a successor Trustee with
respect to the Debentures shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding
Debentures delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no
successor Trustee shall have been so appointed by the Company or
the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a
Debenture for at least six months may, subject to Section 5.14,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders of the Debentures as their
name and addresses appear in the Securities Register. Each notice
shall include the name of the successor Trustee and the address
of its Corporate Trust Office.
SECTION 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee,
every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee, but, on the
written request of the Company or the Successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor, Trustee all
the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all rights,
power and trusts referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified
and eligible under this Article.
SECTION 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the Trustee
hereunder, PROVIDED such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper
or any further act on the part of any of the parties hereto. In case any
Debentures shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the
Debentures so authenticated, and in case any Debentures shall not have been
authenticated, any successor to the Trustee may authenticate such
Debentures either in the name of any predecessor Trustee or in the name of
such successor Trustee, and in all cases the certificate of authentication
shall have the full force which it is provided anywhere in the Debentures
or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 6.14 APPOINTMENT OF AUTHENTICATING AGENT. The Trustee may
appoint an Authenticating Agent or Agents, as described and with the powers
and obligations conferred by this Section 6.14 ("AUTHENTICATING AGENT OR
AGENTS"), with respect to the Debentures which shall be authorized to act
on behalf of the Trustee to authenticate the Debentures issued upon
exchange, registration of transfer or partial redemption thereof, and
Debentures so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Debentures by the Trustee
or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by
an Authenticating Agent. Each Authenticating Agent shall be acceptable to
the Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, or of any State,
Territory or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less
than $50,000,000 and subject to supervision or examination by Federal or
State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section
the combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section, such Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to all
or substantially all of the corporate trust business of an Authenticating
Agent shall be the successor Authenticating Agent hereunder, PROVIDED such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the
Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in
case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to the Company and
shall give notice of such appointment in the manner provided in Section 1.6
to all Holders of the Debentures. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provision of this
Section. The Trustee agrees to pay to each Authenticating Agent from time
to time reasonable compensation for its services under this Section, and
the Trustee shall be entitled to be reimbursed for such payments, subject
to the provisions of Section 6.7. If an appointment is made pursuant to
this Section, the Debentures may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Debentures referred to in the within mentioned
indenture.
________________________________
________________________________
As Trustee
By:_____________________________
As Authenticating Agent
By:_____________________________
Authorized Officer
ARTICLE 7 HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 COMPANY TO FURNISH NAMES AND ADDRESSES OF HOLDERS. The
Company will furnish or cause to be furnished to the Trustee (unless the
Trustee is acting as the Securities Registrar):
(a) quarterly at least five Business Days before each Interest
Payment Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of each
such date; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15
days prior to the time such list is furnished.
SECTION 7.2 PRESERVATION OF INFORMATION: COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section
7.1 and the names and addresses of Holders received by the
Trustee in its capacity as Securities Registrar. The Trustee may
destroy any list furnished to it as provided in Section 7.1 upon
receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the
Debentures, and the corresponding rights and privileges of the
Trustee, shall be as provided in the Trust Indenture Act.
(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company
nor the Trustee nor any agent of either of them shall be held
accountable by reason of the disclosure of information as to the
names and addresses of the Holders made pursuant to the Trust
Indenture Act.
SECTION 7.3 REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act, at the times and in the
manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted within 60 days after
December 31 in each calendar year, commencing with December 31,
1999.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock
exchange or self regulatory organization of which the Trustee has
received notice by the Company upon which the Debentures are
listed and also with the Commission. The Company will notify the
Trustee in writing whenever the Debentures are listed on any
stock exchange or self-regulatory organization.
SECTION 7.4 REPORTS BY COMPANY. The Company shall file with the
Trustee and with the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
in the Trust Indenture Act, PROVIDED that any such information, documents
or reports required to be filed with the Commission pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company shall continue to file with
the Commission and provide the Trustee and Holders with the annual reports
and the information, documents and other reports which are specified in
Sections 13 and 15(d) of the Securities Exchange Act of 1934. The Company
also shall comply with the other provisions of Trust Indenture Act Section
314(a).
ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The
Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into
the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:
(a) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by
such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer, or which leases,
the properties and assets of the Company substantially as an
entirety shall be a Person organized and existing under the laws
of the United States of America or any State or the District of
Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of
the principal of and interest on all the Debentures and the
performance of every covenant of this Indenture on the part of
the Company to be performed or observed and shall have provided
for conversion rights in accordance with Article 13;
(b) immediately after giving effect to such transaction, no Debenture
Event of Default, and no event which, after notice or lapse of
time, or both, would become a Debenture Event of Default, shall
have happened and be continuing;
(c) such consolidation, merger, conveyance, transfer or lease is
permitted under the Trust Agreement and Guarantee and does not
give rise to any breach or violation of the Trust Agreement or
Guarantee; and
(d) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation,
merger, conveyance, transfer or lease and any such supplemental
indenture complies with this Article and that all conditions
precedent herein provided for relating to such transaction have
been complied with, and the Trustee, subject to Section 6.1, may
rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this
Section 8.1.
SECTION 8.2 SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation
or merger by the Company with or into any other corporation, or any
conveyance, transfer or lease by the Company of its properties and assets
substantially as an entirety to any Person in accordance with Section 8.1,
the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company herein; and in the
event of any such conveyance, transfer or lease the Company shall be
discharged from all obligations and covenants under the Indenture and the
Debentures and may be dissolved and liquidated.
Such successor corporation may cause to be signed, and may issue
either in its own name or in the name of the Company, any or all of the
Debentures issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee, and, upon the Company Order of
such successor corporation instead of the Company and subject to all the
terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver any Debentures which previously shall
have been signed and delivered by the officers of the Company to the
Trustee for authentication pursuant to a Company Order such provisions and
any Debentures which such successor corporation thereafter shall cause to
be signed and delivered to the Trustee on its behalf for the purpose
pursuant to such provisions. All the Debentures so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Debentures theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Debentures had been issued at the date
of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Debentures
thereafter to be issued as may be appropriate.
ARTICLE 9 SUPPLEMENTAL INDENTURES
SECTION 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of or notice to any Holder, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the
Company herein and in the Debentures contained;
(b) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee or to surrender any right or power herein
conferred upon the Company;
(c) to add to covenants of the Company for the benefit of the Holders
of the Debentures or to surrender any right or power herein
conferred upon the Company;
(d) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article 13;
(e) to add any additional Debenture Events of Default;
(f) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein,
or to make any other provisions with respect to matters or
questions arising under this Indenture, PROVIDED that such action
pursuant to this clause shall not materially adversely affect the
interest of the Holders of Debentures and, for so long as any of
the Preferred Securities shall remain outstanding, the holders of
such Preferred Securities;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee, pursuant to the requirements of
Section 6.11(b), or to add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate
the administration of the Trust hereunder by more than one
Trustee;
(h) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the
Trust Indenture Act; or
(i) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends,
if any, to be placed on Debentures, and all other matters
required pursuant to Section 3.5 or otherwise necessary,
desirable or appropriate in connection with the issuance of
Debentures to holders of Preferred Securities in the event of a
distribution of Debentures by the Trust if a Special Event occurs
and is continuing.
SECTION 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the
consent of the Holders of not less than a majority in principal amount of
the Outstanding Debentures, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of the Debentures under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Debenture affected thereby,
(a) except to the extent permitted by Section 3.11 with respect to
the extension of the interest payment period of the Debentures,
change the Stated Maturity of the principal of, or any
installment of interest on, the Debentures, or reduce the
principal amount thereof or the rate of interest thereon or
reduce any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any
Debenture or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or
after the Maturity thereof (or, in the case of redemption, on or
after the date fixed for redemption thereof);
(b) adversely affect any right to convert or exchange any Debenture
or modify the provisions of this Indenture with respect to the
subordination of the Debentures in a manner adverse to such
Holder;
(c) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of
this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture;
(d) modify any of the provisions of this Section, Section 4.1,
Section 5.8, Section 5.13 or Section 10.6, except to increase any
such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent
of the Holder of each Debenture affected thereby, or the consent
of the holders of all the Preferred Securities as the case may
be; or
(e) modify the provisions in Article 12 of this Indenture with
respect to the subordination of Outstanding Debentures in a
manner adverse to the Holders thereof;
PROVIDED that, so long as any Preferred Securities remain outstanding (i)
no such modification may be made that adversely affects the holders of such
Preferred Securities in any material respect, no termination of this
Indenture shall occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under this Indenture shall be effective,
without the prior consent of the holders of at least a majority of the
aggregate liquidation amount of such Preferred Securities then outstanding
unless and until the principal of the Debentures and all accrued and unpaid
interest thereon have been paid in full and (ii) where a consent under this
Indenture would require the consent of each Holder of Debentures, no such
consent will be given by the Property Trustee without the prior consent of
each holder of the Preferred Securities. It shall not be necessary for any
Act of Holders under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing or
accepting the additional trusts created by any supplemental indenture
permitted by this Article or the modifications thereby of the trust created
by this Indenture, the Trustee shall be entitled to receive, and (subject
to Section 6.1) shall be fully protected in conclusively relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this
Indenture, and that all conditions precedent have been complied with. The
Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.4 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes, and every Holder of the
Debentures theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5 CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 9.6 REFERENCE IN DEBENTURES TO SUPPLEMENTAL INDENTURES.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Debentures so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Debentures presented to the
Trustee.
ARTICLE 10 COVENANTS
SECTION 10.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
covenants and agrees that it will duly and punctually pay the principal of
and interest on the Debentures in accordance with the terms of the
Debentures and this Indenture.
SECTION 10.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in the United States, an office or agency where Debentures may be
presented or surrendered for payment and an office or agency where
Debentures may be surrendered for transfer or exchange and where notices
and demands to or upon the Company in respect of the Debentures and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any such office or agency. If at any time the Company shall
fail to maintain such office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee,
and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered
for any or all of such purposes, and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an
office or agency in the United States for such purposes. The Company will
give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
SECTION 10.3 MONEY FOR DEBENTURE PAYMENTS TO BE HELD IN TRUST. If the
Company shall at any time act as its own Paying Agent with respect to the
Debentures, it will, on or before each due date of the principal of or
interest on any of the Debentures, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the
principal or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its failure so to act. Whenever the Company shall
have one or more Paying Agents, it will, on or before each due date of the
principal of or interest on the Debentures, deposit with a Paying Agent a
sum sufficient to pay the principal or interest so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to such
principal or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its failure so to act. The
Company will cause each Paying Agent other than the Trustee to execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such
Paying Agent will:
(a) hold all sums held by it for the payment of the principal of or
interest on Debentures in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any payment
of principal or interest;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent; and
(d) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent, and, upon such payment by the Company or
any Paying Agent to the Trustee, such Paying Agent shall be released from
all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on
any Debenture and remaining unclaimed for two years after such principal or
interest has become due and payable shall (unless otherwise required by
mandatory provision of applicable escheat or abandoned or unclaimed
property law) be paid on Company Request, after all payments owing the
Trustee have been paid, to the Company, or (if then held by the Company)
shall (unless otherwise required by mandatory provision of applicable
escheat or abandoned or unclaimed property law) be discharged from such
trust; and the Holder of such Debenture shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 10.4 PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay
or discharge or cause to be paid or discharged, before the same shall
become delinquent, (a) all taxes, assessments and governmental charges
levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, and (b) all lawful
claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 10.5 STATEMENT AS TO COMPLIANCE. The Company shall deliver to
the Trustee, within 120 days after the end of each calendar year of the
Company an Officers' Certificate (signed by at least one of the officers
referred to in Section 314(a)(4) of the Trust Indenture Act) covering the
preceding calendar year, stating whether or not to the best knowledge of
the signers thereof the Company is in default in the performance,
observance or fulfillment of or compliance with any of the terms,
provisions, covenants and conditions of this Indenture, and if the Company
shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge. For the purpose of this Section
10.5, compliance shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this Indenture.
SECTION 10.6 WAIVER OF CERTAIN COVENANTS. The Company may omit in any
particular instance to comply with any covenant or condition set forth in
this Article 10 (other than the covenants contained in Section 10.1), if
before or after the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Debentures, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend
to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of
the Company in respect of any such covenant or condition shall remain in
full force and effect.
SECTION 10.7 ADDITIONAL SUMS. In the event that (a) the Property
Trustee is the Holder of all of the Outstanding Debentures, (b) a Tax Event
in respect of the Trust shall have occurred and be continuing and (c) the
Company shall not have (i) redeemed the Debentures pursuant to Section 11.7
or 11.8 or (ii) dissolved the Trust pursuant to Section 9.2(b) of the Trust
Agreement, the Company shall pay to the Trust (and its permitted successors
or assigns under the Trust Agreement) for so long as the Trust (or its
permitted successor or assignee) is the registered Holder of the
Debentures, such additional amounts as may be necessary in order that the
amount of distributions then due and payable by the Trust on the Preferred
Securities and Common Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a result of any
Additional Taxes (the "ADDITIONAL SUMS"). Whenever in this Indenture or the
Debentures there is a reference in any context to the payment of principal
of or interest on the Debentures, such mention shall be deemed to include
mention of the payments of the Additional Sums provided for in this
paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this
paragraph and express mention of the payment of Additional Sums (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Sums in those provisions hereof where such express mention is
not made, PROVIDED, however, that the extension of an interest payment
period pursuant to Section 3.11 or the Debentures shall not extend the
payment of any Additional Sums that may be due and payable during such
interest payment period.
SECTION 10.8 ADDITIONAL COVENANTS. The Company covenants and agrees
with each Holder of Debentures that so long as the Debentures are
outstanding, if (i) there shall have occurred any event of which the
Company has actual knowledge that (A) with the giving of notice or the
lapse of time or both, would constitute a Debenture Event of Default
hereunder and (B) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) the Company shall be in default with respect
to its payment of any obligations under the Guarantee or (iii) the Company
shall have given notice of its selection of an Extension Period as provided
herein and shall not have rescinded such notice, or such period, or any
extension thereof, shall be continuing, then the Company shall not, and
shall cause any Subsidiary not to, (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any shares of the Company's capital stock or (y)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees of
indebtedness for money borrowed) of the Company that rank PARI PASSU with
or junior to the Debentures (other than (1) any dividend, redemption,
liquidation, interest, principal or guarantee payment by the Company where
the payment is made by way of securities (including capital stock) that
rank PARI PASSU with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made, (2)
redemptions or purchases of any rights pursuant to a stockholder rights
agreement and the declaration of a dividend of such rights or the issuance
of preferred stock under such plans in the future, (3) payments under the
Guarantee, (4) purchases of Common Stock related to the issuance of Common
Stock under any of the Company's benefit plans for its directors, officers
or employees, (5) as a result of a reclassification of the company's
capital stock or the exchange or conversion of one series or class of the
Company's capital stock for another series or class of the Company's
capital stock and (6) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged).
The Company also covenants with each Holder of the Debentures (i) that
for so long as Preferred Securities are outstanding not to convert the
Debentures except pursuant to a notice of conversion delivered to the
Conversion Agent by a holder of Preferred Securities and (ii) to maintain
directly or indirectly 100% ownership of the Common Securities of the
Trust; PROVIDED, HOWEVER, that any permitted successor of the Company
hereunder may succeed to the Company's ownership of such Common Securities,
(iii) not to voluntarily terminate, wind-up, liquidate or dissolve the
Trust, except (a) in connection with a distribution of the Debentures to
the holders of Preferred Securities in dissolution of the Trust or (b) in
connection with certain mergers, consolidations or amalgamations permitted
by the Trust Agreement and (iv) to use its reasonable efforts, consistent
with the terms and provisions of the Trust Agreement, to cause the Trust to
remain a business trust and not to be classified as an association taxable
as a corporation or a partnership for United States Federal income tax
purposes.
SECTION 10.9 PAYMENT OF EXPENSES OF THE TRUST. In connection with the
offering, sale and issuance of the Debentures to the Property Trustee and
in connection with the sale of the Preferred Securities by the Trust, the
Company shall:
(a) pay for all costs, fees and expenses relating to the offering,
sale and issuance of the Preferred Securities and the Common
Securities, including commissions, discounts and expenses payable
with respect thereto and compensation of the Trustee under the
Indenture in accordance with the provisions of Section 6.7 of the
Indenture;
(b) be responsible for and pay for all debts and obligations (other
than with respect to the Preferred Securities) of the Trust, pay
for all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of
the Trust, the offering, sale and issuance of the Preferred
Securities (including commissions, discounts and expenses in
connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating
to the operation of the Trust, including without limitation,
costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of
Trust assets); and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
ARTICLE 11 REDEMPTION OR EXCHANGE OF DEBENTURES
SECTION 11.1 ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of
the Company to redeem any Debentures shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company,
the Company shall, not less than 45 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee in writing of such date and of the principal amount of
Debentures to be redeemed.
SECTION 11.2 SELECTION OF DEBENTURES TO BE REDEEMED. If less than all
the Debentures are to be redeemed, the particular Debentures to be redeemed
shall be selected not more than 45 days prior to the Redemption Date by the
Trustee from the Outstanding Debentures not previously called for
redemption, by lot or by such other method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of a
portion of the principal amount of the Debentures Outstanding, PROVIDED
that the unredeemed portion of the principal amount of the Debentures be in
an authorized denomination (which shall not be less than the minimum
authorized denomination) for the Debentures.
The Trustee shall promptly notify the Company in writing of the
Debentures selected for partial redemption and the principal amount thereof
to be redeemed. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Debentures
shall relate, in the case of any Debenture redeemed or to be redeemed only
in part, to the portion of the principal amount of such Debenture which has
been or is to be redeemed. If the Company shall so direct, Debentures
registered in the name of the Company, any Affiliate or any Subsidiary
thereof shall not be included in the Debentures selected for redemption.
SECTION 11.3 NOTICE OF REDEMPTION. Notice of redemption shall be given
by first-class mail, postage prepaid, mailed not later than the thirtieth
(30{th}) day, and not earlier than the sixtieth (60th) day, prior to the
date fixed for redemption, to each Holder of Debentures to be redeemed, at
the address of such Holder as it appears in the Securities Register.
With respect to Debentures to be redeemed, each notice of redemption
shall state:
(a) the Redemption Date;
(b) the redemption price at which the Debentures are to be redeemed
(the "REDEMPTION PRICE");
(c) if less than all Outstanding Debentures are to be redeemed, the
identification (and, in the case of partial redemption, the
respective principal amounts) of the particular Debentures to be
redeemed (including, if relevant, the CUSIP or ISIN number);
(d) that on the Redemption Date the Redemption Price will become due
and payable upon each such Debenture or portion thereof, and that
upon deposit with the Paying Agent interest thereon, if any,
shall cease to accrue on and after the Redemption Date;
(e) the place or places where the Debentures are to be surrendered
for payment of the redemption price at which the Debentures are
to be redeemed;
(f) that a Holder of Debentures who desires to convert Debentures
called for redemption must satisfy the requirements for
conversion contained in the Debentures, the then existing
Conversion Price, and the date and time when the option to
convert shall expire; and
(g) the record date for the determination of holders entitled to
receive payment of the Redemption Price, as provided in Section
11.5.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name and at the expense of the Company and
shall be irrevocable. The notice if mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives such notice. In any case, a failure to give such notice by
mail or any defect in the notice to the Holder of any Debenture designated
for redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debenture.
SECTION 11.4 DEPOSIT OF REDEMPTION PRICE. Prior to 12:00 noon E.S.T.
on the Redemption Date specified in the notice of redemption given as
provided in Section 11.3, the Company will deposit with the Trustee or with
one or more Paying Agents (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 4.2) an amount of
money sufficient to redeem on the Redemption Date all the Debentures so
called for redemption at the applicable Redemption Price.
If any Debenture called for redemption has been converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and
held in trust for the redemption of such Debenture shall (subject to any
right of the Holder of such Debenture or any Predecessor Debenture to
receive interest as provided in the last paragraph of Section 3.7) be paid
to the Company upon Company Request or, if then held by the Company, shall
be discharged from such trust.
SECTION 11.5 DEBENTURES PAYABLE ON REDEMPTION DATE. If notice of
redemption has been given as provided in Section 11.3, the Debentures so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, including any accrued interest thereon,
and from and after such date (unless the Company shall default in the
payment of the Redemption Price or any accrued interest on such Debentures
shall cease to bear interest. Upon surrender of any such Debenture for
redemption in accordance with said notice, such Debenture shall be paid by
the Company at the Redemption Price, including any accrued interest to the
Redemption Date, PROVIDED, HOWEVER, that installments of interest on
Debentures whose Stated Maturity is on or prior to the Redemption Date
shall be payable to the Holders of such Debentures, or one of more
Predecessor Debentures, registered as such at the close of business on the
relevant Regular Record Dates or Special Record Dates, as the case may be,
according to their terms and the provisions of Section 3.7. In the event
that any date on which any Redemption Price is payable is not a Business
Day, then payment of the Redemption Price payable on such date will be made
on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, with the same
force and effect as if made on such date. Payment of the Redemption Price
shall be made to the Holders of such Debentures as they appear on the
Securities Register for the Debentures on the relevant record date, which
shall be the date which is the fifteenth (15th) day (whether or not a
Business Day) preceding such Redemption Date. If any Debenture called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal shall, until paid, bear interest from the Redemption Date at the
rate prescribed therefor in the Debenture.
SECTION 11.6 DEBENTURES REDEEMED IN PART. In the event of any
redemption in part, the Company shall not be required to (i) issue,
register the transfer of or exchange any Debenture during a period
beginning at 9:00 a.m. E.S.T. 15 Business Days before any selection for
redemption of Debentures and ending at 5:00 p.m. E.S.T. on the earliest
date in which the relevant notice of redemption is deemed to have been
given to all Holders of Debentures to be so redeemed and (ii) register the
transfer of or exchange any Debentures so selected for redemption, in whole
or in part, except for the unredeemed portion of any Debentures being
redeemed in part.
Any Debenture which is to be redeemed only in part shall be
surrendered at the place of payment therefor (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and make
available for delivery to the Holder of such Debenture without service
charge, a new Debenture or Debentures, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Debenture so
surrendered. Each Debenture shall be subject to partial redemption only in
the amount of $10 or integral multiples thereof. The Debentures are not
entitled to the benefit of any sinking or like fund.
SECTION 11.7 MANDATORY REDEMPTION. Upon (i) repayment at maturity or
(ii) as a result of acceleration upon the occurrence and continuation of a
Debenture Event of Default, the Company shall redeem the Outstanding
Debentures, in whole but not in part, at a redemption price equal to 100%
of the principal amount of such Debentures plus any accrued and unpaid
interest, to the date fixed for redemption.
SECTION 11.8 OPTIONAL REDEMPTION. Except as set forth below, on and
after __________ __, 2004, and subject to the next succeeding sentence, the
Company shall have the right, at any time and from time to time, to redeem
the Debentures, in whole or in part, upon notice given as set forth in
Section 11.3, at a Redemption Price equal to the principal amount of such
Debentures plus any accrued and unpaid interest, to the date fixed for such
redemption. The Company may not redeem the Debentures in whole or in part
unless all accrued and unpaid interest has been paid in full on all
outstanding Debentures for all quarterly interest periods terminating on or
prior to the giving of notice of the Redemption Date. If a Tax Event shall
occur and be continuing, the Company shall have the right, upon not less
than 30 nor more than 60 days' notice, to redeem the Debentures in whole or
in part, for cash within 90 days following the occurrence of such Tax Event
at a Redemption Price equal to the principal amount of such Debentures plus
any accrued and unpaid interest, to the date fixed for such redemption.
The Company also may redeem the Debentures (a "PROVISIONAL REDEMPTION"), in
whole or in part, upon notice given as set forth in Section 11.3 at any
time, at a Redemption Price equal to the principal amount of the Debentures
being redeemed, plus any accrued and unpaid interest, if the Current Market
Price of the Common Stock shall have exceeded 150% of the Conversion Price
then in effect for at least 20 Trading Days within any period of 30
consecutive Trading Days ending not more than five Trading Days prior to
the date of mailing of the notice given as set forth in Section 11.3.
SECTION 11.9 EXCHANGE OF TRUST SECURITIES FOR DEBENTURES.
(a) At any time, the Company shall have the right to dissolve the
Trust and cause the Debentures to be distributed to the holders
of the Preferred Securities in dissolution of the Trust after
satisfaction of liabilities to creditors of the Trust as provided
by applicable law.
(b) If a Special Event in respect of the Trust shall occur and be
continuing, the Company shall give the Property Trustee notice of
the same. If a Special Event in respect of the Trust shall occur
and be continuing, the Trust Agreement requires the Property
Trustee to direct the Conversion Agent (as defined in the Trust
Agreement) to exchange all outstanding Trust Securities for the
Debentures having a principal amount equal to the aggregate
liquidation amount of the Trust Securities to be exchanged with
accrued interest in an amount equal to any unpaid distributions
on the Trust Securities PROVIDED that, in the case of a Tax Event
that shall have occurred and be continuing, the Company shall
have the right to direct the Property Trustee that less than all,
or none, of the Trust Securities be so exchanged (i) if and for
so long as the Company shall have elected to pay any Additional
Sums such that the amounts received by holders of the Trust
Securities that remain outstanding are not reduced as a result of
such Tax Event, and shall not have revoked any such election or
failed to make such payments or (ii) if the Company shall instead
elect to redeem the Debentures, in whole or in part, in the
manner set forth in Section 11.8.
ARTICLE 12 SUBORDINATION OF DEBENTURES
SECTION 12.1 DEBENTURES SUBORDINATE TO SENIOR DEBT. The Company
covenants and agrees, and each Holder of a Debenture, by its acceptance
thereof, likewise covenants and agrees, that, to the extent and in the
manner hereinafter set forth in this Article, the payment of the principal
of and interest on each and all of the Debentures are hereby expressly made
junior and subordinate and subject in right of payment to the prior payment
in full of all amounts then due and payable in respect of all Senior Debt
(whether outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of
the holders of Senior Debt. Notwithstanding the foregoing, any and all
amounts payable to the Trustee pursuant to Section 6.7 are not subject to
the provisions of Article 12.
SECTION 12.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceeding in connection with any insolvency
or bankruptcy proceeding of the Company (each such event, if any, herein
sometimes referred to as a "PROCEEDING"), then the holders of Senior Debt
shall be entitled to receive payment in full of principal of (and premium,
if any) and interest (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt), if any, on
such Senior Debt, or provision shall be made for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt, before the Holders of the Debentures, are entitled to receive
or retain any payment or distribution of any kind or character, whether in
cash, property or Debentures (including any payment or distribution which
may be payable or deliverable by reason of the payment of any other Debt of
the Company (including the Debentures) subordinated to the payment of the
Debentures, but not including any payments that are made from funds on
deposit pursuant to Section 4.1 or funds on deposit for the redemption of
Debentures for which notice of Redemption has been given and the applicable
Redemption Date has passed, such payment or distribution being hereinafter
referred to as a "JUNIOR SUBORDINATED PAYMENT"), in respect of principal of
or interest on the Debentures or on account of the purchase or other
acquisition of Debentures by the Company or any Subsidiary and to that end
the holders of Senior Debt shall be entitled to receive, for application to
the payment thereof any payment or distribution of any kind of character,
whether in cash, property or Debentures, including any Junior Subordinated
Payment, which may be payable or deliverable in respect of the Debentures
in any such Proceeding.
In the event that notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Debenture shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or Debentures, including any Junior Subordinated
Payment, prohibited by the foregoing, before all Senior Debt is paid in
full or payment thereof is provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, and if
such fact shall, at or prior to the time of such payment or distribution,
have been made known to the Trustee or, as the case may be, such Holder,
then and in such event such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior
Debt in full, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Debt.
For the purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or
securities" shall not be deemed to include shares of stock of the Company,
as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which
securities are subordinated in right of payment to all then outstanding
Senior Debt to substantially the same extent as the Debentures are so
subordinated as provided in this Article. The consolidation of the Company
with, or the merger of the Company into, another Person or the liquidation
or dissolution of the Company following the sale of all or substantially
all of its properties and assets as an entirety to another Person or the
liquidation or dissolution of the Company following the sale of all or
substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article 8 shall not be
deemed a Proceeding for the purposes of this Section, if the Person formed
by such consolidation or into which the Company is merged or the Person
which acquires by sale such properties and assets as an entirety, as the
case may be, shall, as a part of such consolidation, merger, or sale comply
with the conditions set forth in Article 8.
SECTION 12.3 PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF
DEBENTURES. In the event that the Debentures are declared due and payable
before their Maturity, then and in such event the holders of the Senior
Debt outstanding at the time the Debentures so become due and payable shall
be entitled to receive payment in full of all amounts due on or in respect
of such Senior Debt (including any amounts due upon acceleration), or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, before
the Holders of the Debentures are entitled to receive any payment or
distribution of any kind or character, whether in cash, properties or
securities (including any Junior Subordinated Payment) by the Company on
account of the principal of or interest on the Debentures or on account of
the purchase or other acquisition of Debentures by the Company or any
Subsidiary. In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of the Debentures
prohibited by the foregoing provisions of this Section, and if such fact
shall, at or prior to the time of such payment, have been made known, as
set forth in Section 12.10, to a Responsible Officer of the Trustee or, as
the case may be, such Holder, then and in such event such payment shall be
paid over and delivered forthwith to the Company. The provisions of this
Section shall not apply to any payment with respect to which Section 12.2
would be applicable.
SECTION 12.4 NO PAYMENT WHEN SENIOR DEBT IN DEFAULT. (a) In the event
and during the continuation of any default in the payment of principal of
(or premium, if any) or interest on any Senior Debt, or in the event that
any event of default with respect to any Senior Debt shall have occurred
and be continuing and shall have resulted in such Senior Debt becoming or
being declared due and payable prior to the date on which it would
otherwise have become due and payable, unless and until such event of
default shall have been cured or waived or shall have ceased to exist and
such acceleration shall have been rescinded or annulled, or (b) in the
event any judicial proceeding shall be pending with respect to any such
default in payment or such event or default; then no payment or
distribution of any kind or character, whether in cash, properties or
Debentures (including any Junior Subordinated Payment) shall be made by the
Company on account of principal of or interest, if any, on the Debentures
or on account of the purchase or other acquisition of Debentures by the
Company or any Subsidiary other than payments made from funds on deposit
pursuant to Section 4.1 or from funds on deposit for the redemption of
Debentures for which notice of redemption has been given and the Redemption
Date has passed.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of the Debentures prohibited
by the foregoing provisions of this Section, and if such fact shall, at or
prior to the time of such payment, have been made known as set forth in
Section 12.10, to a Responsible Officer of the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company. The provisions of this Section shall
not apply to any payment with respect to which Section 12.2 would be
applicable.
SECTION 12.5 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in
this Article or elsewhere in this Indenture or in any of the Debentures
shall prevent (a) the Company, at any time except during the pendency of
any Proceeding referred to in Section 12.2 or under the conditions
described in Sections 12.3 and 12.4, from making payments at any time of
principal of or interest on the Debentures, or (b) the application by the
Trustee of any money deposited with it hereunder to the payment of or on
account of the principal of or interest on the Debentures or the retention
of such payment by the Holders, if, at the time of such application by the
Trustee, a Responsible Officer of the Trustee did not have actual knowledge
that such payment would have been prohibited by the provisions of this
Article.
SECTION 12.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT. Subject
to the payment in full of all Senior Debt, or the provision for such
payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, the Holders of the Debentures shall be
subrogated to the extent of the payments or distributions made to the
holders of such Senior Debt pursuant to the provisions of this Article
(equally and ratably with the holders of all indebtedness of the Company
which by its express terms is subordinated to Senior Debt of the Company to
substantially the same extent as the Debentures are subordinated to the
Senior Debt and is entitled to like rights of subrogation by reason of any
payments or distributions made to holders of such Senior Debt) to the
rights of the holders of such Senior Debt to receive payments and
distributions of cash, property and securities applicable to the Senior
Debt until the principal of and interest on the Debentures shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Debt of any cash, property or securities to which the
Holders of the Debentures or the Trustee would be entitled except for the
provisions of this Article, and no payments pursuant to the provisions of
this Article to the holders of Senior Debt by Holders of the Debentures or
the Trustee, shall, as among the Company, its creditors other than holders
of Senior Debt, and the Holders of the Debentures, be deemed to be a
payment or distribution by the Company to or on account of the Senior Debt.
SECTION 12.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Debentures on the one
hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Debentures is
intended to or shall (a) impair, as between the Company and the Holders of
the Debentures, the obligations of the Company, which are absolute and
unconditional, to pay to the Holders of the Debentures the principal of and
interest on the Debentures as and when the same shall become due and
payable in accordance with their terms, or (b) affect the relative rights
against the Company of the Holders of the Debentures and creditors of the
Company other than their rights in relation to the holders of Senior Debt,
or (c) prevent the Trustee or the Holder of any Debenture from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture including, without limitation, filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article of the
holders of Senior Debt to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 12.8 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a
Debenture by his or her acceptance thereof authorizes and directs the
Trustee on his or her behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination provided in this
Article and appoints the Trustee his or her attorney-in-fact for any and
all such purposes.
SECTION 12.9 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any
present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or be
otherwise charged with.
SECTION 12.10 NOTICE TO TRUSTEE. The Company shall give prompt written
notice to the Trustee of any fact known to the Company which would prohibit
the making of any payment to or by the Trustee in respect of the
Debentures. Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of
any payment to or by the Trustee in respect of the Debentures, unless and
until the Trustee shall have received written notice thereof from the
Company or a person representing itself as a holder of Senior Debt or from
any trustee, agent or representative therefor (whether or not the facts
contained in such notice are true).
SECTION 12.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Article 6,
and the Holders of the Debentures shall be entitled to conclusively rely
upon any order or decree entered by any court of competent jurisdiction in
which a Proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the
benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Debentures, for
the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 12.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT. With
respect to the holders of the Senior Debt of the Company, the Trustee
undertakes to perform or observe only such of its obligations and covenants
as are set forth in this Article 12, and no implied covenants or
obligations with respect to the holders of such Senior Debt shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Senior Debt and, subject to
the provisions of Section 6.3, the Trustee shall not be liable to the
holder of any Senior Debt if it shall pay over or deliver to Holders, the
Company, or any other person, money or assets to which any holder of such
Senior Debt shall be entitled to by virtue of this Article 12 or otherwise.
SECTION 12.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION
OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article with respect to any
Senior Debt which may at any time be held by it, to the same extent as any
other holder of Senior Debt, and, subject to the requirements of the Trust
Indenture Act, nothing in this Indenture shall deprive the Trustee of any
of its rights as such holder.
SECTION 12.14 ARTICLE APPLICABLE TO PAYING AGENTS. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "TRUSTEE" as used in this
Article shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its
meaning as fully for all intent and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee.
SECTION 12.15 CERTAIN CONVERSIONS OR EXCHANGES DEEMED PAYMENT.
For the
purpose of this Article only, (a) the issuance and delivery of junior
securities upon conversion or exchange of Debentures shall not be deemed to
constitute a payment or distribution on account of the principal of or
interest on the Debentures or on account of the purchase or other
acquisition of Debentures, and (b) the payment, issuance or delivery of
cash (including any payments for fractional shares), property or securities
(other than junior securities) upon conversion or exchange of a Debenture
shall be deemed to constitute payment on account of the principal of such
security. For the purpose of this Section, the term "JUNIOR SECURITIES"
means (i) shares of any common stock of any class of the Company and (ii)
securities of the Company which are subordinated in right of payment to all
Senior Debt which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Debentures are so subordinated as provided in this Article.
ARTICLE 13 CONVERSION OF DEBENTURES
SECTION 13.1 CONVERSION RIGHTS. Subject to and upon compliance with
the provisions of this Article, the Debentures are convertible, at the
option of the Holder, at any time prior to the redemption or maturity, into
fully paid and nonassessable shares of Common Stock at an initial
conversion rate of ______ shares of Common Stock for each $10 in aggregate
principal amount of Debentures (equal to a conversion price of
approximately $_____ per share of Common Stock), subject to adjustment as
described in this Article 13 (as adjusted, the "CONVERSION PRICE"). A
Holder of Debentures may convert any portion of the principal amount of the
Debentures into that number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing the principal amount of the Debentures to be
converted by the Conversion Price. In case a Debenture or portion thereof
is called for redemption, such conversion right in respect of the Debenture
or portion so called shall expire at the close of business on the
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
SECTION 13.2 CONVERSION PROCEDURES.
(a) In order to convert all or a portion of the Debentures, the
Holder thereof shall deliver to the Property Trustee, as
conversion agent or to such other agent appointed for such
purposes (the "CONVERSION AGENT") an irrevocable Notice of
Conversion setting forth the principal amount of Debentures to be
converted, together with the name or names, if other than the
Holder, in which the shares of Common Stock should be issued upon
conversion and surrender to the Conversion Agent the Debentures
to be converted, duly endorsed or assigned to the Company or in
blank. In addition, a holder of Preferred Securities may exercise
its right under the Trust Agreement to convert such Preferred
Securities into Common Stock by delivering to the Conversion
Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing
the Conversion Agent (i) to exchange such Preferred Security for
a portion of the Debentures held by the Trust (at an exchange
rate of $10 principal amount of Debentures for each Preferred
Security) and (ii) to immediately convert such Debentures, on
behalf of such holder, into Common Stock pursuant to this Article
13 and, surrendering such Preferred Securities, duly endorsed or
assigned to the Company or in blank. So long as any Preferred
Securities are outstanding, the Trust shall not convert any
Debentures except pursuant to a Notice of Conversion delivered to
the Conversion Agent by a holder of Preferred Securities.
If a Notice of Conversion is delivered on or after the Regular
Record Date and prior to the subsequent Interest Payment Date,
the Holder of record on the Regular Record Date will be entitled
to receive the interest paid on the subsequent Interest Payment
Date on the portion of Debentures to be converted notwithstanding
the conversion thereof prior to such Interest Payment Date.
Except as otherwise provided in the immediately preceding
sentence, in the case of any Debenture which is converted,
interest whose Stated Maturity is on or after the date of
conversion of such Debenture shall not be payable, and the
Company shall not make nor be required to make any other payment,
adjustment or allowance with respect to accrued but unpaid
interest on the Debentures being converted, which shall be deemed
to be paid in full. Debentures submitted for conversion prior to
the expiration of conversion rights as provided in Section 13.3
shall be deemed to have been effected immediately prior to the
close of business on the day on which the Notice of Conversion
was received (the "CONVERSION DATE") by the Conversion Agent from
the Holder or from a holder of the Preferred Securities effecting
a conversion thereof pursuant to its conversion rights under the
Trust Agreement, as the case may be. The Person or Persons
entitled to receive Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders
of such Common Stock as of the Conversion Date and such Person or
Persons will cease to be a record Holder or record Holders of the
Debentures on that date. As promptly as practicable on or after
the Conversion Date, the Company shall issue and deliver at the
office of the Conversion Agent, unless otherwise directed by the
Holder or holder in the Notice of Conversion, a certificate or
certificates for the number of full shares of Common Stock
issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or
Persons entitled to receive the same. The Conversion Agent shall
deliver such certificate or certificates to such Person or
Persons.
(b) The Company's delivery upon conversion of the fixed number of
shares of Common Stock into which the Debentures are convertible
(together with the cash payment, if any, in lieu of fractional
shares) shall be deemed to satisfy the Company's obligation to
pay the principal amount at Maturity of the portion of Debentures
so converted and any unpaid interest accrued on such Debentures
at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a result
of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same
fraction of the Current Market Price with respect to such
fractional interest on the date on which the Debentures or
Preferred Securities, as the case may be, were duly surrendered
to the Conversion Agent for conversion, and the Conversion Agent
in turn will make such payment, if any, to the Holder of the
Securities or the holder of the Preferred Securities so
converted.
(d) In the event of the conversion of any Debenture in part only, a
new Debenture or Debentures for the unconverted portion thereof
will be issued in the name of the Holder thereof upon the
cancellation of the Debenture converted in part in accordance
with Section 3.5.
(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the holders
of Preferred Securities (in the exchange of Preferred Securities
for Debentures) and as agent of the Holders of Debentures (in the
conversion of Debentures into Common Stock), as the case may be,
directing it to effect such conversion transactions. The
Conversion Agent is hereby authorized (i) to exchange Debentures
held by the Trust from time to time for Preferred Securities in
connection with the conversion of such Preferred Securities in
accordance with this Article 13 and (ii) to convert all or a
portion of the Debentures into Common Stock and thereupon to
deliver such shares of Common Stock in accordance with the
provisions of this Article 13 and to deliver to the Trust a new
Debenture or Debentures for any resulting unconverted principal
amount.
(f) The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance
upon the conversion of the Debentures, such number of shares of
Common Stock as shall from time to time be issuable upon the
conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, the Company shall be entitled to
deliver upon conversion of Debentures shares of Common Stock
reacquired and held in the treasury of the Company (in lieu of
the issuance of authorized and unissued shares of Common Stock)
so long as any such treasury shares are free and clear of all
liens, charges, security interests or encumbrances. Whenever the
Company issues shares of Common Stock upon conversion of
Debentures, and the Company has in effect at such time a stock
purchase rights agreement under which holders of Common Stock are
issued rights ("RIGHTS") entitling the holders under certain
circumstances to purchase an additional share or shares of stock,
the Company will issue, together with each such share of Common
Stock, such number of Rights (which number may be a fraction) as
shall at that time be issuable with a share of Common Stock
pursuant to such stock purchase rights agreement. Any shares of
Common Stock issued upon conversion of the Debentures shall be
duly authorized, validly issued and fully paid and nonassessable.
The Conversion Agent shall deliver the shares of Common Stock
received upon conversion of the Debentures to the converting
Holder free and clear of all liens, charges, security interests
and encumbrances, except for United States withholding taxes. The
Company shall use its best efforts to obtain and keep in force
such governmental or regulatory permits or other authorizations
as may be required by law, and shall comply with all applicable
requirements as to registration or qualification of Common Stock
(and all requirements to list Common Stock issuable upon
conversion of Debentures that are at the time applicable), in
order to enable the Company to lawfully issue Common Stock upon
conversion of the Debentures and to lawfully deliver Common Stock
to each Holder upon conversion of the Debentures.
(g) The Company will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on
conversion of Debentures. The Company shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common
Stock in a name other than that in which the Debentures so
converted were registered, and no such issue or delivery shall be
made unless and until the Person requesting such issue has paid
to the Conversion Agent the amount of any such tax, or has
established to the satisfaction of the Conversion Agent that such
tax has been paid.
(h) Nothing in this Article 13 shall limit the requirement of the
Company to withhold taxes pursuant to the terms of the Debentures
or as set forth in this Agreement or otherwise require the
Trustee or the Company to pay any amounts on account of such
withholdings.
SECTION 13.3 EXPIRATION OF CONVERSION RIGHTS. The conversion rights of
Holders of Debentures shall expire at the close of business on the date set
for redemption of the Debentures or if not theretofore redeemed the Stated
Maturity of the Debentures.
SECTION 13.4 CONVERSION PRICE ADJUSTMENTS. The conversion price shall
be subject to adjustment (without duplication) from time to time as
follows:
(a) In case the Company shall, while any of the Debentures are
outstanding, (i) pay a dividend or make a distribution with
respect to its Common Stock exclusively in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its
shares of Common Stock any shares of capital stock of the
Company, the conversion privilege and the Conversion Price in
effect immediately prior to such action shall be adjusted so that
the Holder of any Debentures thereafter surrendered for
conversion shall be entitled to receive the number of shares of
capital stock of the Company which he would have owned
immediately following such action had such Debentures been
converted immediately prior thereto. An adjustment made pursuant
to this subsection (a) shall become effective immediately after
the record date in the case of a dividend or other distribution
and shall become effective immediately after the effective date
in case of a subdivision, combination or reclassification (or
immediately after the record date if a record date shall have
been established for such event). If, as a result of an
adjustment made pursuant to this subsection (a), the Holder of
any Debenture thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes or series of
capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a
Board Resolution filed with the Trustee) shall determine the
allocation of the adjusted Conversion Price between or among
shares of such classes or series of capital stock. In the event
that such dividend, distribution, subdivision, combination or
issuance is not so paid or made, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in
effect if such record date had not been fixed.
(b) In case the Company shall, while any of the Debentures are
Outstanding, issue rights or warrants to all holders of its
Common Stock entitling them (for a period expiring within 45 days
after the record date for the determination of stockholders
entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than
the Current Market Price per share of Common Stock on such record
date, the Conversion Price for the Debentures shall be adjusted
so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of
the total number of shares so offered for subscription or
purchase would purchase at such Current Market Price, and of
which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock
offered for subscription or purchase. Such adjustment shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or
warrants. For the purposes of this subsection, the number of
shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company shall not
issue any rights or warrants in respect of shares of Common Stock
held in the treasury of the Company. In case any rights or
warrants referred to in this subsection in respect of which an
adjustment shall have been made shall expire unexercised within
45 days after the same shall have been distributed or issued by
the Company, the Conversion Price shall be readjusted at the time
of such expiration to the Conversion Price that would have been
in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
(c) Subject to the last sentence of this subparagraph, in case the
Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares
of any class or series of capital stock, cash or assets
(including securities, but excluding any rights or warrants
referred to in subparagraph (b), any dividend or distribution
paid exclusively in cash and any dividend or distribution
referred to in subparagraph (a) of this Section 13.4), the
Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in
effect immediately prior to the effectiveness of the Conversion
Price reduction contemplated by this subparagraph (c) by a
fraction of which the numerator shall be the Current Market Price
per share of Common Stock on the date fixed for the payment of
such distribution (the "REFERENCE DATE") less the fair market
value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of the Board of Directors), on the Reference Date, of
the portion of the evidences of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of
Common Stock and the denominator shall be such Current Market
Price per share of Common Stock, such reduction to become
effective immediately prior to the opening of business on the day
following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be
in effect if such dividend or distribution had not occurred. For
purposes of this subparagraph (c), any dividend or distribution
that includes shares of Common Stock or rights or warrants to
subscribe for or purchase shares of Common Stock shall be deemed
instead to be (i) a dividend or distribution of the evidences of
indebtedness, shares of capital stock, cash or assets other than
such shares of Common Stock or such rights or warrants (making
any Conversion Price reduction required by this subparagraph (c))
immediately followed by (ii) a dividend or distribution of such
shares of Common Stock or such rights or warrants (making any
further conversion price reduction required by subparagraph (a)
or (b)), except (A) the Reference Date of such dividend or
distribution as defined in this subparagraph shall be substituted
as (x) "the record date in the case of a dividend or other
distribution," and (y) "the record date for the determination of
stockholders entitled to receive such rights or warrants" and (z)
"the date fixed for such determination" within the meaning of
subparagraphs (a) and (b) and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed
outstanding for purposes of computing any adjustment of the
conversion price in subparagraph (a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding
any regular quarterly dividend payable solely in cash that may be
established by the Board of Directors in the future (as adjusted
to reflect any of the events referred to in subparagraphs (a),
(b), (c), (d) or (e) of this Section)), the Conversion Price
shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph (d) by a fraction of
which the numerator shall be the Current Market Price per share
of Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed (excluding
that portion of such distribution that does not exceed any
regular quarterly dividend payable solely in cash that may be
established by the Board of Directors in the future (as adjusted
to reflect any of the events referred to in subparagraphs (a),
(b), (c), (d) or (e) of this Section)) applicable to one share of
Common Stock and the denominator shall be such Current Market
Price per share of Common Stock, such reduction to become
effective immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution;
PROVIDED, HOWEVER, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to
or greater than the Current Market Price per share of Common
Stock on the record date mentioned above (excluding that portion
of such distribution that does not exceed any regular quarterly
dividend payable solely in cash that may be established by the
Board of Directors in the future (as adjusted to reflect any of
the events referred to in subparagraphs (a), (b), (c), (d) or (e)
of this Section)), in lieu of the foregoing adjustment, adequate
provision shall be made so that each Holder of shares of
Debentures shall have the right to receive upon conversion the
amount of cash such Holder would have received had such Holder
converted each share of the Debentures immediately prior to the
record date for the distribution of the cash (less that portion
of such distribution that does not exceed any regular quarterly
dividend payable solely in cash that may be established by the
Board of Directors in the future (as adjusted to reflect any of
the events referred to in subparagraphs (a), (b), (c), (d) or (e)
of this Section)). In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the conversion price which would then be
in effect if such record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any Subsidiary of the Company for all or
any portion of Common Stock shall expire and such tender or
exchange offer shall involve the payment by the Company or such
Subsidiary of consideration per share of Common Stock having a
fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors) at the last time (the
"EXPIRATION TIME") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amended)
that exceeds 110% of the Current Market Price per share of Common
Stock on the trading day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in
effect immediately prior to the effectiveness of the Conversion
Price reduction contemplated by this subparagraph (e) by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time (including the Purchased Shares)
(as defined below) multiplied by the Current Market Price per
share of Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the
fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the
"PURCHASED SHARES") (excluding that portion of such consideration
that does not exceed 110% of the Current Market Price per share)
and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time
and the Current Market Price per share of Common Stock on the
trading day next succeeding the Expiration Time, such reduction
to become effective immediately prior to the opening of business
on the day following the Expiration Time. In the event that such
tender or exchange offer is not so made, the Conversion Price
shall again be adjusted to be the Conversion Price which would
then be in effect if such record date had not been fixed.
(f) The Company shall have the right to reduce from time to time the
Conversion Price by any amount selected by the Company for any
period of at least 30 days, PROVIDED, that Company shall give at
least 15 days' written notice of such reduction to the Trustee
and the Property Trustee. The Company may, at its option, make
such reductions in the Conversion Price, in addition to those set
forth above in Section 13.4(a), as the Board of Directors deems
advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such
for United States Federal income tax purposes.
(g) Notwithstanding anything to the contrary in this Section 13.4, no
adjustment of the Conversion Price will be made upon the issuance
of any shares of Common Stock (or securities convertible or
exchangeable for Common Stock), except as specifically provided
above, including pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan,
or the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any present or future
employee benefit plan or program of the Company or pursuant to
any option, warrant, right, or exercisable, exchangeable or
convertible security which does not constitute an issuance to all
holders of Common Stock of rights or warrants entitling holders
of such rights or warrants to subscribe for or purchase Common
Stock at less than the Current Market Price. Further, such
issuances shall not be deemed to constitute an issuance of Common
Stock or exercisable, exchangeable or convertible securities by
the Company to which any of the adjustment provisions described
above applies. There shall also be no adjustment of the
Conversion Price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the
Company except as specifically described in this Article 13. No
adjustment in the Conversion Price will be required unless such
adjustment would require an increase or decrease of at least 1%
of the Conversion Price, but any adjustment that would otherwise
be required to be made shall be carried forward and taken into
account in a subsequent adjustment.
(h) If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only
one adjustment shall be made and such adjustment shall be the
amount of adjustment that has the highest absolute value to the
Holder of the Debentures.
SECTION 13.5 FUNDAMENTAL CHANGE.
(a) In the event that the Company is a party to any transaction
(including, without limitation, a merger other than a merger that
does not result in a reclassification, conversion, exchange or
cancellation of Common Stock), consolidation, sale of all or
substantially all of the assets of the Company, recapitalization
or reclassification of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination of
Common Stock) or any compulsory share exchange (each of the
foregoing being referred to as a "TRANSACTION"), in each case, as
a result of which shares of Common Stock shall be converted into
the right to receive, or shall be exchanged for, (i) in the case
of any Transaction other than a Transaction involving a Common
Stock Fundamental Change (and subject to funds being legally
available for such purpose under applicable law and the time of
such conversion), securities, cash or other property, each
Debenture shall thereafter be convertible into the kind and, in
the case of a Transaction which does not involve a Fundamental
Change, amount of securities, cash and other property receivable
upon the consummation of such Transaction by a holder of that
number of shares of Common Stock into which a Debenture was
convertible immediately prior to such Transaction, or (ii) in the
case of a Transaction involving a Common Stock Fundamental
Change, common stock, each Debenture shall thereafter be
convertible (in the manner described herein) into common stock of
the kind received by holders of Common Stock (but in each case
after giving effect to any adjustment discussed in paragraphs (b)
and (c) relating to a Fundamental Change if such Transaction
constitutes a Fundamental Change). The holders of Debentures or
Preferred Securities will have no voting rights with respect to
any Transaction.
(b) If any Fundamental Change occurs, then the Conversion Price in
effect will be adjusted immediately after such Fundamental Change
as described in paragraph (c) below. In addition, in the event of
a Common Stock Fundamental Change, each Debenture shall be
convertible solely into common stock of the kind received by
holders of Common Stock as a result of such Common Stock
Fundamental Change.
(c) The Conversion Price in the case of any Transaction involving a
Fundamental Change will be adjusted immediately after such
Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change, the
Conversion Price of the Debentures will thereupon become the
lower of (A) the Conversion Price in effect immediately
prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to
the preceding paragraphs, and (B) the result obtained by
multiplying the greater of the Applicable Price or the then
applicable Reference Market Price by a fraction of which the
numerator will be $10 and the denominator will be (x) the
amount of the Redemption Price for one Debenture if the
Redemption Date were the date of such Non-Stock Fundamental
Change plus (y) any then-accrued and unpaid interest on one
Debenture; and
(ii) in the case of a Common Stock Fundamental Change, the
Conversion Price of the Debentures in effect immediately
prior to such Common Stock Fundamental Change, but after
giving effect to any other prior adjustments effected
pursuant to the preceding paragraphs, will thereupon be
adjusted by multiplying such Conversion Price by a fraction
of which the numerator will be the Purchaser Stock Price and
the denominator will be the Applicable Price; PROVIDED,
HOWEVER, that in the event of a Common Stock Fundamental
Change in which (A) 100% of the value of the consideration
received by a holder of common stock is common stock of the
successor, acquiror, or other third party (and cash, if any,
is paid only with respect to any fractional interests in
such common stock resulting from such Common Stock
Fundamental Change) and (B) all of common stock will have
been exchanged for, converted into, or acquired for common
stock (and cash with respect to fractional interests) of the
successor, acquiror, or other third party, the Conversion
Price of the Debentures in effect immediately prior to such
Common Stock Fundamental Change will thereupon be adjusted
by multiplying such Conversion Price by a fraction of which
the numerator will be one and the denominator will be the
number of shares of common stock of the successor, acquiror,
or other third party received by a holder of one share of
common stock as a result of such Common Stock Fundamental
Change.
SECTION 13.6 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price and shall
prepare a certificate signed by the Chief Financial Officer or
the Treasurer of the Company setting forth the adjusted
conversion price and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall
forthwith be filed with the Trustee, the Conversion Agent and the
transfer agent for the Preferred Securities and the Debentures;
and
(b) a notice stating the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall as soon as
practicable be mailed by the Company to all record holders of
Preferred Securities and the Debentures at their last addresses
as they appear upon the stock transfer books of the Company and
the Trust and the Securities Registrar.
SECTION 13.7 PRIOR NOTICE OF CERTAIN EVENTS. In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend
payable in shares of Common Stock or (B) a dividend payable in
cash that would not require an adjustment pursuant to Section
13.4(c) or (d) or (ii) authorize a tender or exchange offer that
would require an adjustment pursuant to Section 13.4(e);
(b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or series or of any other rights or
warrants;
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which
the Company is a party and for which approval of stockholders of
the Company shall be required, or of the sale or transfer of all
or substantially all of the assets of the Company or of any
compulsory share exchange whereby Common Stock is converted into
other securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall (A) if any Preferred Securities are outstanding
under the Trust Agreement, cause to be filed with the transfer agent
for the Preferred Securities, and shall cause to be mailed to the
holders of record of the Preferred Securities, at their last addresses
as they shall appear upon the stock transfer books of the Trust or (B)
shall cause to be mailed to all Holders at their last addresses as
they shall appear in the Security Register, at least 15 days prior to
the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record (if any) is to be taken
for the purpose of such dividend, distribution, rights or warrants or,
if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up (but no failure to
mail such notice or any defect therein or in the mailing thereof shall
affect the validity of the corporate action required to be specified
in such notice).
SECTION 13.8 CERTAIN ADDITIONAL RIGHTS. In case the Company shall, by
dividend or otherwise, declare or make a distribution on its Common Stock
referred to in Section 13.4(c) or 13.4(d) (including, without limitation,
dividends or distributions referred to in the last sentence of Section
13.4(c)), the Holders of the Debentures, upon the conversion thereof
subsequent to the close of business on the date fixed for the determination
of stockholders entitled to receive such distribution and prior to the
effectiveness of the Conversion Price adjustment in respect of such
distribution, shall also be entitled to receive for each share of Common
Stock into which the Debentures are converted, the portion of the shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share of
Common Stock; PROVIDED, HOWEVER, that, at the election of the Company
(whose election shall be evidenced by a resolution of the Board of
Directors) with respect to all Holders so converting, the Company may, in
lieu of distributing to such Holder any portion of such distribution not
consisting of cash or securities of the Company, pay such Holder an amount
in cash equal to the fair market value thereof (as determined in good faith
by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors). If any conversion of
Debentures described in the immediately preceding sentence occurs prior to
the payment date for a distribution to holders of Common Stock which the
Holder of Debentures so converted is entitled to receive in accordance with
the immediately preceding sentence, the Company may elect (such election to
be evidenced by a resolution of the Board of Directors) to distribute to
such Holder a due bill for the shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets to which
such Holder is so entitled, PROVIDED, that such due bill (i) meets any
applicable requirements of the principal national securities exchange or
other market on which Common Stock is then traded and (ii) requires payment
or delivery of such shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets no later than the
date of payment or delivery thereof to holders of shares of Common Stock
receiving such distribution.
SECTION 13.9 RESTRICTIONS ON COMMON STOCK ISSUABLE UPON
CONVERSION.
(a) Shares of Common Stock to be issued upon conversion of a
Debenture in respect of Preferred Securities shall bear such
restrictive legends as the Company may provide in accordance with
applicable law.
(b) If shares of Common Stock to be issued upon conversion of a
Debenture in respect of Preferred Securities are to be registered
in a name other than that of the Holder of such Preferred
Security, then the Person in whose name such shares of Common
Stock are to be registered must deliver to the Conversion Agent a
certificate satisfactory to the Company and signed by such
Person, as to compliance with the restrictions on transfer
applicable to such Preferred Security. Neither the Trustee nor
any Conversion Agent or Registrar shall be required to register
in a name other than that of the Holder shares of Common Stock
issued upon conversion of any such Debenture in respect of such
Preferred Securities not so accompanied by a properly completed
certificate.
SECTION 13.10 TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION
PRICE OR ADJUSTMENTS.
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Debenture or to any
holder of a Preferred Security to determine whether any facts exist which
may require any adjustment of the Conversion Price, or with respect to the
nature or extent of any such adjustment when made, or with respect to the
method employed, or herein or in any supplemental indenture provided to be
employed, in making the same. Neither the Trustee nor any Conversion Agent
shall be accountable with respect to the validity or value (or the kind of
account) of any shares of Common Stock or of any securities or property,
which may at any time be issued or delivered upon the conversion of any
Debenture; and neither the Trustee nor any Conversion gent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of
any Debenture for the purpose of conversion, or, except as expressly herein
provided, to comply with any of the covenants of the Company contained in
Article 10 or this Article 13.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
MERRY LAND PROPERTIES, INC.
By:_______________________________
Name:____________________________
Title:_____________________________
FIRST UNION NATIONAL BANK,
as Trustee
By:_______________________________
Name:__________________________
Title:___________________________
GUARANTEE AGREEMENT
Merry Land Properties, Inc.
and
First Union National Bank
Relating to the Preferred Securities of
Merry Land Capital Trust
Dated as of _______________, 1999
<PAGE>
CROSS REFERENCE TABLE*
SECTION OF TRUST SECTION OF
INDENTURE ACT OF GUARANTEE
1939, AS AMENDED AGREEMENT
310(a)...............................................................4.1(a)
310(b)..........................................................4.1(c), 2.8
310(c).........................................................Inapplicable
311(a)...............................................................2.2(b)
311(b)...............................................................2.2(b)
311(c).........................................................Inapplicable
312(a)...............................................................2.2(a)
312(b)...............................................................2.2(b)
313.....................................................................2.3
314(a)..................................................................2.4
314(b).........................................................Inapplicable
314(c)..................................................................2.5
314(d).........................................................Inapplicable
314(e)........................................................1.1, 2.5, 3.2
314(f)..................................................................3.2
315(a)...............................................................3.1(d)
315(b)..................................................................2.7
315(c)..................................................................3.1
315(d)...............................................................3.1(d)
316(a)........................................................1.1, 2.6, 5.4
316(b)..................................................................5.3
317(a).........................................................Inapplicable
317(b).........................................................Inapplicable
318(a)...............................................................2.1(b)
318(b)..................................................................2.1
318(c)...............................................................2.1(a)
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS...................................................2
SECTION 1.1 DEFINITIONS.............................................2
ARTICLE 2 TRUST INDENTURE ACT...........................................4
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION........................4
SECTION 2.2 LIST OF HOLDERS.........................................4
SECTION 2.3 REPORTS BY THE GUARANTEE TRUSTEE........................4
SECTION 2.4 PERIODIC REPORTS TO GUARANTEE TRUSTEE...................5
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT........5
SECTION 2.6 EVENTS OF DEFAULT; WAIVER...............................5
SECTION 2.7 EVENT OF DEFAULT; NOTICE................................5
SECTION 2.8 CONFLICTING INTERESTS...................................5
ARTICLE 3 POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE.............6
SECTION 3.1 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE..............6
SECTION 3.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.....................7
SECTION 3.3 INDEMNITY...............................................9
ARTICLE 4 GUARANTEE TRUSTEE..............................................9
SECTION 4.1 GUARANTEE TRUSTEE; ELIGIBILITY.........................9
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF THE
GUARANTEE
TRUSTEE.......................................................10
ARTICLE 5 GUARANTEE.....................................................11
SECTION 5.1 GUARANTEE..............................................11
SECTION 5.2 WAIVER OF NOTICE AND DEMAND............................11
SECTION 5.3 OBLIGATIONS NOT AFFECTED...............................11
SECTION 5.4 RIGHTS OF HOLDERS......................................12
SECTION 5.5 GUARANTEE OF PAYMENT...................................12
SECTION 5.6 SUBROGATION............................................12
SECTION 5.7 INDEPENDENT OBLIGATIONS................................12
ARTICLE 6 COVENANTS AND SUBORDINATION...................................13
SECTION 6.1 SUBORDINATION..........................................13
SECTION 6.2 CERTAIN COVENANTS OF THE GUARANTOR.....................13
ARTICLE 7 TERMINATION...................................................14
SECTION 7.1 TERMINATION............................................14
ARTICLE 8 MISCELLANEOUS.................................................14
SECTION 8.1 SUCCESSORS AND ASSIGNS.................................14
SECTION 8.2 AMENDMENTS.............................................14
SECTION 8.3 NOTICES................................................15
SECTION 8.4 BENEFIT................................................15
SECTION 8.5 INTERPRETATION.........................................15
SECTION 8.6 GOVERNING LAW..........................................16
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of _____________, 1999, is executed
and delivered by MERRY LAND PROPERTIES, INC., a Georgia corporation (the
"Guarantor"), and FIRS UNION NATIONAL BANK, a national banking association,
as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Merry Land Capital Trust, a Delaware statutory business trust
(the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of ________, 1999, among the Trustees named
therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing up to ________ of its ___% Convertible Trust Preferred Securities
(liquidation preference $10 per preferred security) (the "Preferred
Securities") representing preferred undivided beneficial interests in the
assets of the Issuer and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the
Issuer's Common Securities (as defined herein), will be used to purchase
the Debentures (as defined in the Trust Agreement) of the Guarantor which
will be deposited with First Union National Bank, as Property Trustee under
the Trust Agreement, as trust assets;
WHEREAS, as incentive for the Holders to purchase Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree,
to the extent set forth herein, to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical
terms to this Guarantee for the benefit of the holders of the Common
Securities (as defined herein), except that if an event of default (as
defined in the Indenture (as defined herein)), has occurred and is
continuing, the rights of holders of the Common Securities to receive
Guarantee Payments (as defined in the Common Securities Guarantee) under
the Common Securities Guarantee shall be subordinated to the rights of
Holders of Preferred Securities to receive Guarantee Payments (as defined
herein) under this Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.
ARTICLE 1 DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Guarantee Agreement, the terms set
forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in
the Trust Agreement as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct common control with
such specified Person, provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Common Securities" means the securities representing common
beneficial interests in the assets of the Issuer.
"Common Shares" means the common shares of the Guarantor.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided,
however, that except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received written notice of default and
shall not have cured such default within 60 days after receipt of such
notice.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the
extent not paid or made by or on behalf of the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Trust Agreement) required to be
paid on the Preferred Securities, to the extent the Issuer shall have funds
on hand available therefor at such time, (ii) the redemption price,
including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price"), with respect to the Preferred Securities called
for redemption by the Issuer to the extent the Issuer shall have funds on
hand available therefor, and (iii) upon a voluntary or involuntary
dissolution of the Issuer, unless Debentures are distributed to the
Holders, the lesser of (a) the aggregate of the liquidation preference of
$10 per Preferred Security plus accrued and unpaid Distributions on the
Preferred Securities to the date of payment to the extent the Issuer shall
have funds on hand available to make such payment or (b) the amount of
assets of the Issuer remaining available for distribution to Holders in
dissolution of the Issuer (in either case, the "Stockholder Distribution").
"Guarantee Trustee" means First Union National Bank, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement and thereafter means each
such Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of
the Issuer, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Convertible Subordinated Indenture, dated
as of ________, 1999, as supplemented and amended between the Guarantor and
the First Union National Bank, as trustee.
"Issuer" means Merry Land Capital Trust.
"List of Holders" has the meaning specified in Section 2.2 (a).
"Majority in Liquidation Preference of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the liquidation preference of
all the outstanding Preferred Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by (i) the Chairman, Chief Executive Officer, President or a Vice
President, and by (ii) the Treasurer, an Assistant Treasurer, the
Controller, the Secretary or an Assistant Secretary of such Person, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in
this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company,
limited liability company, trust, unincorporated association, or government
or any agency or political subdivision thereof, or any other entity of
whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer assigned to the Guarantee Trustee's Corporate Trust Office,
including any managing director, vice president, assistant vice president,
assistant treasurer, assistant secretary or any other officer of the
Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Guarantee Agreement, and
also, with respect to a particular matter, any other officer, to whom such
matter is referred because of such officer's knowledge of and familiarity
with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section
4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE 2 TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to
317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 LIST OF HOLDERS.
(a) The Guarantor shall furnish or cause to be furnished to the Guarantee
Trustee (i) semi-annually, on or before January 15 and July 15 of each
year, a list, in such form as the Guarantee Trustee may reasonably
require, of the names and addresses of the Holders ("List of Holders") as
of a date not more than 15 days prior to the delivery thereof, and (ii) at
such other times as the Guarantee Trustee may request in writing, within
30 days after the receipt by the Guarantor of any such written request, a
List of Holders as of a date not more than 15 days prior to the time such
list is furnished, in each case to the extent such information is in the
possession or control of the Guarantor and is not identical to a
previously supplied list of Holders or has not otherwise been received by
the Guarantee Trustee. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE GUARANTEE TRUSTEE. Within 60 days after
___________, in each calendar year, commencing with ___________, 2000, the
Guarantee Trustee shall provide to the Holders such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the
manner provided by Section 313 of the Trust Indenture Act. The Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the
Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor shall
provide to the Guarantee Trustee, the Securities and Exchange Commission
and the Holders such documents, reports and information, if any, as
required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust
Indenture Act; and such compliance certificate of the Guarantor shall be
delivered on or before 120 days after the end of each calendar year.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor
shall provide to the Guarantee Trustee such evidence of compliance with
such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
Liquidation Preference of the Securities may, by vote, on behalf of the
Holders, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent therefrom.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default actually known to a Responsible
Officer of the Guarantee Trustee, unless such defaults have been cured
before the giving of such notice, provided, that, except in the case of a
default in the payment of a Guarantee Payment, the Guarantee Trustee shall
be fully protected in withholding such notice if and so long as the Board
of Directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have actual knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration
of the Trust Agreement shall have obtained written notice, of such Event
of Default.
SECTION 2.8 CONFLICTING INTERESTS. The Trust Agreement and the Indenture
shall be deemed to be specifically described in this Guarantee Agreement
for the purposes of clause (i) of the first proviso contained in Section
310(b) of the Trust Indenture Act.
ARTICLE 3 POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee Agreement to any Person except a Holder exercising his or
her rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee
on acceptance by such Successor Guarantee Trustee of its appointment to
act as Successor Guarantee Trustee. The right, title and interest of the
Guarantee Trustee shall automatically vest in any Successor Guarantee
Trustee, upon acceptance by such Successor Guarantee Trustee of its
appointment hereunder, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Guarantee Agreement for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth
in this Guarantee Agreement, and no implied covenants shall be read into
this Guarantee Agreement against the Guarantee Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to the Responsible Officer of the
Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights
and powers vested in it by this Guarantee Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstances in the conduct of his or her
own affairs.
(d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred; (A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Guarantee Agreement, and no implied covenants or
obligations shall be read into this Guarantee Agreement against the
Guarantee Trustee; and (B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Guarantee Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that
by any provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in
Liquidation Preference of the Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee, or exercising any trust or power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Guarantee Agreement or indemnity satisfactory to it
against such risk or liability is not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, proxy, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to
be genuine and to have been signed, sent or presented by the proper
party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request from the Guarantee Trustee, shall be
promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and the
written advice or opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or opinion.
Such legal counsel may be legal counsel to the Guarantor or any of its
Affiliates and may be one of its employees. The Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Guarantee Agreement at
the request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee and its officers, directors and
agents such adequate security and indemnity as would satisfy a
reasonable person in the position of the Guarantee Trustee, against
the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Guarantee Trustee; provided that, nothing contained
in this Section 3.2(a)(v) shall be taken to relieve the Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Guarantee
Agreement and use the same degree of care and skill in the exercise
thereof as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through its agents, custodians, nominees or attorneys or any
Affiliate, and the Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee Agreement the
Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request written instructions
from the Holders of a Majority in Liquidation Preference of the
Securities, (B) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (C)
shall be fully protected in acting in accordance with such
instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority
available to the Guarantee Trustee shall be construed to be a duty to act
in accordance with such power and authority.
SECTION 3.3 INDEMNITY. The Guarantor agrees to indemnify the Guarantee
Trustee for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on the part of the
Guarantee Trustee, arising out of or in connection with the acceptance or
administration of this Guarantee Agreement, including the reasonable costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Guarantee Trustee will not claim or exact any lien or charge
on any Guarantee Payment as a result of any amount due to it under this
Guarantee Agreement. Guarantor's indemnification obligations set forth in
this Section 3.3 shall survive termination of this Guarantee Agreement or
resignation or removal of the Guarantee Trustee.
ARTICLE 4 GUARANTEE TRUSTEE
SECTION 4.1 GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture Act
to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of
Section 310(a) of the Trust Indenture Act. If such corporation
publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority, then,
for the purposes of this Section and to the extent permitted by the
Trust Indenture Act, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign
in the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE TRUSTEE.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal
or resignation. The Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument in writing executed
by the Guarantee Trustee and delivered to the Guarantor, which resignation
shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by an instrument in writing
executed by such Successor Guarantee Trustee and delivered to the
Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court
of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any,
as it may deem proper, appoint a Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions of any
successor Guarantor Trustee.
(f) Upon the removal or resignation of the Guarantee Trustee, the
Guarantor shall pay all amounts due and owing to such Guarantee Trustee.
ARTICLE 5 GUARANTEE
SECTION 5.1 GUARANTEE. The Guarantor irrevocably and unconditionally agrees
to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Issuer), as and when
due, regardless of any defense, right of set-off or counterclaim which the
Issuer may have or assert other than the defense of payment. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or
by causing the Issuer to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice
of acceptance of the Guarantee Agreement and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require
a proceeding first against the Guarantee Trustee, Issuer or any other
Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices
and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall
in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment
of Distributions that results from the extension of any interest payment
period on the Debentures as so provided in the Indenture), Redemption
Price, Liquidation Distribution or any other sums payable under the terms
of the Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with, the
Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or the Guarantee Trustee to
give notice to, or obtain the consent of, the Guarantor with respect to the
happening of any of the foregoing.
SECTION 5.4 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges that:
(i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has
the right to enforce this Guarantee Agreement on behalf of the Holders;
(iii) the Holders of a Majority in Liquidation Preference of the Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of
this Guarantee Agreement or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement; and
(iv) if the Guarantee Trustee fails to enforce the Guarantee, any Holder
may institute a legal proceeding directly against the Guarantor to enforce
its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Guarantee Trustee, the Issuer or any other
Person.
SECTION 5.5 GUARANTEE OF PAYMENT. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will
not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by the Issuer) or upon
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.6 SUBROGATION. The Guarantor shall be subrogated to all (if any)
rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and shall have
the right to waive payment by the Issuer pursuant to Section 5.1; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement
or other agreement, in all cases as a result of payment under this
Guarantee Agreement, if, at the time of any such payment, any amounts are
due and unpaid under this Guarantee Agreement. If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such
amount to the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its
obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be liable
as principal and as debtor hereunder to make Guarantee Payments pursuant to
the terms of this Guarantee Agreement notwithstanding the occurrence of any
event referred to in subsections (a) through (g), inclusive, of Section 5.3
hereof.
ARTICLE 6 COVENANTS AND SUBORDINATION
SECTION 6.1 SUBORDINATION. The Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank subordinate and junior
in right of payment to all liabilities of the Guarantor and PARI PASSU with
the most senior preferred stock of the Guarantor, if any, now or hereafter
issued by the Company and with any guarantee now or hereafter entered into
by the Company in respect of any preferred or preference stock of any
affiliate of the Guarantor.
SECTION 6.2 CERTAIN COVENANTS OF THE GUARANTOR.
(a) Guarantor covenants and agrees that if and so long as (i) the Issuer
is the holder of all the Debentures, (ii) a Tax Event (as defined in the
Trust Agreement) in respect of the Issuer has occurred and is continuing
and (iii) the Guarantor has elected, and has not revoked such election, to
pay Additional Sums (as defined in the Trust Agreement) in respect of the
Preferred Securities and Common Securities, the Guarantor will pay to the
Issuer such Additional Sums.
(b) The Guarantor covenants and agrees that it will not, and will not
cause any subsidiary of the Guarantor to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Guarantor's capital stock or (ii) make
any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities (including guarantees of
indebtedness for money borrowed) of the Guarantor that rank PARI PASSU
with or junior to the Debentures (other than (a) any dividend, redemption,
liquidation, interest, principal or guarantee payment by the Guarantor
where the payment is made by way of securities (including capital stock)
that rank PARI PASSU with or junior to the securities on which such
dividend, redemption, interest, principal or guarantee payment is being
made, (b) redemptions or purchases of any rights pursuant to a stockholder
rights agreement, and the declaration of a dividend of such rights or the
issuance of preferred stock under such a plan in the future, (c) payments
under this Agreement, (d) purchases of Common Shares related to the
issuance of Common Shares under any of the Guarantor's benefit plans for
its directors, officers or employees, (e) as a result of a
reclassification of the Guarantor's capital stock or the exchange or
conversion of one series or class of the Guarantor's capital stock for
another series or class of the Guarantor's capital stock and (f) the
purchase of fractional interests in shares of the Guarantor's capital
stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged) if at such time (i)
there shall have occurred any event of which the Guarantor has actual
knowledge that (a) with the giving of notice or the lapse of time, or
both, would constitute an "Event of Default" under the Indenture with
respect to the Debentures and (b) in respect of which the Guarantor shall
not have taken reasonable steps to cure, (ii) the Guarantor shall be in
default with respect to its payment of any obligations under the Guarantee
or (iii) the Guarantor shall have given notice of its selection of an
Extension Period (as defined in the Indenture) with respect to the
Debentures and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing.
(c) The Guarantor covenants and agrees (i) to maintain directly or
indirectly 100% ownership of the Common Securities, provided that certain
successors which are permitted by the Indenture may succeed to the
Guarantor's ownership of the Common Securities, (ii) not to voluntarily
dissolve the Issuer, except (a) in connection with a distribution of the
Debentures to the holders of the Preferred Securities in dissolution of
the Issuer or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the Trust Agreement, (iii) to use its
reasonable efforts, consistent with the terms and provisions of the Trust
Agreement, to cause the Issuer to remain classified as a grantor trust and
not as an association taxable as a corporation or a partnership for United
States Federal income tax purposes, (iv) for so long as Preferred
Securities are outstanding, not to convert Debentures except pursuant to a
notice of conversion delivered to the Conversion Agent (as defined in the
Trust Agreement) by a Holder, (v) to maintain the reservation for issuance
of the number of Common Shares that would be required from time to time
upon the conversion of all the Debentures then outstanding, (vi) to
deliver shares of Common Shares upon an election by the Holders to convert
such Preferred Securities into Common Shares and (vii) to honor all
obligations described herein relating to the conversion or exchange of the
Preferred Securities into or for Common Shares or Debentures.
ARTICLE 7 TERMINATION
SECTION 7.1 TERMINATION. This Guarantee Agreement shall terminate and be of
no further force and effect upon (i) full payment of the Redemption Price
of all Preferred Securities, (ii) the distribution of Debentures to the
Holders in exchange for all of the Preferred Securities, (iii) full payment
of the amounts payable in accordance with the Trust Agreement upon
dissolution of the Issuer or (iv) upon the distribution, if any, of Common
Shares to the holders of the Preferred Securities in respect of the
conversion of all such holders' Preferred Securities into Common Shares.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid with respect to Preferred
Securities or this Guarantee Agreement.
ARTICLE 8 MISCELLANEOUS
SECTION 8.1 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained
in this Guarantee Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. Except
in connection with a consolidation, merger or sale involving the Guarantor
that is permitted under Article 8 of the Indenture and pursuant to which
the assignee agrees in writing to perform the Guarantor's obligations
hereunder, the Guarantor shall not assign its obligations hereunder.
SECTION 8.2 AMENDMENTS. Except with respect to any changes which do not
adversely affect the rights of the Holders in any material respect (in
which case no consent of the Holders will be required), this Guarantee
Agreement may only be amended with the prior approval of the Holders of not
less than a Majority in Liquidation Preference of the Securities. The
provisions of Article 6 of the Trust Agreement concerning meetings of the
Holders shall apply to the giving of such approval. The Guarantor shall
furnish the Guarantee Trustee with an Officers' Certificate and an Opinion
of Counsel to the effect that any amendment of this Agreement is authorized
and permitted.
SECTION 8.3 NOTICES. Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the
party giving such notice, and delivered, telecopied or mailed by first
class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders: Merry
Land Properties, Inc., 624 Ellis Street, Augusta, Georgia 30901 Phone No.:
(706) 722-6756 Facsimile No.: (706) 722-0002 Attention: Mr. Dorrie E.
Green
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such
other address as the Guarantee Trustee on behalf of the Issuer may give
notice of to the Holders:
Merry Land Capital Trust, 624 Ellis Street, Augusta, Georgia 30901 Phone
No.: (706) 722-6756 Facsimile No.: (706) 722-0002 Attention: Mr. Dorrie E.
Green
with a copy to:
First Union National Bank, 999 Peachtree Street, N.E., Atlanta, Georgia
30309 Phone No.: (404) 827-7346 Facsimile No.: (404) 827-7305 Attention:
Ms. Teresa Davis
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no
notice was given, such notice or other document shall be deemed to have
been delivered on the date of such refusal or inability to deliver.
SECTION 8.4 BENEFIT. This Guarantee Agreement is solely for the benefit of
the Holders and is not separately transferable from the Preferred
Securities.
SECTION 8.5 INTERPRETATION. In this Guarantee Agreement, unless the context
otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined in
the preamble hereto have the respective meanings assigned to them in
Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include
the masculine, feminine and neuter genders.
SECTION 8.6 GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
GEORGIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
MERRY LAND PROPERTIES, INC.
By:_____________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Guarantee Trustee
By:_____________________________________
Name:
Title:
RECORD AND RETURN TO:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Erin O'Brien
DEED TO SECURE DEBT AND SECURITY AGREEMENT
ML HAMMOCKS AT LONG POINT, L.L.C.,
GRANTOR
TO
FIRST UNION NATIONAL BANK,
GRANTEE
DATED: AS OF August 23, 1999
County: Chatham
State of Georgia
FUNB Loan No. 26-5330594
<PAGE>
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (this "Security
Deed") is made as of the 23rd day of August, 1999, by ML HAMMOCKS AT LONG
POINT, L.L.C., a Georgia limited liability company ("Grantor"), whose
address is c/o Dorrie E. Green, 624 Ellis Street, 2{nd} Floor, Augusta,
Georgia 30901 in favor of FIRST UNION NATIONAL BANK, a national banking
association ("Grantee"), whose address is One First Union Center, DC6, 301
South College Street, Charlotte, North Carolina 28288-0166.
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100
DOLLARS ($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, GRANTOR HEREBY IRREVOCABLY
GRANTS, BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND
ASSIGNS, AND GRANTS A SECURITY INTEREST, TO Grantee, ITS SUCCESSORS AND
ASSIGNS, with power of sale, in all of Grantor's estate, right, title and
interest in, to and under any and all of the following described property,
whether now owned or hereafter acquired (collectively, the "Property"):
A. All that certain real property situated at 25 Johnny Mercer
Boulevard, County of Chatham, State of Georgia, more particularly described
on EXHIBIT A attached hereto and incorporated herein by this reference (the
"Real Estate"), together with all of the easements, rights, privileges,
franchises, tenements, hereditaments and appurtenances now or hereafter
thereunto belonging or in any way appertaining and all of the estate,
right, title, interest, claim and demand whatsoever of Grantor therein or
thereto, either at law or in equity, in possession or in expectancy, now or
hereafter acquired;
B. All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Real
Estate (the "Improvements");
C. All furniture, furnishings, fixtures, goods, equipment,
inventory or personal property owned by Grantor and now or hereafter
located on, attached to or used in and about the Improvements, including,
but not limited to, all machines, engines, boilers, dynamos, elevators,
stokers, tanks, cabinets, awnings, screens, shades, blinds, carpets,
draperies, lawn mowers, and all appliances, plumbing, heating, air
conditioning, lighting, ventilating, refrigerating, disposal and
incinerating equipment, and all fixtures and appurtenances thereto, and
such other goods and chattels and personal property owned by Grantor as are
now or hereafter used or furnished in operating the Improvements, or the
activities conducted therein, and all building materials and equipment
hereafter situated on or about the Real Estate or Improvements, and all
warranties and guaranties relating thereto, and all additions thereto and
substitutions and replacements therefor (exclusive of any of the foregoing
owned or leased by tenants of space in the Improvements);
D. All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, passages, sewer rights, air rights and other
development rights now or hereafter located on the Real Estate or under or
above the same or any part or parcel thereof, and all estates, rights,
titles, interests, tenements, hereditaments and appurtenances, reversions
and remainders whatsoever, in any way belonging, relating or appertaining
to the Real Estate and/or Improvements or any part thereof, or which
hereafter shall in any way belong, relate or be appurtenant thereto,
whether now owned or hereafter acquired by Grantor;
E. All water, ditches, wells, reservoirs and drains and all
water, ditch, well, reservoir and drainage rights which are appurtenant to,
located on, under or above or used in connection with the Real Estate or
the Improvements, or any part thereof, whether now existing or hereafter
created or acquired;
F. All minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or above the Real
Estate;
G. All cash funds, deposit accounts and other rights and evidence
of rights to cash, now or hereafter created or held by Grantee pursuant to
this Security Deed or any other of the Loan Documents (as hereinafter
defined), including, without limitation, all funds now or hereafter on
deposit in the Impound Account and the Replacement Reserve (each as
hereafter defined);
H. All leases (including, without limitation, oil, gas and
mineral leases), licenses, concessions and occupancy agreements of all or
any part the Real Estate or the Improvements (each, a "Lease" and
collectively, "Leases"), whether written or oral, now or hereafter entered
into and all rents, royalties, issues, profits, revenue, income and other
benefits (collectively, the "Rents and Profits") of the Real Estate or the
Improvements, now or hereafter arising from the use or enjoyment of all or
any portion thereof or from any present or future Lease or other agreement
pertaining thereto or arising from any of the Contracts (as hereinafter
defined) or any of the General Intangibles (as hereinafter defined) and all
cash or, to the extent permitted by law, securities deposited to secure
performance by the tenants, lessees or licensees (each, a "Tenant" and
collectively, "Tenants"), as applicable, of their obligations under any
such Leases, whether said cash or securities are to be held until the
expiration of the terms of said Leases or applied to one or more of the
installments of rent coming due prior to the expiration of said terms,
subject to, however, the provisions contained in Section 1.11 hereinbelow;
I. All contracts and agreements now or hereafter entered into
covering any part of the Real Estate or the Improvements (collectively, the
"Contracts") and all revenue, income and other benefits thereof, including,
without limitation, management agreements, service contracts, maintenance
contracts, equipment leases, personal property leases and any contracts or
documents relating to construction on any part of the Real Estate or the
Improvements (including plans, drawings, surveys, tests, reports, bonds and
governmental approvals) or to the management or operation of any part of
the Real Estate or the Improvements;
J. All present and future monetary deposits given to any public
or private utility with respect to utility services furnished to any part
of the Real Estate or the Improvements;
K. All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles
(including without limitation, trademarks, trade names, servicemarks and
symbols now or hereafter used in connection with any part of the Real
Estate or the Improvements, all names by which the Real Estate or the
Improvements may be operated or known, all rights to carry on business
under such names, and all rights, interest and privileges which Grantor has
or may have as developer or declarant under any covenants, restrictions or
declarations now or hereafter relating to the Real Estate or the
Improvements) and all notes or chattel paper now or hereafter arising from
or by virtue of any transactions related to the Real Estate or the
Improvements (collectively, the "General Intangibles");
L. All water taps, sewer taps, certificates of occupancy,
permits, licenses, franchises, certificates, consents, approvals and other
rights and privileges now or hereafter obtained in connection with the Real
Estate or the Improvements and all present and future warranties and
guaranties relating to the Improvements or to any equipment, fixtures,
furniture, furnishings, personal property or components of any of the
foregoing now or hereafter located or installed on the Real Estate or the
Improvements;
M. All building materials, supplies and equipment now or
hereafter placed on the Real Estate or in the Improvements and all
architectural renderings, models, drawings, plans, specifications, studies
and data now or hereafter relating to the Real Estate or the Improvements;
N. All right, title and interest of Grantor in any insurance
policies or binders now or hereafter relating to the Property including any
unearned premiums thereon;
O. All proceeds, products, substitutions and accessions
(including claims and demands therefor) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation
awards; and
P. All other or greater rights and interests of every nature in
the Real Estate or the Improvements and in the possession or use thereof
and income therefrom, whether now owned or hereafter acquired by Grantor.
THIS CONVEYANCE IS INTENDED TO (I) OPERATE AND BE CONSTRUED AS A
DEED PASSING TITLE TO THE PROPERTY TO GRANTEE AND IS MADE UNDER THOSE
PROVISIONS OF THE EXISTING LAWS OF THE STATE OF GEORGIA RELATING TO DEEDS
TO SECURE DEBT, AND NOT AS A MORTGAGE AND (II) TO CONSTITUTE A SECURITY
AGREEMENT PURSUANT TO THE GEORGIA UNIFORM COMMERCIAL CODE, AND IS GIVEN TO
SECURE THE FOLLOWING:
(1) The debt evidenced by that certain promissory note (such
promissory note, together with any and all renewals, modifications,
consolidations and extensions thereof, is hereinafter referred to as the
"Note") of even date with this Security Deed, made by Grantor to the order
of Grantee in the original principal amount of Eighteen Million Seven
Hundred Eighty-Seven Thousand and 00/100 Dollars ($18,787,000.00) together
with interest as therein provided; which Note has a stated maturity date of
September 1, 2011;
(2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and
contained in any other agreements, documents or instruments now or
hereafter evidencing, securing, guarantying or otherwise relating to the
indebtedness evidenced by the Note, including, but not limited to, the
Hazardous Indemnity Agreement (as hereinafter defined) (the Note, this
Security Deed, and such other agreements, documents and instruments,
together with any and all renewals, amendments, extensions and
modifications thereof, are hereinafter collectively referred to as the
"Loan Documents") and the payment of all other sums therein covenanted to
be paid;
(3) Any and all additional advances made by Grantee to protect or
preserve the Property or the lien or security interest created hereby on
the Property, or for taxes, assessments or insurance premiums as
hereinafter provided or for performance of any of Grantor's obligations
hereunder or under the other Loan Documents or for any other purpose
provided herein or in the other Loan Documents (whether or not the original
Grantor remains the owner of the Property at the time of such advances);
and
(4) Any and all other indebtedness now owing or which may
hereafter be owing by Grantor to Grantee, including, without limitation,
all prepayment fees, however and whenever incurred or evidenced, whether
express or implied, direct or indirect, absolute or contingent, or due or
to become due, and all renewals, modifications, consolidations,
replacements and extensions thereof.
(All of the sums referred to in Paragraphs (1) through (4) above
are herein sometimes referred to as the "secured indebtedness" or the
"indebtedness secured hereby").
TO HAVE AND TO HOLD the Property unto Grantee, its successors and
assigns forever, for the purposes and uses herein set forth, in fee simple,
forever.
PROVIDED, HOWEVER, that if the principal and interest and all
other sums due or to become due under the Note or under the other Loan
Documents, including, without limitation, any prepayment fees required
pursuant to the terms of the Note, shall have been paid at the time and in
the manner stipulated therein and all other sums payable hereunder and all
other indebtedness secured hereby shall have been paid and all other
covenants contained in the Loan Documents shall have been performed, then,
in such case, this Security Deed shall be satisfied and the estate, right,
title and interest of Grantee in the Property shall cease, and upon payment
to Grantee of all costs and expenses incurred for the preparation of the
release hereinafter referenced and all recording costs if allowed by law,
Grantee shall release this Security Deed and the lien hereof by proper
instrument.
ARTICLE I
COVENANTS OF GRANTOR
For the purpose of further securing the indebtedness secured
hereby and for the protection of the security of this Security Deed, for so
long as the indebtedness secured hereby or any part thereof remains unpaid,
Grantor covenants and agrees as follows:
1.1 WARRANTIES OF GRANTOR. Grantor, for itself and its
successors and assigns, does hereby represent, warrant and covenant to and
with Grantee, its successors and assigns, that:
(a) Grantor has good and marketable fee simple title to the
Property, subject only to those matters expressly set forth as exceptions
to or subordinate matters in the title insurance policy insuring the lien
of this Security Deed which Grantee has agreed to accept, excepting
therefrom all preprinted and/or standard exceptions (the "Permitted
Exceptions"), and has full power and lawful authority to grant, bargain,
sell, convey, assign, transfer and mortgage its interest in the Property in
the manner and form hereby done or intended. Grantor will preserve its
interest in and title to the Property and will forever warrant and defend
the same to Grantee against any and all claims whatsoever and will forever
warrant and defend the validity and priority of the lien and security
interest created herein against the claims of all persons and parties
whomsoever, subject to the Permitted Exceptions. The foregoing warranty of
title shall survive the foreclosure of this Security Deed and shall inure
to the benefit of and be enforceable by Grantee in the event Grantee
acquires title to the Property pursuant to any foreclosure;
(b) No bankruptcy or insolvency proceedings are pending or
contemplated by Grantor or, to the best knowledge of Grantor, against
Grantor or by or against any endorser or cosigner of the Note, or any
guarantor or indemnitor under any guaranty or indemnity agreement executed
in connection with the Note of the loan evidenced thereby and secured
hereby;
(c) To the best of Grantor's knowledge, all reports,
certificates, affidavits, statements and other data furnished by or on
behalf of Grantor to Grantee in connection with the loan evidenced by the
Note are true and correct in all material respects and do not omit to state
any fact or circumstance necessary to make the statements contained therein
not misleading;
(d) The execution, delivery and performance of this Security
Deed, the Note and all of the other Loan Documents have been duly
authorized by all necessary action to be, and are, binding and enforceable
against Grantor in accordance with the respective terms thereof and do not
contravene, result in a breach of or constitute (upon the giving of notice
or the passage of time or both) a default under the partnership agreement,
articles of incorporation or other organizational documents of Grantor or
any contract or agreement of any nature to which Grantor is a party or by
which Grantor or any of its property may be bound and do not violate or
contravene any law, order, decree, rule or regulation to which Grantor is
subject;
(e) The Real Estate and the Improvements, and the intended use
thereof by Grantor comply in all material respects with all applicable
restrictive covenants, zoning ordinances, subdivision and building codes,
flood disaster laws, applicable health and environmental laws and
regulations and all other ordinances, orders or requirements issued by any
state, federal or municipal authorities having or claiming jurisdiction
over the Property. The Real Estate and Improvements constitute one or more
separate tax parcels for purposes of ad valorem taxation. The Real Estate
and Improvements do not require any rights over, or restrictions against,
other property in order to comply with any of the aforesaid governmental
ordinances, orders or requirements other than Permitted Exceptions.
(f) All utility services necessary and sufficient for the full
use, occupancy, operation and disposition of the Real Estate and the
Improvements for their intended purposes are available to the Property,
including water, storm sewer, sanitary sewer, gas, electric, cable and
telephone facilities, through public rights-of-way or perpetual private
easements;
(g) All streets, roads, highways, bridges and waterways necessary
for access to and full use, occupancy, operation and disposition of the
Real Estate and the Improvements have been completed, have been dedicated
to and accepted by the appropriate municipal authority and are open and
available to the Real Estate and the Improvements without further condition
or cost to Grantor or served by a perpetual private easement reflected in
the Permitted Exceptions;
(h) All curb cuts, driveways and traffic signals shown on the
survey delivered to Grantee prior to the execution and delivery of this
Security Deed are existing and have been fully approved by the appropriate
governmental authority;
(i) To the best of Grantor's knowledge, there are no judicial,
administrative, mediation or arbitration actions, suits or proceedings
pending or threatened against or affecting Grantor, (and, if Grantor is a
partnership, any of its general partners) or the Property which, if
adversely determined, would materially impair either the Property or
Grantor's ability to perform the covenants or obligations required to be
performed under the Loan Documents;
(j) The Property is free from delinquent water charges, sewer
rents, taxes and assessments;
(k) As of the date of this Security Deed, the Property is free
from unrepaired damage caused by fire, flood, accident or other casualty;
(l) As of the date of this Security Deed, no part of the Real
Estate or the Improvements has been taken in condemnation, eminent domain
or like proceeding nor is any such proceeding pending or to Grantor's
knowledge and belief, threatened or contemplated;
(m) Grantor possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits adequate for the conduct of
its business substantially as now conducted;
(n) To the best of Grantor's knowledge, the Improvements are
structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial
compliance with the plans and specifications relating thereto, ordinary
wear and tear excepted. All major building systems located within the
Improvements, including, without limitation, the heating and air
conditioning systems and the electrical and plumbing systems, are in good
working order and condition, ordinary wear and tear excepted;
(o) Grantor has delivered to Grantee true, correct and complete
copies of all Contracts and all amendments thereto or modifications
thereof;
(p) Each Contract constitutes the legal, valid and binding
obligation of Grantor and, to the best of Grantor's knowledge and belief,
is enforceable against any other party thereto. To the best of Grantor's
knowledge, no default exists, or with the passing of time or the giving of
notice or both would exist, under any Contract which would, in the
aggregate, have a material adverse effect on Grantor or the Property;
(q) No Contract provides any party with the right to obtain a
lien or encumbrance upon the Property superior to the lien of this Security
Deed other than Permitted Exceptions;
(r) Grantor and the Property are free from any delinquent
obligations for sales and payroll taxes;
(s) There are no security agreements or financing
statements affecting any of the Property other than (i) as disclosed in
writing by Grantor to Grantee prior to the date hereof and (ii) the
security agreements and financing statements created in favor of Grantee;
and
(t) The Property forms no part of any property owned, used or
claimed by Grantor as a residence or business homestead and is not exempt
from forced sale under the laws of the State of Georgia. Grantor hereby
disclaims and renounces each and every claim to all or any portion of the
Property as a homestead.
(u) The Permitted Exceptions do not and will not materially and
adversely affect (1) the ability of Grantor to pay in full the principal
and interest on the Note in a timely manner or (2) the use of the Property
for the use currently being made thereof, the operation of the Property as
currently being operated or the value of the Property.
(v) Grantor shall take all action necessary to assure that
Grantor's computer based systems are able to operate and effectively
process data, including dates on and after January 1, 2000 and at the
request of Grantee, Grantor shall provide Grantee with assurance acceptable
to Grantee of Grantor's Year 2000 compatibility.
1.2 DEFENSE OF TITLE. If, while this Security Deed is in force,
the title to the Property or the interest of Grantee therein shall be the
subject, directly or indirectly, of any action at law or in equity, or be
attached directly or indirectly, or endangered, clouded or adversely
affected in any manner, Grantor, at Grantor's expense, shall take all
necessary and proper steps for the defense of said title or interest,
including the employment of counsel approved by Grantee, the prosecution or
defense of litigation, and the compromise or discharge of claims made
against said title or interest. Notwithstanding the foregoing, in the
event that Grantee determines that Grantor is not adequately performing its
obligations under this Section, Grantee may, without limiting or waiving
any other rights or remedies of Grantee hereunder, take such steps, with
respect thereto as Grantee shall deem necessary or proper and any and all
costs and expenses incurred by Grantee in connection therewith, together
with interest thereon at the Default Interest Rate (as defined in the Note)
from the date incurred by Grantee until actually paid by Grantor, shall be
immediately paid by Grantor on demand and shall be secured by this Security
Deed and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.
1.3 PERFORMANCE OF OBLIGATIONS. Grantor shall pay when due the
principal of and the interest on the indebtedness evidenced by the Note.
Grantor shall also pay all charges, fees and other sums required to be paid
by Grantor as provided in the Loan Documents, and shall observe, perform
and discharge all obligations, covenants and agreements to be observed,
performed or discharged by Grantor set forth in the Loan Documents in
accordance with their terms. Further, Grantor shall promptly and strictly
perform and comply with all covenants, conditions, obligations and
prohibitions required of Grantor in connection with any other document or
instrument affecting title to the Property, or any part thereof, regardless
of whether such document or instrument is superior or subordinate to this
Security Deed.
1.4 INSURANCE. Grantor shall, at Grantor's expense, maintain in
force and effect on the Property at all times while this Security Deed
continues in effect the following insurance:
(a) Insurance against loss or damage to the Property by fire,
windstorm, tornado and hail and against loss and damage by such other,
further and additional risks as may be now or hereafter embraced by an
"all-risk" or "special form" type of insurance policy. The amount of such
insurance shall be not less than one hundred percent (100%) of the full
replacement cost (insurable value) of the Improvements (as established by
an MAI appraisal), without reduction for depreciation. The determination
of the replacement cost amount shall be adjusted annually to comply with
the requirements of the insurer issuing such coverage or, at Grantee's
election, by reference to such indices, appraisals or information as
Grantee determines in its reasonable discretion in order to reflect
increased value due to inflation. Absent such annual adjustment, each
policy shall contain inflation guard coverage insuring that the policy
limit will be increased over time to reflect the effect of inflation. Full
replacement cost, as used herein, means, with respect to the Improvements,
the cost of replacing the Improvements without regard to deduction for
depreciation, exclusive of the cost of excavations, foundations and
footings below the lowest basement floor. Grantor shall also maintain
insurance against loss or damage to furniture, furnishing, fixtures,
equipment and other items (whether personalty or fixtures) included in the
Property and owned by Grantor from time to time to the extent applicable.
Each policy shall contain a replacement cost endorsement and either an
agreed amount endorsement (to avoid the operation of any co-insurance
provisions) or a waiver of any co-insurance provisions, all subject to
Grantee's approval. The maximum deductible shall be $10,000.00.
(b) Commercial General Liability Insurance against claims for
personal injury, bodily injury, death and property damage occurring on, in
or about the Real Estate or the Improvements in amounts not less than
$1,000,000.00 per occurrence and $2,000,000.00 in the aggregate plus
umbrella coverage in an amount not less than $2,000,000. Grantee hereby
retains the right to periodically review the amount of said liability
insurance being maintained by Grantor and to require an increase in the
amount of said liability insurance should Grantee deem an increase to be
reasonably prudent under then existing circumstances.
(c) Boiler and machinery insurance is required if steam boilers
or other pressure-fired vessels are in operation at the Property. Minimum
liability coverage per accident must equal the greater of the replacement
cost (insurable value) of the Improvements housing such boiler or pressure-
fired machinery or $2,000,000.00. If one or more large HVAC units is in
operation at the Property, "Systems Breakdowns" coverage shall be required,
as determined by Grantee. Minimum liability coverage per accident must
equal the value of such unit(s).
(d) If the Improvements or any part thereof is situated in an
area designated by the Federal Emergency Management Agency ("FEMA") as a
special flood hazard area (Zone A or Zone V), flood insurance in an amount
equal to the lesser of: (a) the minimum amount required, under the terms of
coverage, to compensate for any damage or loss on a replacement basis (or
the unpaid balance of the indebtedness secured hereby if replacement cost
coverage is not available for the type of building insured); or (b) the
maximum insurance available under the appropriate National Flood Insurance
Administration program. The maximum deductible shall be $3,000.00 per
building or a higher minimum amount as required by FEMA or other applicable
law.
(e) During the period of any construction, renovation or
alteration of the existing Improvements which exceeds the lesser of 10% of
the principal amount of the Note or $500,000, at Grantee's request, a
completed value, "All Risk" Builder's Risk form or "Course of Construction"
insurance policy in nonreporting form, in an amount approved by Grantee,
may be required. During the period of any construction of any addition to
the existing Improvements, a completed value, "All Risk" Builder's Risk
form or "Course of Construction" insurance policy in non-reporting form, in
an amount approved by Grantee, shall be required.
(f) When required by applicable law, ordinance or other
regulation, Worker's Compensation and Employer's Liability Insurance
covering all persons subject to the worker's compensation laws of the state
in which the Property is located.
(g) Business income (loss of rents) insurance in amounts
sufficient to compensate Grantor for all Rents and Profits or income during
a period of not less than twelve (12) months. The amount of coverage shall
be adjusted annually to reflect the Rents and Profits or income payable
during the succeeding twelve (12) month period.
(h) Such other insurance on the Property or on any replacements
or substitutions thereof or additions thereto as may from time to time be
required by Grantee against other insurable hazards or casualties which at
the time are commonly insured against in the case of property similarly
situated including, without limitation, Sinkhole, Mine Subsidence,
Earthquake and Environmental insurance, due regard being given to the
height and type of buildings, their construction, location, use and
occupancy.
All such insurance shall (i) be with insurers fully licensed and
authorized to do business in the state within which the Real Estate is
located and who have and maintain a rating of at least A from Standard &
Poor's, or equivalent, (ii) contain the complete address of the Real Estate
(or a complete legal description), (iii) be for terms of at least one year,
with premium prepaid, and (vi) be subject to the approval of Grantee as to
insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates, and (v) include a standard, non-
contributory, mortgagee clause naming EXACTLY:
First Union National Bank
its Successors and Assigns ATIMA
Attn. Commercial Security Deed Servicing
P.O. Box 20068
Charlotte, NC 28202
(a) as an additional insured under all liability insurance
policies, (b) as the first mortgagee on all property insurance policies and
(c) as the loss payee on all loss of rents or loss of business income
insurance policies.
Grantor shall, as of the date hereof, deliver to Grantee evidence
that said insurance policies have been prepaid as required above and
certified copies of such insurance policies and original certificates of
insurance signed by an authorized agent of the applicable insurance
companies evidencing such insurance satisfactory to Grantee. Grantor shall
renew all such insurance and deliver to Grantee certificates and policies
evidencing such renewals at least thirty (30) days before any such
insurance shall expire. Grantor further agrees that each such insurance
policy: (i) shall provide for at least thirty (30) days' prior written
notice to Grantee prior to any policy reduction or cancellation for any
reason other than non-payment of premium and at least ten (10) days' prior
written notice to Grantee prior to any cancellation due to non-payment of
premium; (ii) shall contain an endorsement or agreement by the insurer that
any loss shall be payable to Grantee in accordance with the terms of such
policy notwithstanding any act or negligence of Grantor which might
otherwise result in forfeiture of such insurance; (iii) shall waive all
rights of subrogation against Grantee; (iv) in the event that the Real
Estate or the Improvements constitutes a legal non-conforming use under
applicable building, zoning or land use laws or ordinances, shall include
an ordinance or law coverage endorsement which will contain Coverage A:
"Loss Due to Operation of Law" (with a minimum liability limit equal to
Replacement Cost With Agreed Value Endorsement), Coverage B: "Demolition
Cost" and Coverage C: "Increased Cost of Construction" coverages; and (v)
may be in the form of a blanket policy provided that, in the event that any
such coverage is provided in the form of a blanket policy, Grantor hereby
acknowledges and agrees that failure to pay any portion of the premium
therefor which is not allocable to the Property or by any other action not
relating to the Property which would otherwise permit the issuer thereof to
cancel the coverage thereof, would require the Property to be insured by a
separate, single-property policy. The blanket policy must properly
identify and fully protect the Property as if a separate policy were issued
for 100% of Replacement Cost at the time of loss and otherwise meet all of
Grantee's applicable insurance requirements set forth in this Section 1.4.
The delivery to Grantee of the insurance policies or the certificates of
insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance policies relating to the Property by Grantor
to Grantee as further security for the indebtedness secured hereby. In the
event of foreclosure of this Security Deed, or other transfer of title to
the Property in extinguishment in whole or in part of the indebtedness
secured hereby, all right, title and interest of Grantor in and to all
proceeds payable under such policies then in force concerning the Property
shall thereupon vest in the purchaser at such foreclosure, or in Grantee or
other transferee in the event of such other transfer of title. Approval of
any insurance by Grantee shall not be a representation of the solvency of
any insurer or the sufficiency of any amount of insurance. In the event
Grantor fails to provide, after five (5) days notice, maintain, keep in
force or deliver and furnish to Grantee the policies of insurance required
by this Security Deed or evidence of their renewal as required herein,
Grantee may, but shall not be obligated to, procure such insurance and
Grantor shall pay all amounts advanced by Grantee therefor, together with
interest thereon at the Default Interest Rate from and after the date
advanced by Grantee until actually repaid by Grantor, promptly upon demand
by Grantee. Any amounts so advanced by Grantee, together with interest
thereon, shall be secured by this Security Deed and by all of the other
Loan Documents securing all or any part of the indebtedness secured hereby.
Grantee shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to perform, even
though Grntee has caused the insurance to be placed with the insurer after
failure of Grantor to furnish such insurance. Grantor shall not obtain
insurance for the Property in addition to that required by Grantee without
the prior written consent of Grantee, which consent will not be
unreasonably withheld provided that (i) Grantee is a named insured on such
insurance, (ii) Grantee receives complete copies of all policies evidencing
such insurance, and (iii) such insurance complies with all of the
applicable requirements set forth herein.
1.5 PAYMENT OF TAXES. Grantor shall pay or cause to be paid,
except to the extent provision is actually made therefor pursuant to
Section 1.6 of this Security Deed, all taxes and assessments which are or
may become a lien on the Property or which are assessed against or imposed
upon the Property. Grantor shall furnish Grantee with receipts (or if
receipts are not immediately available, with copies of canceled checks
evidencing payment with receipts to follow promptly after they become
available) showing payment of such taxes and assessments at least fifteen
(15) days prior to the applicable delinquency date therefor.
Notwithstanding the foregoing, Grantor may in good faith, by appropriate
proceedings and upon notice to Grantee, contest the validity, applicability
or amount of any asserted tax or assessment so long as (a) such contest is
diligently pursued, (b) Grantee determines, in its subjective opinion, that
such contest suspends the obligation to pay the tax and that nonpayment of
such tax or assessment will not result in the sale, loss, forfeiture or
diminution of the Property or any part thereof or any interest of Grantee
therein, and (c) prior to the earlier of the commencement of such contest
or the delinquency date of the asserted tax or assessment, Grantor deposits
in the Impound Account (as hereinafter defined) an amount determined by
Grantee to be adequate to cover the payment of such tax or assessment and a
reasonable additional sum to cover possible interest, costs and penalties;
provided, however, that Grantor shall promptly cause to be paid any amount
adjudged by a court of competent jurisdiction to be due, with all interest,
costs and penalties thereon, promptly after such judgment becomes final;
and provided, further, that in any event each such contest shall be
concluded, the taxes, assessments, interest, costs and penalties shall be
paid prior to the date any writ or order is issued under which the Property
may be sold, lost or forfeited.
1.6 TAX AND INSURANCE IMPOUND ACCOUNT. Grantor shall establish
and maintain at all times while this Security Deed continues in effect an
impound account (the "Impound Account") with Grantee for payment of real
estate taxes and assessments and insurance on the Property and as
additional security for the indebtedness secured hereby. Simultaneously
with the execution hereof, Grantor shall deposit in the Impound Account an
amount determined by Grantee to be necessary to ensure that there will be
on deposit with Grantee an amount which, when added to the monthly payments
subsequently required to be deposited with Grantee hereunder on account of
real estate taxes, assessments and insurance premiums, will result in there
being on deposit with Grantee in the Impound Account an amount sufficient
to pay the next due installment of real estate taxes and assessment on the
Property at least one (1) month prior to the due date thereof and the next
due annual insurance premiums with respect to the Property at least one (1)
month prior to the due date thereof. Commencing on the first monthly
payment date under the Note and continuing thereafter on each monthly
payment date under the Note, Grantor shall pay to Grantee, concurrently
with and in addition to the monthly payment due under the Note and until
the Note and all other indebtedness secured hereby is fully paid and
performed, deposits in an amount equal to one-twelfth (1/12) of the amount
of the annual real estate taxes and assessments that will next become due
and payable on the Property, plus one-twelfth (1/12) of the amount of the
annual premiums that will next become due and payable on insurance policies
which Grantor is required to maintain hereunder, each as estimated and
determined by Grantee. So long as no Event of Default (as hereinafter
defined), or event which with the passage of time, the giving of notice, or
both, would constitute an Event of Default (a "Default") hereunder or under
the other Loan Documents has occurred and is continuing, all sums in the
Impound Account shall be held by Grante in the Impound Account to pay said
taxes, assessments and insurance premiums before the same become
delinquent. Grantor shall be responsible for ensuring the receipt by
Grantee, at least thirty (30) days prior to the respective due date for
payment thereof, of all bills, invoices and statements for all taxes,
assessments and insurance premiums to be paid from the Impound Account, and
so long as no Default or Event of Default hereunder or under the other Loan
Documents has occurred and is continuing, Grantee shall pay the
governmental authority or other party entitled thereto directly to the
extent funds are available for such purpose in the Impound Account. In
making any payment from the Impound Account, Grantee shall be entitled to
rely on any bill, statement or estimate procured from the appropriate
public office or insurance company or agent without any inquiry into the
accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability or contestability of any tax,
assessment, valuation, sale, forfeiture, tax lien or title or claim
thereof. The Impound Account shall not, unless otherwise explicitly
required by applicable law, be or be deemed to be escrow or trust funds,
but, at Grantee's option and in Grantee's discretion, may either be held in
a separate account or be commingled by Grantee with the general funds of
Grantee. No interest on the funds contained in the Impound Account shall
be paid by Grantee to Grantor. The Impound Account is solely for the
protection of Grantee and entails no responsibility on Grantee's part
beyond the payment of taxes, assessments and insurance premiums following
receipt of bills, invoices or statements therefor in accordance with the
terms hereof and beyond the allowing of due credit for the sums actually
received. Upon assignment of this Security Deed by Grantee, any funds in
the Impound Account shall be turned over to the assignee and any
responsibility of Grantee, as assignor, with respect thereto shall
terminate. If th total funds in the Impound Account shall exceed the
amount of payments actually applied by Grantee for the purposes of the
Impound Account, such excess may be credited by Grantee on subsequent
payments to be made hereunder or, at the option of Grantee, refunded to
Grantor. If, however, the Impound Account shall not contain sufficient
funds to pay the sums required when the same shall become due and payable,
Grantor shall, within ten (10) days after receipt of written notice
thereof, deposit with Grantee the full amount of any such deficiency. If
the Grantor shall fail to deposit with Grantee the full amount of such
deficiency as provided above, Grantee shall have the option, but not the
obligation, to make such deposit and all amounts so deposited by Grantee,
together with interest thereon at the Default Interest Rate from the date
incurred by Grantee until actually paid by Grantor, shall be immediately
paid by Grantor on demand and shall be secured by this Security Deed and by
all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. If there is an Event of Default under
this Security Deed, Grantee may, but shall not be obligated to, apply at
any time the balance then remaining in the Impound Account against the
indebtedness secured hereby in whatever order Grantee shall subjectively
determine. No such application of the Impound Account shall be deemed to
cure any Default or Event of Default hereunder. Upon full payment of the
indebtedness secured hereby in accordance with its terms or at such
earlier time as Grantee may elect, the balance of the Impound Account then
in Grantee's possession shall be paid over to Grantor and no other party
shall have any right or claim thereto.
1.7 INTENTIONALLY OMITTED PRIOR TO EXECUTION.
1.8 REPLACEMENT RESERVE; SECURITY INTEREST RESERVES.
(a) As additional security for the indebtedness secured hereby,
Grantor shall establish and maintain at all times while this Security Deed
continues in effect a repair reserve (the "Replacement Reserve") with
Grantee for payment of certain non-recurring types of costs and expenses
incurred by Grantor for interior and exterior work to the Property,
including without limitation, performance of work to the roofs, chimneys,
gutters, downspouts, paving, curbs, driveways, ramps, balconies, porches,
patios, exterior walls, carpets, exterior doors and doorways, windows,
elevators and mechanical and HVAC equipment (collectively, the "Repairs")
provided such costs and expenses are incurred for repairs (i) not incurred
for ordinary wear and tear at the Property and (ii) categorized under
generally accepted accounting principles as a capital expense and not as an
operating expense. Commencing on the first Payment Date under the Note and
continuing thereafter on each monthly Payment Date under the Note, the
Grantor shall pay to Grantee, concurrently with and in addition to the
monthly payment due under the Note and until the Note and all other
indebtedness secured hereby is fully paid and performed, a deposit to the
Replacement Reserve in an amount equal to $6,416.67 per month. So long as
no Default or Event of Default hereunder or under the other Loan Documents
has occurred and is continuing, all sums in the Replacement Reserve shall
be held by Grantee in the Replacement Reserve to pay the costs and expenses
of Repairs. So long as no Default or Event of Default hereunder or under
the other Loan Documents has occurred and is continuing, Grantee shall, to
the extent funds are available for such purpose in the Replacement Reserve,
disburse to Grantor the amount incurred and paid by Grantor in performing
such Repairs within ten (10) days following: (a) the receipt by Grantee of
a written request from Grantor for disbursement from the Replacement
Reserve and a certification by Grantor in the form attached hereto as
EXHIBIT B that the applicable item of Repair has been completed, (b) the
delivery to Grantee of paid invoices, receipts or other evidence
satisfactory to Grantee verifying the cost and payment of performing the
Repairs; (c) for disbursement requests in excess of $10,000.00, the
delivery to Grantee of affidavits, lien waivers or other evidence
reasonably satisfactory to Grantee showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished material or labor to
the Property have been paid all amounts due for labor and materials
furnished to the Property; (d) for disbursement requests in excess of
$10,000.00, delivery to Grantee of a certification from an inspecting
architect or other third party acceptable to Grantee describing the
completed Repairs and verifying the completion of the Repairs and the value
of the completion of the Repairs and the value of the completed Repairs;
(e) for disbursement requests in excess of $10,000,00, delivery to Grantee
of a new certificate of occupancy for the portion of the Improvements
covered by such Repairs, if said new certificate of occupancy is required
by law, or a certification by Grantor that no new certificate of occupancy
is required; and (f) the receipt by Grantee of an administrative fee in the
amount of $150.00. Grantee shall not be required to make advances from the
Replacement Reserve more frequently than once in any ninety (90) day
period. In making any payment from the Replacement Reserve, Grantee shall
be entitled to rely on such request from Grantor without any inquiry into
the accuracy, validity or contestability of any such amount. Grantee may,
at Grantor's expense, make or cause to be made during the term of this
Security Deed an annual inspection at the Property to determine the need,
as determined by Grantee in its reasonable judgment, for further Repairs of
the Property in order to maintain the Property in good condition and repair
in accordance with the secnd sentence of Section 1.16 hereof. In the event
that such inspection reveals that further Repairs of the Property are so
required, Grantee shall provide Grantor with a written description of the
required Repairs and Grantor shall complete such Repairs to the reasonable
satisfaction of Grantee within ninety (90) days after the receipt of such
description from Grantee, or such later date as may be approved by Grantee
in its sole discretion. The Replacement Reserve shall not, unless
otherwise explicitly required by applicable law, be or be deemed to be
escrow or trust funds, but, at Grantee's option and in Grantee's
discretion, may either be held in a separate account or be commingled by
Grantee with the general funds of Grantee. Interest on the funds contained
in the Replacement Reserve shall be credited to Grantor as provided in
Section 4.31 hereof. The Replacement Reserve is solely for the protection
of Grantee and entails no responsibility on Grantee's part beyond the
payment of the costs and expenses described in this Section in accordance
with the terms hereof and beyond the allowing of due credit for the sums
actually received. In the event that the amounts on deposit or available
in the Replacement Reserve are inadequate to pay the cost of the Repairs,
Grantor shall pay the amount of such deficiency. Upon assignment of this
Security Deed by Grantee, any funds in the Replacement Reserve shall be
turned over to the assignee and any responsibility of Grantee, as assignor,
with respect thereto shall terminate. If there is an Event of Default
under this Security Deed, Grantee may, but shall not be obligated to, apply
at any time the balance then remaining in the Replacement Reserve against
the indebtedness secured hereby in whatever order Grantee shall
subjectively determine. No such application of the Replacement Reserve
shall be deemed to cure any Default or Event of Default hereunder. Upon
full payment of the indebtedness secured hereby in accordance with its
terms or at such earlier time as Grantee ay elect, the balance of the
Replacement Reserve then in Grantee's possession shall be paid over to
Grantor and no other party shall have any right or claim thereto.
(b) As additional security for the payment and performance by
Grantor of all duties, responsibilities and obligations under the Note and
the other Loan Documents, Grantor hereby unconditionally and irrevocably
assigns, conveys, pledges, mortgages, transfers, delivers, deposits, sets
over and confirms unto Grantee, and hereby grants to Grantee a security
interest in, (i) the Impound Account, the Replacement Reserve and any other
reserve or escrow account established pursuant to the terms hereof or of
any other Loan Document (collectively, the "Reserves"), (ii) the accounts
into which the Reserves have been deposited, (iii) all insurance on said
accounts, (iv) all accounts, contract rights and general intangibles or
other rights and interests pertaining thereto, (v) all sums now or
hereafter therein or represented thereby, (vi) all replacements,
substitutions or proceeds thereof, (vii) all instruments and documents now
or hereafter evidencing the Reserves or such accounts, (viii) all powers,
options, rights, privileges and immunities pertaining to the Reserves
(including the right to make withdrawals therefrom), and (ix) all proceeds
of the foregoing. Grantor hereby authorizes and consents to the account
into which the Reserves have been deposited being held in Grantee's name or
the name of any entity servicing the Note for Grantee and hereby
acknowledges and agrees, that Grantee, or at Grantee's election, such
servicing agent, shall have exclusive control over said account. Notice of
the assignment and security interest granted to Grantee herein may be
delivered by Grantee at any time to the financial institution wherein the
Reserves have been established, and Grantee, or such servicing entity,
shall have possession of all passbooks or other evidences of such accounts.
Grantor hereby assumes all risk of loss with respect to amounts on deposit
in the Reserves as long as such Reserves are deposited into "Permitted
Investments" as described in EXHIBIT C annexed hereto. Grantor hereby
knowingly, voluntarily and intentionally stipulates, acknowledges and
agrees that the advancement of the funds from the Reserves as set forth
herein is at Grantor's direction and is not the exercise by Grantee of any
right of set-off or other remedy upon a Default or an Event of Default.
Grantor hereby waives all right to withdraw funds from the Reserves. If an
Event of Default shall occur hereunder or under any other of the Loan
Documents, then Grantee may, without notice or demand on Grantor, at its
option: (A) withdraw any or all of the funds (including, without
limitation, interest) then remaining in the Reserves and apply the same,
after deducting all costs and expenses of safekeeping, collection and
delivery (including, but not limited to, attorneys' fees, costs and
expenses) to the indebtedness evidenced by the Note or any other
obligations of Grantor under the other Loan Documents in such manner or as
Grantee shall deem appropriate in its sole discretion, and the excess, if
any, shall be paid to Grantor, (B) exercise any and all rights and remedies
of a secured party under any applicable Uniform Commercial Code, and/or (C)
exercise any other remedies available at law or in equity. No such use or
application of the funds contained in the Reserves shall be deemed to cure
any Default or Event of Default hereunder or under the other Loan
Documents.
1.9 CASUALTY AND CONDEMNATION. Grantor shall give Grantee prompt
written notice of the occurrence of any casualty affecting, or the
institution of any proceedings for eminent domain or for the condemnation
of, the Property or any portion thereof. All insurance proceeds on the
Property, and all causes of action, claims, compensation, awards and
recoveries for any damage, condemnation or taking of all or any part of the
Property or for any damage or injury to it for any loss or diminution in
value of the Property, are hereby assigned to and shall be paid to Grantee.
Grantee may participate in any suits or proceedings relating to any such
proceeds, causes of action, claims, compensation, awards or recoveries and
Grantee is hereby authorized, in its own name or in Grantor's name, to
adjust any loss covered by insurance or any condemnation claim or cause of
action, and to settle or compromise any claim or cause of action in
connection therewith, and Grantor shall from time to time deliver to
Grantee any instruments required to permit such participation; provided,
however, that so long as no Default or Event of Default shall have occurred
and be continuing. Grantee shall not have the right to participate in the
adjustment of any loss which is not in excess of the lesser of (i) ten
percent (10%) of the then outstanding principal balance of the Note and
(ii) $500,000.00. Grantee shall apply any sums received by it under this
Section first to the payment of all of its costs and expenses (including,
but not limited to, legal fees and disbursements) incurred in obtaining
those sums, and then, as follows:
(a) In the event that less than sixty percent (60%) of the
Improvements located on the Real Estate have been taken or destroyed, then
if:
(1) no Default or Event of Default is then continuing hereunder
or under any of the other Loan Documents, and
(2) the Property can, in Grantee's reasonable judgment, with
diligent restoration or repair, be returned to a condition at least equal
to the condition thereof that existed prior to the casualty or partial
taking causing the loss or damage within the earlier to occur of (i) six
(6) months after the receipt of insurance proceeds or condemnation awards
by either Grantor of Grantee and (ii) sixty (60) days prior to the stated
maturity date of the Note, and
(3) all necessary governmental approvals can be obtained to allow
the rebuilding and reoccupancy of the Property as described in Section
1.9(a)(2) above, and
(4) there are sufficient sums available (through insurance
proceeds or condemnation awards and contributions by Grantor, the full
amount of which shall at Grantee's option have been deposited with Grantee)
for such restoration or repair (including, without limitation, for any
costs and expenses of Grantee to be incurred in administering said
restoration or repair) and for payment of principal and interest to become
due and payable under the Note during such restoration or repair, and
(5) the economic feasibility of the Improvements after such
restoration or repair will be such that income from their operation is
reasonably anticipated to be sufficient to pay operating expenses of the
Property and debt service on the indebtedness secured hereby in full with
the same coverage ratio considered by Grantee in its determination to make
the loan secured hereby including an assessment of the impact of the
termination of any Leases due to such casualty or condemnation, and
(6) in the event that the insurance proceeds or condemnation
awards received as a result of such casualty or partial taking exceed the
lesser of (i) five percent (5%) of the then outstanding principal balance
of the Note and (ii) $150,000, Grantor shall have delivered to Grantee, at
Grantor's sole cost and expense, an appraisal report in form and substance
satisfactory to Grantee appraising the value of the Property as proposed to
be restored or repaired to be not less than the appraised value of the
Property considered by Grantee in its determination to make the loan
secured hereby, and
(7) Grantor so elects by written notice delivered to Grantee
within five (5) days after settlement of the aforesaid insurance or
condemnation claim, then, Grantee shall, solely for the purposes of such
restoration or repair, advance so much of the remainder of such sums as may
be required for such restoration or repair, and any funds deposited by
Grantor therefor, to Grantor in the manner and upon such terms and
conditions as would be required by a prudent interim construction lender,
including, but not limited to, the prior approval by Grantee of plans and
specifications, contractors and form of construction contracts and the
furnishing to Grantee of permits, bonds, lien waivers, invoices, receipts
and affidavits from contractors and subcontractors in form and substance
satisfactory to Grantee in its discretion, with any remainder being applied
by Grantee for payment of the indebtedness secured hereby in whatever order
Grantee directs in its absolute discretion.
(8) In all other cases, namely, in the event that sixty percent
(60%) or more of the Improvements located on the Real Estate have been
taken or destroyed or Grantor does not elect to restore or repair the
Property pursuant to clause (a) above, or otherwise fails to meet the
requirements of clause (a) above, then in any of such events, Grantee shall
elect, in Grantee's absolute discretion and without regard to the adequacy
of Grantee's security, to do either of the following: (1) accelerate the
maturity date of the Note and declare any and all indebtedness secured
hereby to be immediately due and payable and apply the remainder of such
sums received pursuant to this Section to the payment of the indebtedness
secured hereby in whatever order Grantee directs in its absolute
discretion, with any remainder being paid to Grantor, or (2)
notwithstanding that Grantor may have elected not to restore or repair the
Property pursuant to the provisions of Section 1.9(a)(7) above, require
Grantor to restore or repair the Property, to the extent that proceeds are
received by Grantor, in the manner and upon such terms and conditions as
would be required by a prudent interim construction lender, including, but
not limited to the deposit by Grantor with Grantee, within thirty (30) days
after demand therefor, of any deficiency necessary in order to assure the
availability of sufficient funds to pay for such restoration or repair,
including Grantee's costs and expenses to be incurred in connection
therewith, the prior approval by Grantee of plans and specifications,
contractors and form of construction contracts and the furnishing to
Grantee of permits, bonds, lien waivers, invoices, receipts and affidavits
from contractors and subcontractors in form and substance satisfactory to
Grantee in its discretion, and apply the remainder of such sums toward such
restoration and repair, with any balance thereafter remaining being applied
by Grantee for payment of the indebtedness secured hereby in whatever order
Grantee directs in its absolute dscretion.
Any reduction in the indebtedness secured hereby resulting from Grantee's
application of any sums received by it hereunder shall take effect only
when Grantee actually receives such sums and elects to apply such sums to
the indebtedness secured hereby and, in any event, the unpaid portion of
the indebtedness secured hereby shall remain in full force and effect and
Grantor shall not be excused in the payment thereof. Partial payments
received by Grantee, as described in the preceding sentence, shall be
applied to the unpaid principal balance evidenced hereby and the remaining
principal balance will be recast to adjust the fixed monthly installments
required to be paid pursuant to Section 1.02 of the Note over the remaining
amortization period. If Grantor elects or Grantee directs Grantor to
restore or repair the Property after the occurrence of a casualty or
partial taking of the Property as provided above, Grantor shall promptly
and diligently, at Grantor's sole cost and expense and regardless of
whether the insurance proceeds or condemnation award, as appropriate, shall
be sufficient for the purpose, restore, repair, replace and rebuild the
Property as nearly as possible to its value, condition and character
immediately prior to such casualty or partial taking in accordance with the
foregoing provisions and Grantor shall pay to Grantee all costs and
expenses of Grantee incurred in administering said rebuilding, restoration
or repair, provided the Grantee makes such proceeds or award available for
such purpose. Grantor agrees to execute and deliver from time to time such
further instruments as may be requested by Grantee to confirm the foregoing
assignment to Grantee of any award, damage, insurance proceeds, payment or
other compensation. Grantee is hereby irrevocably constituted and
appointed the attorney-in-fact of Grantor (which power of attorney shall be
irrevocable so long as any indebtedness secured hereby is outstanding,
shall be deemed coupled with an interest, shall survive the voluntary or
involuntry dissolution of Grantor and shall not be affected by any
disability or incapacity suffered by Grantor subsequent to the date
hereof), with full power of substitution, subject to the terms of this
section, to settle for, collect and receive any such awards, damages,
insurance proceeds, payments or other compensation from the parties or
authorities making the same, to appear in and prosecute any proceedings
therefor and to give receipts and acquittances therefor.
1.10 MECHANICS' LIENS. Grantor shall pay when due all claims and
demands of mechanics, materialmen, laborers and others for any work
performed or materials delivered for the Real Estate or Improvements;
provided, however, that, Grantor shall have the right to contest in good
faith any such claim or demand, so long as it does so diligently, by
appropriate proceedings and without prejudice to Grantee and provided that
neither the Property nor any interest therein would be in any danger of
sale, loss or forfeiture as a result of such proceeding or contest. In the
event Grantor shall contest any such claim or demand, Grantor shall
promptly notify Grantee of such contest and thereafter shall, upon
Grantee's request, promptly provide a bond, cash deposit or other security
satisfactory to Grantee to protect Grantee's interest and security should
the contest be unsuccessful. If Grantor shall fail to immediately
discharge or provide security against any such claim or demand as
aforesaid, Grantee may do so and any and all expenses incurred by Grantee,
together with interest thereon at the Default Interest Rate from the date
incurred by Grantee until actually paid by Grantor, shall be immediately
paid by Grantor on demand and shall be secured by this Security Deed and by
all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.
1.11 RENTS AND PROFITS. As additional and collateral security
for the payment of the indebtedness secured hereby and cumulative of any
and all rights and remedies herein provided for, Grantor hereby absolutely
and presently assigns to Grantee all existing and future Rents and Profits.
Grantor hereby grants to Grantee the sole, exclusive and immediate right,
without taking possession of the Property, to demand, collect (by suit or
otherwise), receive and give valid and sufficient receipts for any and all
of said Rents and Profits, for which purpose Grantor does hereby
irrevocably make, constitute and appoint Grantee its attorney-in-fact with
full power to appoint substitutes or a trustee to accomplish such purpose
(which power of attorney shall be irrevocable so long as any indebtedness
secured hereby is outstanding, shall be deemed to be coupled with an
interest, shall survive the voluntary or involuntary dissolution of Grantor
and shall not be affected by any disability or incapacity suffered by
Grantor subsequent to the date hereof). Grantee shall be without liability
for any loss which may arise from a failure or inability to collect Rents
and Profits, proceeds or other payments. However, until the occurrence of
an Event of Default under this Security Deed, Grantor shall have a license
to collect and receive the Rents and Profits when due and prepayments
thereof for not more than one month prior to due date thereof. Upon the
occurrence of an Event of Default hereunder, Grantor's license shall
automatically terminate without notice to Grantor and Grantee may
thereafter, without taking possession of the Property, collect the Rents
and Profits itself or by an agent or receiver. From and after the
termination of such license, Grantor shall be the agent of Grantee in
collection of the Rents and Profits and all of the Rents and Profits so
collected by Grantor shall be held in trust by Grantor for the sole and
exclusive benefit of Grantee and Grantor shall, within one (1) business day
after receipt of any Rents and Profits, pay the ame to Grantee to be
applied by Grantee as hereinafter set forth. Neither the demand for or
collection of Rents and Profits by Grantee shall constitute any assumption
by Grantee of any obligations under any agreement relating thereto.
Grantee is obligated to account only for such Rents and Profits as are
actually collected or received by Grantee. Grantor irrevocably agrees and
consents that the respective payors of the Rents and Profits shall, upon
demand and notice from Grantee of an Event of Default hereunder, pay said
Rents and Profits to Grantee without liability to determine the actual
existence of any Event of Default claimed by Grantee. Grantor hereby
waives any right, claim or demand which Grantor may now or hereafter have
against any such payor by reason of such payment of Rents and Profits to
Grantee, and any such payment shall discharge such payor's obligation to
make such payment to Grantor. All Rents and Profits collected or received
by Grantee shall be applied against all expenses of collection, including,
without limitation, attorneys' fees, against costs of operation and
management of the Property and against the indebtedness secured hereby, in
whatever order or priority as to any of the items so mentioned as Grantee
directs in its sole subjective discretion and without regard to the
adequacy of its security. Neither the exercise by Grantee of any rights
under this Section nor the application of any Rents and Profits to the
secured indebtedness shall cure or be deemed a waiver of any Event of
Default hereunder. The assignment of Rents and Profits hereinabove granted
shall continue in full force and effect during any period of foreclosure or
redemption with respect to the Property. Grantor has executed an
Assignment of Leases and Rents dated of even date herewith (the
"Assignment") in favor of Grantee covering all of the right, title and
interest of Grantor, as landlord, lessor or licensor, in and to any Leases.
All rights and remedies granted to Grantee under the Assignment shall be in
adition to and cumulative of all rights and remedies granted to Grantee
hereunder.
1.12 LEASES AND LICENSES.
(a) Prior to execution of any Leases of space in the Improvements
after the date hereof, Grantor shall submit to Grantee, for Grantee's prior
approval, which approval shall not be unreasonably withheld, a copy of the
form Lease Grantor plans to use in leasing space in the Improvements. All
Leases of space in the Improvements shall be on terms consistent with the
terms for similar leases in the market area of the Real Estate, shall
provide for free rent only if the same is consistent with prevailing market
conditions and shall provide for market rents then prevailing in the market
area of the Real Estate. Grantor shall also submit to Grantee for
Grantee's approval, which approval shall not be unreasonably withheld,
prior to the execution thereof, any proposed Lease of the Improvements or
any portion thereof that differs materially and adversely from the
aforementioned form Lease. Grantor shall not execute any Lease for all or
a substantial portion of the Property, except for an actual occupancy by
the Tenant thereunder, and shall at all times promptly and faithfully
perform, or cause to be performed, all of the covenants, conditions and
agreements contained in all Leases with respect to the Property, now or
hereafter existing, on the part of the landlord, lessor or licensor
thereunder to be kept and performed. Grantor shall furnish to Grantee,
within ten (10) days after a request by Grantee to do so, but in any event
by January 1 of each year, a current Rent Roll certified by Grantor as
being true and correct containing the names of all Tenants with respect to
the Property, the terms of their respective Leases, the spaces occupied and
the rentals or fees payable thereunder and the amount of each tenant's
security deposit. Upon the request of Grantee, Grantor shall deliver to
Grantee a copy of each such Lease. Grantor shall not do or suffer to be
done any act that might result in a default by the landlord, lessor or
licensor under any such Lease or allow the Tenant thereunder to withhold
payment or rent and, excet as otherwise expressly permitted by the terms of
Section 1.12 hereof, shall not further assign any such Lease or any such
rents. Grantor, at no cost or expense to Grantee, shall enforce, short of
termination, the performance and observance of each and every condition and
covenant of each of the parties under such Leases. Grantor shall not,
without the prior written consent of Grantee, modify any of the Leases,
terminate or accept the surrender of any Leases, waive or release any other
party from the performance or observance of any obligation or condition
under such Leases except in the normal course of business in a manner which
is consistent with sound and customary leasing and management practices for
similar properties in the community in which the Property is located.
Grantor shall not permit the prepayment of any rents under any of the
Leases for more than one (1) month prior to the due date thereof.
(b) Each commercial Lease executed after the date hereof
affecting any of the Real Estate or the Improvements must provide, in a
manner approved by Grantee, that the Tenant will recognize as its landlord,
lessor or licensor, as applicable, and attorn to any person succeeding to
the interest of Grantor upon any foreclosure of this Security Deed or deed
in lieu of foreclosure. Each such commercial Lease shall also provide
that, upon request of said successor-in-interest, the Tenant shall execute
and deliver an instrument or instruments confirming its attornment as
provided for in this Section; provided, however, that neither Grantee nor
any successor-in-interest shall be bound by any payment of rental for more
than one (1) month in advance, or any amendment or modification of said
commercial Lease made without the express written consent of Grantee or
said successor-in-interest.
(c) Upon the occurrence of an Event of Default under this
Security Deed, whether before or after the whole principal sum secured
hereby is declared to be immediately due or whether before or after the
institution of legal proceedings to foreclose this Security Deed,
forthwith, upon demand of Grantee, Grantor shall surrender to Grantee and
Grantee shall be entitled to take actual possession of the Property or any
part thereof personally, or by its agent or attorneys. In such event,
Grantee shall have, and Grantor hereby gives and grants to Grantee, the
right, power and authority to make and enter into Leases with respect to
the Property or portions thereof for such rents and for such periods of
occupancy and upon conditions and provisions as Grantee may deem desirable
in its sole discretion, and Grantor expressly acknowledges and agrees that
the term of any such Lease may extend beyond the date of any foreclosure
sale at the Property; it being the intention of Grantor that in such event
Grantee shall be deemed to be and shall be the attorney-in-fact of Grantor
for the purpose of making and entering into Leases of parts or portions of
the Property for the rents and upon the terms, conditions and provisions
deemed desirable to Grantee in its sole discretion and with like effect as
if such Leases had been made by Grantor as the owner in fee simple of the
Property free and clear of any conditions or limitations established by
this Security Deed. The power and authority hereby given and granted by
Grantor to Grantee shall be deemed to be coupled with an interest, shall
not be revocable by Grantor so long as any indebtedness secured hereby is
outstanding, shall survive the voluntary or involuntary dissolution of
Grantor and shall not be affected by any disability or incapacity suffered
by Grantor subsequent to the date hereof. In connection with any action
taken by Grantee pursuant to this Section, Grantee shall not be liable for
any loss sustained by Grantor resulting from any failure to let the
Property, or any part threof, or from any other act or omission of Grantee
in managing the Property, nor shall Grantee be obligated to perform or
discharge any obligation, duty or liability under any Lease covering the
Property or any part thereof or under or by reason of this instrument or
the exercise of rights or remedies hereunder. Grantor shall, and does
hereby, indemnify Grantee for, and hold Grantee harmless from, any and all
claims, actions, demands, liabilities, loss or damage which may or might be
incurred by Grantee under any such Lease or under this Security Deed or by
the exercise of rights or remedies hereunder and from any and all claims
and demands whatsoever which may be asserted against Grantee by reason of
any alleged obligations or undertakings on its part to perform or discharge
any of the terms, covenants or agreements contained in any such Lease other
than those finally determined by a court of competent jurisdiction to have
resulted solely from the gross negligence or willful misconduct of Grantee.
Should Grantee incur any such liability, the amount thereof, including,
without limitation, costs, expenses and attorneys' fees, together with
interest thereon at the Default Interest Rate from the date incurred by
Grantee until actually paid by Grantor, shall be immediately due and
payable to Grantee by Grantor on demand and shall be secured hereby and by
all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. Nothing in this Section shall impose
on Grantee any duty, obligation or responsibility for the control, care,
management or repair of the Property, or for the carrying out of any of the
terms and conditions of any such Lease nor shall it operate to make Grantee
responsible or liable for any waste committed on the Property by the
Tenants or by any other parties or for any dangerous or defective condition
of the Property, or for any negligence in the management, upkeep, repair or
control of the Property. Grantor hereby assents to, ratifies and confirms
any and all ations of Grantee with respect to the Property taken under this
Section.
1.13 ALIENATION AND FURTHER ENCUMBRANCES.
(a) Grantor acknowledges that Grantee has relied upon the
principals of Grantor and their experience in owning and operating the
Property through a management contract with Merry Land Property Management,
Inc. and properties similar to the Property in connection with the closing
of the loan evidenced by the Note. Accordingly, except as specifically
allowed hereinbelow in this Section and notwithstanding anything to the
contrary contained in SECTION 4.6 hereof, in the event that the Property or
any part thereof or interest therein shall be sold, conveyed, disposed of,
alienated, hypothecated, leased (except to Tenants of space in the
Improvements in accordance with the provisions of SECTION 1.12 hereof),
assigned, pledged, mortgaged, further encumbered or otherwise transferred
or Grantor shall be divested of its title to the Property or any interest
therein, in any manner or way, whether voluntarily or involuntarily,
without the prior written consent of Grantee being first obtained, which
consent may be withheld in Grantee's sole discretion, then the same shall
constitute an Event of Default hereunder and Grantee shall have the right,
at its option, to declare any or all of the indebtedness secured hereby,
irrespective of the maturity date specified in the Note, immediately due
and payable and to otherwise exercise any of its other rights and remedies
contained in ARTICLE III hereof. If such acceleration is during any period
when a prepayment fee is payable pursuant to the provisions set forth in
the Note, then, in addition to all of the foregoing, such prepayment fee
shall also then be immediately due and payable to the same end as though
Grantor were prepaying the entire indebtedness secured hereby on the date
of such acceleration. For the purposes of this Section: (i) in the event
either Grantor or any of its general partners or managing members is a
corporation or trust, the sale, conveyance, transfer or disposition of more
than 10% of the issued and outstanding capital stock of Grantor or any of
its general partners or of the beneficial interest of such trust (or the
issuance of new shares of capital stock in Grantor or any of its general
partners or managing members so that immediately after such issuance the
total capital stock then issued and outstanding is more than 110% of the
total immediately prior to such issuance) shall be deemed to be a transfer
of an interest in the Property; and (ii) in the event Grantor or any
general partner or managing member of Grantor is a limited or general
partnership, a joint venture or a limited liability company, a change in
the ownership interests in any general partner, any joint venturer or any
managing member, either voluntarily, involuntarily or otherwise, or the
sale, conveyance, transfer, disposition, alienation, hypothecation or
encumbering of all or any portion of the interest of any such general
partner, joint venturer or managing member in Grantor or such general
partner (whether in the form of a beneficial or partnership interest or in
the form of a power of direction, control or management, or otherwise),
shall be deemed to be a transfer of an interest in the Property.
Notwithstanding the foregoing, however, (i) limited partnership or non-
managing member interests in Grantor or in any general partner or managing
member of Grantor shall be freely transferable without the consent of
Grantee, (ii) any involuntary transfer caused by the death of Grantor or
any general partner, shareholder, joint venturer, or beneficial owner of a
trust shall not be an Event of Default under this Security Deed so long as
Grantor is reconstituted, if required, following such death and so long as
those persons responsible for the management of the Property remain
unchanged as a result of such death or any replacement management is
approved by Grantee and (iii) gifts for estate planning purposes of any
individual's interests in Grantor or in any of Grantor's general partners,
managing members or joint venturers to the spouse or any lineal descendant
of such individual, or to a trust for the benefit of any one or more of
such individual, spouse or lineal descendant, shall not be an Event of
Default under this Security Deed so long as Grantor is reconstituted, if
required, following such gift and so long as those persons responsible for
the management of the Property and Grantor remain unchanged following such
gift or any replacement management is approved by Grantee.
(b) Notwithstanding the foregoing provisions of this Section,
Grantee shall consent to one or more sales, conveyances or transfers of the
Property in its entirety (hereinafter, "SALE") to any person or entity
provided that each of the following terms and conditions are satisfied for
each such Sale:
(1) No Default or Event of Default is then continuing
hereunder or under any of the other Loan Documents;
(2) Grantor gives Grantee written notice of the terms of such
prospective Sale not less than sixty (60) days before the date on which
such Sale is scheduled to close and, concurrently therewith, gives Grantee
all such information concerning the proposed transferee of the Property
(hereinafter, "BUYER") as Grantee would require in evaluating an initial
extension of credit to a borrower and pays to Grantee a non-refundable
application fee in the amount of $5,000.00. Grantee shall have the right to
approve or disapprove the proposed Buyer. In determining whether to give
or withhold its approval of the proposed Buyer, Grantee shall consider the
Buyer's experience and track record in owning and operating facilities
similar to the Property, the Buyer's financial strength, the Buyer's
general business standing and the Buyer's relationships and experience with
contractors, vendors, tenants, lenders and other business entities;
PROVIDED, HOWEVER, that, notwithstanding Grantee's agreement to consider
the foregoing factors in determining whether to give or withhold such
approval, such approval shall be given or withheld based on what Grantee
determines to be commercially reasonable in Grantee's commercially
reasonable discretion and, if given, may be given subject to such
conditions as Grantee may deem appropriate;
(3) Grantor pays Grantee, concurrently with the closing of
such Sale, a non-refundable assumption fee in an amount equal to all out-
of-pocket costs and expenses, including, without limitation, attorneys'
fees, incurred by Grantee in connection with the Sale, plus an amount equal
to one percent (1.0%) of the then outstanding principal balance of the
Note;
(4) The Buyer assumes and agrees to pay the indebtedness
secured hereby subject to the provisions of SECTION 4.27 hereof and, prior
to or concurrently with the closing of such Sale, the Buyer executes,
without any cost or expense to Grantee, such documents and agreements as
Grantee shall reasonably require to evidence and effectuate said assumption
and delivers such legal opinions as Grantee may require;
(5) A party associated with the Buyer approved by Grantee in
its sole discretion assumes the obligations of the current indemnitor under
its guaranty or indemnity agreement and such party associated with the
Buyer executes, without any cost or expense to Grantee, a new guaranty or
indemnity agreement in form and substance satisfactory to Grantee and
delivers such legal opinions as Grantee may require;
(6) Grantor and the Buyer execute, without any cost or
expense to Grantee, new financing statements or financing statement
amendments and any additional documents reasonably requested by Grantee;
(7) Grantor delivers to Grantee, without any cost or expense
to Grantee, such endorsements to Grantee's title insurance policy, hazard
insurance endorsements or certificates and other similar materials as
Grantee may deem necessary at the time of the Sale, all in form and
substance satisfactory to Grantee, including, without limitation, an
endorsement or endorsements to Grantee's title insurance policy insuring
the lien of this Security Deed, extending the effective date of such policy
to the date of execution and delivery (or, if later, of recording) of the
assumption agreement referenced above in SUBPARAGRAPH (4) of this Section,
with no additional exceptions added to such policy, and insuring that fee
simple title to the Property is vested in the Buyer;
(8) Grantor executes and delivers to Grantee, without any
cost or expense to Grantee, a release of Grantee, its officers, directors,
employees and agents, from all claims and liability relating to the
transactions evidenced by the Loan Documents, through and including the
date of the closing of the Sale, which agreement shall be in form and
substance satisfactory to Grantee and shall be binding upon the Buyer;
(9) Subject to the provisions of SECTION 4.27 hereof, such
Sale is not construed so as to relieve Grantor of any personal liability
under the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising prior to or simultaneously with the
closing of such Sale, and Grantor executes, without any cost or expense to
Grantee, such documents and agreements as Grantee shall reasonably require
to evidence and effectuate the ratification of said personal liability.
Grantor shall be released from and relieved of any personal liability under
the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising after the closing of such Sale which are
not caused by or arising out of any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale;
(10) Such Sale is not construed so as to relieve any current
indemnitor of its obligations under any guaranty or indemnity agreement for
any acts or events occurring or obligations arising prior to or
simultaneously with the closing of such Sale, and each such current
indemnitor executes, without any cost or expense to Grantee, such documents
and agreements as Grantee shall reasonably require to evidence and
effectuate the ratification of each such guaranty and indemnity agreement.
Each such current indemnitor shall be released from and relieved of any of
its obligations under any guaranty or indemnity agreement executed in
connection with the loan secured hereby for any acts or events occurring or
obligations arising after the closing of such Sale which are not caused by
or arising out of any acts or events occurring or obligations arising prior
to or simultaneously with the closing of such Sale;
(11) The Buyer shall furnish, if the Buyer is a corporation,
partnership or other entity, all appropriate papers evidencing the Buyer's
capacity and good standing, and the qualification of the signers to execute
the assumption of the indebtedness secured hereby, which papers shall
include certified copies of all documents relating to the organization and
formation of the Buyer and of the entities, if any, which are partners of
the Buyer. The Buyer and such constituent partners, members or
shareholders of Buyer (as the case may be), as Grantee shall require, shall
be single purpose, "bankruptcy remote" entities, whose formation documents
shall be approved by counsel to Grantee. The one (1) individual
recommended by the Grantor shall serve as an independent director of the
Buyer (if the Buyer is a corporation) or the Buyer's corporate general
partner or as independent member or, as manager, of Buyer if the Buyer is a
limited liability company. The consent of such independent party shall be
required for, among other things, any merger, consolidation, dissolution,
bankruptcy or insolvency of such independent party or of the Buyer; and
(12) Grantor delivers to Grantee a written statement from the
applicable rating agency to the effect that the Sale will not result in a
downgrading, withdrawal or qualification of the respective ratings in
effect immediately prior to such Sale for any securities issues in
connection with a Secondary Market Transaction (as hereinafter defined).
1.14 PAYMENT OF UTILITIES, ASSESSMENTS, CHARGES, ETC. Grantor
shall pay when due all utility charges which are incurred by Grantor or
which may become a charge or lien against any portion of the Property for
gas, electricity, water and sewer services furnished to the Real Estate
and/or the Improvements and all other assessments or charges of a similar
nature, or assessments payable pursuant to any restrictive covenants,
whether public or private, affecting the Real Estate and/or the
Improvements or any portion thereof, whether or not such assessments or
charges are or may become liens thereon.
1.15 ACCESS PRIVILEGES AND INSPECTIONS. Grantee and the agents,
representatives and employees of Grantee shall, subject to the rights of
tenants, have full and free access to the Real Estate and the Improvements
and any other location where books and records concerning the Property are
kept at all reasonable times for the purposes of inspecting the Property
and of examining, copying and making extracts from the books and records of
Grantor relating to the Property. Grantor shall lend assistance to all
such agents, representatives and employees of Grantee.
1.16 WASTE; ALTERATION OF IMPROVEMENTS. Grantor shall not
commit, suffer or permit any waste on the Property nor take any actions
that might invalidate any insurance carried on the Property. Grantor shall
maintain the Property in good condition and repair. No part of the
Improvements may be removed, demolished or materially altered, without the
prior written consent of Grantee. Without the prior written consent of
Grantee, Grantor shall not commence construction of any improvements on the
Real Estate other than improvements required for the maintenance or repair
of the Property.
1.17 ZONING. Without the prior written consent of Grantee,
Grantor shall not seek, make, suffer, consent to or acquiesce in any change
in the zoning or conditions of use of the Real Estate or the Improvements.
Grantor shall comply with and make all payments required under the
provisions of any covenants, conditions or restrictions affecting the Real
Estate or the Improvements. Grantor shall comply with all existing and
future requirements of all governmental authorities having jurisdiction
over the Property. Grantor shall keep all licenses, permits, franchises
and other approvals necessary for the operation of the Property in full
force and effect. Grantor shall operate the Property as an apartment
development for so long as the indebtedness secured hereby is outstanding.
If, under applicable zoning provisions, the use of all or any part of the
Real Estate or the Improvements is or becomes a nonconforming use, Grantor
shall not cause or permit such use to be discontinued or abandoned without
the prior written consent of Grantee. Further, without Grantee's prior
written consent, Grantor shall not file or subject any part of the Real
Estate or the Improvements to any declaration of condominium or
co-operative or convert any part of the Real Estate or the Improvements to
a condominium, co-operative or other form of multiple ownership and
governance.
1.18 FINANCIAL STATEMENTS AND BOOKS AND RECORDS. Grantor shall
keep accurate books and records of account of the Property and its own
financial affairs sufficient to permit the preparation of financial
statements therefrom in accordance with generally accepted accounting
principles. Grantee and its duly authorized representatives shall have the
right to examine, copy and audit Grantor's records and books of account at
all reasonable times. So long as this Security Deed continues in effect,
Grantor shall provide to Grantee, in addition to any other financial
statements required hereunder or under any of the other Loan Documents, the
following financial statements and information, all of which must be
certified to Grantee as being true and correct by Grantor or the person or
entity to which they pertain, as applicable, be prepared in accordance with
generally accepted accounting principles consistently applied and be in
form and substance acceptable to Grantee:
(a) copies of all tax returns filed by Grantor, within thirty
(30) days after the date of filing;
(b) monthly operating statements for the Property within ten (10)
days after the end of each month during the first twelve months of the term
of the loan secured hereby;
(c) quarterly operating statements for the Property, within
thirty (30) days after the end of each calendar quarter;
(d) annual balance sheets for the Property and annual financial
statements for Grantor, each principal or general partner in Grantor, and
each indemnitor and guarantor under any indemnity or guaranty executed in
connection with the loan secured hereby, within ninety (90) days after the
end of each calendar year; and
(e) such other information with respect to the Property, Grantor,
the principals or general partners in Grantor, and each indemnitor and
guarantor under any indemnity or guaranty executed in connection with the
loan secured hereby, which may be requested from time to time by Grantee,
within a reasonable time after the applicable request.
If any of the aforementioned materials are not furnished to Grantee within
the applicable time periods or Grantee is dissatisfied with the contents of
any of the foregoing, in addition to any other rights and remedies of
Grantee contained herein, Grantee shall have the right, but not the
obligation after notice and a 30 day right to cure, to obtain the same by
means of an audit by an independent certified public accountant selected by
Grantee, in which event Grantor agrees to pay, or to reimburse Grantee for,
any expense of such audit and further agrees to provide all necessary
information to said accountant and to otherwise cooperate in the making of
such audit.
1.19 FURTHER DOCUMENTATION. (a) Grantor shall, on the request of
Grantee and at the expense of Grantor: (a) promptly correct any defect,
error or omission which may be discovered in the contents of this Security
Deed or in the contents of any of the other Loan Documents; (b) promptly
execute, acknowledge, deliver and record or file such further instruments
(including, without limitation, further mortgages, deeds of trust, security
deeds, security agreements, financing statements, continuation statements
and assignments of rents or leases) and promptly do such further acts as
may be necessary, desirable or proper to carry out more effectively the
purposes of this Security Deed and the other Loan Documents and to subject
to the liens and security interests hereof and thereof any property
intended by the terms hereof and thereof to be covered hereby and thereby,
including specifically, but without limitation, any renewals, additions,
substitutions, replacements or appurtenances to the Property; (c) promptly
execute, acknowledge, deliver, procure and record or file any document or
instrument (including specifically any financing statement) deemed
advisable by Grantee to protect, continue or perfect the liens or the
security interests hereunder against the rights or interests of third
persons; and (d) promptly furnish to Grantee, upon Grantee's request, a
duly acknowledged written statement and estoppel certificate addressed to
such party or parties as directed by Grantee and in form and substance
supplied by Grantee, setting forth all amounts due under the Note, stating
whether any Default or Event of Default has occurred hereunder, stating
whether any offsets or defenses exist against the indebtedness secured
hereby and containing such other matters as Grantee may reasonably require.
(b) Grantor acknowledges that Grantee and its successors and
assigns may effectuate a Secondary Market Transaction. Grantor shall
cooperate in good faith with Grantee in effecting any such Secondary Market
Transaction and shall cooperate in good faith to implement all requirements
imposed by any rating agency involved in any Secondary Market Transaction
including, without limitation, all structural or other changes to the
indebtedness secured hereby, modifications to any documents evidencing or
securing the loan; provided, however, that the Grantor shall not be
required to modify any documents evidencing or securing the indebtedness
secured hereby which would modify (A) the interest rate payable under the
Note, (B) the stated maturity of the Note, (C) the amortization of
principal of the Note, or (D) any other material economic term of the
indebtedness secured hereby. Grantor shall provide such information, and
documents relating to Grantor, any guarantor or indemnitor, the Property
and any tenants of the Improvements as Grantee may reasonably request in
connection with such Secondary Market Transaction. Grantor shall make
available to Grantee all information concerning its business and operations
that Grantee may reasonably request. Grantee shall be permitted to share
all such information with the investment banking firms, rating agencies,
accounting firms, law firms and other third-party advisory firms involved
with the Loan Documents or the applicable Secondary Market Transaction. It
is understood that the information provided by Grantor to Grantee may
ultimately be incorporated into the offering documents for the Secondary
Market Transaction and thus various investors may also see some or all of
the information. Grantee and all of the aforesaid third-party advisors and
professional firms shall be entitled to rely on the information supplied
by, or on behalf of, Grantor and Grantor indemnifies Grantee as to any
losses, claims, damages or liabilities that arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in such information or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated in such information or necessary in order to make the statements
in such information, or in light of the circumstances under which they were
made, not misleading. Grantee may publicize the existence of the
indebtedness secured hereby in connection with its marketing for a
Secondary Market Transaction or otherwise as part of its business
development. For purposes hereof, a "Secondary Market Transaction" shall
be (a) any sale of the Security Deed, Note and other Loan Documents to one
or more investors as a whole loan; (b) a participation of the indebtedness
secured hereby to one or more investors, (c) any deposit of the Security
Deed, Note and other Loan Documents with a trust or other entity which may
sell certificates or other instruments to investors evidencing an ownership
interest in the assets of such trust or other entity, or (d) any other sale
or transfer of the indebtedness secured hereby or any interest therein to
one or more investors.
1.20 PAYMENT OF COSTS; REIMBURSEMENT TO GRANTEE. Grantor shall
pay all costs and expenses of every character incurred in connection with
the closing of the loan evidenced by the Note and secured hereby or
otherwise attributable or chargeable to Grantor as the owner of the
Property, including, without limitation, appraisal fees, recording fees,
documentary, stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, uniform
commercial code/tax lien/litigation search fees, escrow fees and reasonable
attorneys' fees. If Grantor defaults in any such payment, which default is
not cured within any applicable grace or cure period, Grantee may pay the
same and Grantor shall reimburse Grantee on demand for all such costs and
expenses incurred or paid by Grantee, together with such interest thereon
at the Default Interest Rate from and after the date of Grantee's making
such payment until reimbursement thereof by Grantor. Any such sums
disbursed by Grantee, together with such interest thereon, shall be
additional indebtedness of Grantor secured by this Security Deed and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. Further, Grantor shall promptly notify Grantee in
writing of any litigation or threatened litigation affecting the Property,
or any other demand or claim which, if enforced, could impair or threaten
to impair Grantee's security hereunder. Without limiting or waiving any
other rights and remedies of Grantee hereunder, if Grantor fails to perform
any of its covenants or agreements contained in this Security Deed or in
any of the other Loan Documents and such failure is not cured within any
applicable grace or cure period, or if any action or proceeding of any kind
(including, but not limited to, any bankruptcy, insolvency, arrangement,
reorganization or other debtor relief proceeding) is commenced which might
affect Grantee's interest in the Property or Grantee's right to enforce its
security, then Grantee may, at its option, with or without notie to
Grantor, make any appearances, disburse any sums and take any actions as
may be necessary or desirable to protect or enforce the security of this
Security Deed or to remedy the failure of Grantor to perform its covenants
and agreements (without, however, waiving any default of Grantor). Grantor
agrees to pay on demand all expenses of Grantee incurred with respect to
the foregoing (including, but not limited to, reasonable fees and
disbursements of counsel), together with interest thereon at the Default
Interest Rate from and after the date on which Grantee incurs such expenses
until reimbursement thereof by Grantor. Any such expenses so incurred by
Grantee, together with interest thereon as provided above, shall be
additional indebtedness of Grantor secured by this Security Deed and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. The necessity for any such actions and of the
amounts to be paid shall be determined by Grantee in its discretion.
Grantee is hereby empowered to enter and to authorize others to enter upon
the Property or any part thereof for the purpose of performing or observing
any such defaulted term, covenant or condition without thereby becoming
liable to Grantor or any person in possession holding under Grantor.
Grantor hereby acknowledges and agrees that the remedies set forth in this
Section 1.20 shall be exercisable by Grantee, and any and all payments made
or costs or expenses incurred by Grantee in connection therewith shall be
secured hereby and shall be, without demand, immediately repaid by Grantor
with interest thereon at the Default Interest Rate, notwithstanding the
fact that such remedies were exercised and such payments made and costs
incurred by Grantee after the filing by Grantor of a voluntary case or the
filing against Grantor of an involuntary case pursuant to or within the
meaning of the Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C.,
or after any similar action pursuant to any other debtor relief law whether
statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter, in effect, which may be or become applicable
to Grantor, Grantee, any guarantor or indemnitor, the secured indebtedness
or any of the Loan Documents. Grantor hereby indemnifies and holds Grantee
harmless from and against all loss, cost and expenses with respect to any
Event of Default hereof, any liens (i.e., judgments, mechanics' and
materialmen's liens, or otherwise), charges and encumbrances filed against
the Property, and from any claims and demands for damages or injury,
including claims for property damage, personal injury or wrongful death,
arising out of or in connection with any accident or fire or other casualty
on the Real Estate or the Improvements or any nuisance made or suffered
thereon, including, in any case, attorneys' fees, costs and expenses as
aforesaid, whether at pretrial, trial or appellate level, and such
indemnity shall survive payment in full of the indebtedness secured hereby.
This Section shall not be construed to require Grantee to incur any
expenses, make any appearances or take any actions.
1.21 SECURITY INTEREST. This Security Deed is also intended to
encumber and create a security interest in, and Grantor hereby grants to
Grantee a security interest in all sums on deposit with Grantee pursuant to
the provisions of Sections 1.6, 1.7 and 1.8 hereof or any other Section
hereof and all fixtures, chattels, accounts, equipment, inventory, contract
rights, general intangibles and other personal property included within the
Property, all renewals, replacements of any of the aforementioned items, or
articles in substitution therefor or in addition thereto or the proceeds
thereof (said property is hereinafter referred to collectively as the
"Collateral"), whether or not the same shall be attached to the Real Estate
or the Improvements in any manner. It is hereby agreed that to the extent
permitted by law, all of the foregoing property is to be deemed and held to
be a part of and affixed to the Real Estate and the Improvements. The
foregoing security interest shall also cover Grantor's leasehold interest
in any of the foregoing property which is leased by Grantor.
Notwithstanding the foregoing, all of the foregoing property shall be owned
by Grantor and no material leasing or installment sales or other financing
or title retention agreement in connection therewith shall be permitted
without the prior written approval of Grantee. Grantor shall, from time to
time upon the request of Grantee, supply Grantee with a current inventory
of all of the property in which Grantee is granted a security interest
hereunder, in such detail as Grantee may require. Grantor shall promptly
replace all of the Collateral subject to the lien or security interest of
this Security Deed when worn or obsolete with Collateral comparable to the
worn out or obsolete Collateral when new and will not, without the prior
written consent of Grantee, remove from the Real Estate or the Improvements
any of the Collateral subject to the lien or security interest of this
Security Deed except such as is replaced by an article of equal suitability
and value as abov provided, owned by Grantor free and clear of any lien or
security interest except that created by this Security Deed and the other
Loan Documents and except as otherwise expressly permitted by the terms of
Section 1.13 of this Security Deed. All of the Collateral shall be kept at
the location of the Real Estate except as otherwise required by the terms
of the Loan Documents. Grantor shall not use any of the Collateral in
violation of any applicable statute, ordinance or insurance policy.
1.22 SECURITY AGREEMENT. This Security Deed constitutes a
security agreement between Grantor and Grantee with respect to the
Collateral in which Grantee is granted a security interest hereunder, and,
cumulative of all other rights and remedies of Grantee hereunder, Grantee
shall have all of the rights and remedies of a secured party under any
applicable Uniform Commercial Code. Grantor hereby agrees to execute and
deliver on demand and hereby irrevocably constitutes and appoints Grantee
the attorney-in-fact of Grantor to execute and deliver and, if appropriate,
to file with the appropriate filing officer or office such security
agreements, financing statements, continuation statements or other
instruments as Grantee may request or require in order to impose, perfect
or continue the perfection of the lien or security interest created hereby.
Except with respect to Rents and Profits to the extent specifically
provided herein to the contrary, Grantee shall have the right of possession
of all cash, securities, instruments, negotiable instruments, documents,
certificates and any other evidences of cash or other property or evidences
of rights to cash rather than property, which are now or hereafter a part
of the Property and Grantor shall promptly deliver the same to Grantee,
endorsed to Grantee, without further notice from Grantee. Grantor agrees
to furnish Grantee with notice of any change in the name, identity,
organizational structure, residence, or principal place of business or
mailing address of Grantor within ten (10) days of the effective date of
any such change. Upon the occurrence of any Event of Default, Grantee
shall have the rights and remedies as prescribed in this Security Deed, or
as prescribed by general law, or as prescribed by any applicable Uniform
Commercial Code, all at Grantee's election. Any disposition of the
Collateral may be conducted by an employee or agent of Grantee. Any
person, including both Grantor and Grantee, shall be eligible to purchase
any part or all of the Collateral at any such disposition. xpenses of
retaking, holding, preparing for sale, selling or the like (including,
without limitation, Grantee's attorneys' fees and legal expenses), together
with interest thereon at the Default Interest Rate from the date incurred
by Grantee until actually paid by Grantor, shall be paid by Grantor on
demand and shall be secured by this Security Deed and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by
the Note. Grantee shall have the right to enter upon the Real Estate and
the Improvements or any real property where any of the property which is
the subject of the security interest granted herein is located to take
possession of, assemble and collect the same or to render it unusable, or
Grantor, upon demand of Grantee, shall assemble such property and make it
available to Grantee at the Real Estate, a place which is hereby deemed to
be reasonably convenient to Grantee and Grantor. Grantee shall give
Grantor at least ten (10) days' prior written notice of the time and place
of any public sale of such property or of the time of or after which any
private sale or any other intended disposition thereof is to be made, and
if such notice is sent to Grantor, as the same is provided for the mailing
of notices herein, it is hereby deemed that such notice shall be and is
reasonable notice to Grantor. No such notice is necessary for any such
property which is perishable, threatens to decline speedily in value or is
of a type customarily sold on a recognized market. Any sale made pursuant
to the provisions of this Section shall be deemed to have been a public
sale conducted in a commercially reasonable manner if held
contemporaneously with the foreclosure sale as provided in Section 3.1(e)
hereof upon giving the same notice with respect to the sale of the Property
hereunder as is required under said Section 3.1(e). Furthermore, to the
extent permitted by law, in conjunction with, in addition to or in
substitution for the rights and remedies available to Grantee pursuant to
an applicable Uniform Commercial Code:
(a) In the event of a foreclosure sale, the Property may, at the
option of Grantee, be sold as a whole; and
(b) It shall not be necessary that Grantee take possession of the
aforementioned Collateral, or any part thereof, prior to the time that any
sale pursuant to the provisions of this Section is conducted and it shall
not be necessary that said Collateral, or any part thereof, be present at
the location of such sale; and
(c) Grantee may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Grantee, including the sending of notices and the conduct of the sale, but
in the name and on behalf of Grantee.
The name and address of Grantor (as Debtor under any applicable
Uniform Commercial Code) are:
ML Hammocks at Long Point, L.L.C.
c/o Dorrie E. Green
624 Ellis Street, 2{nd} Floor
Augusta, Georgia 30901
The name and address of Grantee (as Secured Party under any
applicable Uniform Commercial Code) are:
First Union National Bank
One First Union Center, DC6
Charlotte, North Carolina 28288-0166
1.23 EASEMENTS AND RIGHTS OF WAY. Grantor shall not grant any
easement or right-of-way with respect to all or any portion of the Real
Estate or the Improvements without the prior written consent of Grantee.
The purchaser at any foreclosure sale hereunder may, at its discretion,
disaffirm any easement or right-of-way granted in violation of any of the
provisions of this Security Deed and may take immediate possession of the
Property free from, and despite the terms of, such grant of easement or
right-of-way. If Grantee consents to the grant of an easement or
right-of-way, Grantee agrees to grant such consent provided that Grantee is
paid a standard review fee together with all other expenses, including,
without limitation, attorneys' fees, incurred by Grantee in the review of
Grantor's request and in the preparation of documents effecting the
subordination.
1.24 COMPLIANCE WITH LAWS. Grantor shall at all times comply
with all statutes, ordinances, orders, regulations and other governmental
or quasi-governmental requirements and private covenants now or hereafter
relating to the ownership, construction, use or operation of the Property,
including, but not limited to, those concerning employment and compensation
of persons engaged in operation and maintenance of the Property and any
environmental or ecological requirements, even if such compliance shall
require structural changes to the Property; provided, however, that,
Grantor may, upon providing Grantee with security satisfactory to Grantee,
proceed diligently and in good faith to contest the validity or
applicability of any such statute, ordinance, regulation or requirement so
long as during such contest the Property shall not be subject to any lien,
charge, fine or other liability and shall not be in danger of being
forfeited, lost or closed. Grantor shall not use or occupy, or allow the
use or occupancy of, the Property in any manner which violates any Lease of
or any other agreement applicable to the Property or any applicable law,
rule, regulation or order or which constitutes a public or private nuisance
or which makes void, voidable or cancelable, or increases the premium of,
any insurance then in force with respect thereto.
1.25 ADDITIONAL TAXES. In the event of the enactment after this
date of any law of the state where the Property is located or of any other
governmental entity deducting from the value of the Property for the
purpose of taxing any lien, conveyance or security interest thereon or
thereof, or imposing upon Grantee the payment of the whole or any part of
the taxes or assessments or charges of liens herein required to be paid by
Grantor, or changing in any way the laws relating to the taxation of deeds
of trust, security deeds, mortgages or security agreements or debts secured
by mortgages, security deeds, or security agreements or the interest of the
Grantee or secured party in the property covered thereby, or the manner of
collection of such taxes, so as to adversely affect this Security Deed or
the indebtedness secured hereby or Grantee, then, and in any such event,
Grantor, upon demand by Grantee, shall pay such taxes, assessments, charges
or liens, or reimburse Grantee therefor; provided, however, that if in the
opinion of counsel for Grantee (a) it might be unlawful to require Grantor
to make such payment, or (b) the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by law, then and
in either such event, Grantee may elect, by notice in writing given to
Grantor, to declare all of the indebtedness secured hereby to be and become
due and payable in full thirty (30) days from the giving of such notice.
1.26 SECURED INDEBTEDNESS. It is understood and agreed that this
Security Deed shall secure payment of not only the indebtedness evidenced
by the Note but also any and all substitutions, replacements, renewals and
extensions of the Note, any and all indebtedness and obligations arising
pursuant to the terms hereof and any and all indebtedness and obligations
arising pursuant to the terms of any of the other Loan Documents, all of
which indebtedness is equally secured with and has the same priority as any
amounts advanced as of the date hereof. It is agreed that any future
advances made by Grantee to or for the benefit of Grantor from time to time
under this Security Deed or the other Loan Documents and whether or not
such advances are obligatory or are made at the option of Grantee, or
otherwise, made for any purpose, within twenty (20) years from the date
hereof, and all interest accruing thereon, shall be equally secured by this
Security Deed and shall have the same priority as all amounts, if any,
advanced as of the date hereof and shall be subject to all of the terms and
provisions of this Security Deed.
1.27 GRANTOR'S WAIVERS. To the full extent permitted by law,
Grantor agrees that Grantor shall not at any time insist upon, plead, claim
or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, moratorium or extension,
or any law now or hereafter in force providing for the reinstatement of the
indebtedness secured hereby prior to any sale of the Property to be made
pursuant to any provisions contained herein or prior to the entering of any
decree, judgment or order of any court of competent jurisdiction, or any
right under any statute to redeem all or any part of the Property so sold.
Grantor, for Grantor and Grantor's successors and assigns, and for any and
all persons ever claiming any interest in the Property, to the full extent
permitted by law, hereby knowingly, intentionally and voluntarily with and
upon the advice of competent counsel: (a) waives, releases, relinquishes
and forever forgoes all rights of valuation, appraisement, stay of
execution, reinstatement and notice of election or intention to mature or
declare due the secured indebtedness (except such notices as are
specifically provided for herein); (b) waives, releases, relinquishes and
forever forgoes all right to a marshalling of the assets of Grantor,
including the Property, to a sale in the inverse order of alienation, or to
direct the order in which any of the Property shall be sold in the event of
foreclosure of the liens and security interests hereby created and agrees
that any court having jurisdiction to foreclose such liens and security
interests may order the Property sold as an entirety; and (c) waives,
releases, relinquishes and forever forgoes all rights and periods of
redemption provided under applicable law. To the full extent permitted by
law, Grantor shall not have or assert any right under any statute or rule
of law pertaining to the exemption of homestead or other exemption under
any federal, state or local law now or hereafter in effect, the
administration of estates of decedents or oher matters whatever to defeat,
reduce or affect the right of Grantee under the terms of this Security Deed
to a sale of the Property, for the collection of the secured indebtedness
without any prior or different resort for collection, or the right of
Grantee under the terms of this Security Deed to the payment of the
indebtedness secured hereby out of the proceeds of sale of the Property in
preference to every other claimant whatever. Further, Grantor hereby
knowingly, intentionally and voluntarily, with and upon the advice of
competent counsel, waives, releases, relinquishes and forever forgoes all
present and future statutes of limitations as a defense to any action to
enforce the provisions of this Security Deed or to collect any of the
indebtedness secured hereby the fullest extent permitted by law. Grantor
covenants and agrees that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against Grantor, Grantor shall not
seek a supplemental stay or otherwise shall not seek pursuant to 11 U.S.C.
<section>105 or any other provision of the Bankruptcy Reform Act of 1978,
as amended, or any other debtor relief law (whether statutory, common law,
case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in
effect, which may be or become applicable, to stay, interdict, condition,
reduce or inhibit the ability of Grantee to enforce any rights of Grantee
against any guarantor or indemnitor of the secured obligations or any other
party liable with respect thereto by virtue of any indemnity, guaranty or
otherwise.
1.28 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE
IN WHICH THE PROPERTY IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING
BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS SECURITY DEED OR
ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION, SUIT
OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION OVER THE COUNTY IN WHICH THE PROPERTY IS
LOCATED, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (iv) TO THE
FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL
AFFECT THE RIGHT OF GRANTEE TO BRING ANY ACTION, SUIT OR PROCEEDING IN
ANY OTHER FORUM OR GRANTOR'S ABILITY TO ACCESS SUCH OTHER FORUM IN CONNECTION
WITH ANY ACTION, SUIT OR PROCEEDING BROUGHT BY GRANTEE). GRANTOR FURTHER
CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED
U.S. MAIL, POSTAGE PREPAID, TO GRANTOR AT THE ADDRESS FOR NOTICES DESCRIBED
IN SECTION 4.5 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN
SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY
OTHER MANNER PERMITTED BY LAW).
(b) GRANTEE AND GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE
OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO THE INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR
OMISSION OF GRANTEE OR GRANTOR, OR ANY OF THEIR DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH GRANTEE OR GRANTOR, IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
1.29 CONTRACTUAL STATUTE OF LIMITATIONS. Grantor hereby agrees
that any claim or cause of action by Grantor against Grantee, or any of
Grantee's directors, officers, employees, agents, accountants or attorneys,
based upon, arising from or relating to the indebtedness secured hereby, or
any other matter, cause or thing whatsoever, whether or not relating
thereto, occurred, done, omitted or suffered to be done by Grantee or by
Grantee's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred
unless asserted by Grantor by the commencement of an action or proceeding
in a court of competent jurisdiction by the filing of a complaint within
one (1) year after Grantor first acquires or reasonably should have
acquired knowledge of the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based and service of a
summons and complaint on an officer of Grantee or any other person
authorized to accept service of process on behalf of Grantee, within thirty
(30) days thereafter. Grantor agrees that such one (1) year period of time
is reasonable and sufficient time for a borrower to investigate and act
upon any such claim or cause of action. The one (1) year period provided
herein shall not be waived, tolled or extended except by the specific
written agreement of Grantee. This provision shall survive any termination
of this Security Deed or any of the other Loan Documents.
1.30 MANAGEMENT. The management of the Property shall be by
either: (a) Grantor or an entity affiliated with Grantor approved by
Grantee for so long as Grantor or said affiliated entity is managing the
Property in a first class manner; or (b) a professional property management
company approved by Grantee. Such management by an affiliated entity or a
professional property management company shall be pursuant to a written
agreement approved by Grantee. In no event shall any manager be removed or
replaced or the terms of any management agreement modified or amended
without the prior written consent of Grantee. After an Event of Default or
a default under any management contract then in effect, which default is
not cured within any applicable grace or cure period, Grantee shall have
the right to terminate, or to direct Grantor to terminate, such management
contract upon thirty (30) days' notice and to retain, or to direct Grantor
to retain, a new management agent approved by Grantee. All Rents and
Profits generated by or derived from the Property shall first be utilized
solely for current expenses directly attributable to the ownership and
operation of the Property, including, without limitation, current expenses
relating to Grantor's liabilities and obligations with respect to this
Security Deed and the other Loan Documents, and none of the Rents and
Profits generated by or derived from the Property shall be diverted by
Grantor and utilized for any other purposes unless all such current
expenses attributable to the ownership and operation of the Property have
been fully paid and satisfied.
1.31 HAZARDOUS WASTE AND OTHER SUBSTANCES.
(a) Except for those matters disclosed in the environmental
reports furnished by Grantor to Grantee, Grantor hereby represents and
warrants to Grantee that, as of the date hereof: (i) to the best of
Grantor's knowledge, information and belief, the Property is not in direct
or indirect violation of any local, state or federal law, rule or
regulation pertaining to environmental regulation, contamination or
clean-up (collectively, "Environmental Laws"), including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. section 9601 ET SEQ. and 40 CFR
section 302.1 ET SEQ.), the Resource Conservation and Recovery Act of 1976
(42 U.S.C. section 6901 ET SEQ.), the Federal Water Pollution Control Act
(33 U.S.C. section 1251 ET SEQ. and 40 CFR section 116.1 ET SEQ.), those
relating to lead based paint, and the Hazardous Materials Transportation
Act (49 U.S.C. section 5101 ET SEQ.), the Georgia Hazardous Waste
Management Act, as amended, O.C.G.A. section 12-8-60 ET SEQ., the Georgia
Oil or Hazardous Materials Spills or Releases Act, as amended, O.C.G.A.
section 12-14-1 ET SEQ., the Georgia Comprehensive Solid Waste Management
Act, as amended, O.C.G.A. section 12-8-20 ET SEQ., the Georgia Asbestos
Safety Act, as amended, O.C.G.A. section 12-12-1 ET SEQ., the Georgia
Underground Storage Tank Act, as amended, O.C.G.A. section 12-13-1 ET
SEQ., and the regulations promulgated pursuant to said laws, all as
amended; (ii) no hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos, lead
based paint, polychlorinated biphenyls, petroleum products, flammable
explosives, radioactive materials, infectious substances or raw materials
which include hazardous constituents) or any other substances or materials
which are included under or regulated by Environmental Laws (collectively,
"Hazardous Substances") are located on or have been handled, generated,
stored, processed or disposed of on or released or discharged from the
Property (including underground contamination) except for those substances
used by Grantor in the ordinary course of its business and in compliance
with all Environmental Laws; (iii) the Property is not subject to any
private or governmental lien or judicial or administrative notice or action
relating to Hazardous Substances; (iv) there are no existing or closed
underground storage tanks or other underground storage receptacles for
Hazardous Substances on the Property except for underground storage tanks
which are used to store propane and in compliance with all Environmental
Laws; (v) Grantor has received no notice of, and to the best of Grantor's
knowledge and belief, there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any third party
which could result in any liability, penalty, sanction or judgment under
any Environmental Laws with respect to any condition, use or operation of
the Property nor does Grantor know of any basis for such a claim; and (vi)
Grantor has received no notice of and, to the best of Grantor's knowledge
and belief, there has been no claim by any party that any use, operation or
condition of the Property has caused any nuisance or any other liability or
adverse condition on any other property nor does Grantor know of any basis
for such a claim.
(b) Grantor shall keep or cause the Property to be kept free from
Hazardous Substances (except those substances used by Grantor in the
ordinary course of its business and in compliance with all Environmental
Laws) and in compliance with all Environmental Laws, shall not install or
use any underground storage tanks except for underground storage tanks
which are used to store propane and in compliance with all Environmental
Laws, shall expressly prohibit the use, generation, handling, storage,
production, processing and disposal of Hazardous Substances by all tenants
of space in the Improvements, and, without limiting the generality of the
foregoing, during the term of this Security Deed, shall not install in the
Improvements or permit to be installed in the Improvements asbestos or any
substance containing asbestos.
(c) Grantor shall promptly notify Grantee if Grantor shall become
aware of the possible existence of any Hazardous Substances on the Property
or if Grantor shall become aware that the Property is or may be in direct
or indirect violation of any Environmental Laws. Further, immediately upon
receipt of the same, Grantor shall deliver to Grantee copies of any and all
orders, notices, permits, applications, reports, and other communications,
documents and instruments pertaining to the actual, alleged or potential
presence or existence of any Hazardous Substances at, on, about, under,
within, near or in connection with the Property. Grantor shall, promptly
and when and as required by applicable Environmental Laws, at Grantor's
sole cost and expense, take all actions as shall be necessary or advisable
for the clean-up of any and all portions of the Property or other affected
property, including, without limitation, all investigative, monitoring,
removal, containment and remedial actions in accordance with all applicable
Environmental Laws (and in all events in a manner satisfactory to Grantee),
and shall further pay or cause to be paid, at no expense to Grantee, all
clean-up, administrative and enforcement costs of applicable governmental
agencies which may be asserted against the Property. In the event Grantor
fails to do so, Grantee may, but shall not be obligated to, cause the
Property or other affected property to be freed from any Hazardous
Substances or otherwise brought into conformance with Environmental Laws
and any and all costs and expenses incurred by Grantee in connection
therewith, together with interest thereon at the Default Interest Rate from
the date incurred by Grantee until actually paid by Grantor, shall be
immediately paid by Grantor on demand and shall be secured by this Security
Deed and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. Grantor hereby grants to Grantee and
its agents and employees access to the Property and a license to removeany
items deemed by Grantee to be Hazardous Substances and to do all things
Grantee shall deem necessary to bring the Property in conformance with
Environmental Laws. Grantor covenants and agrees, at Grantor's sole cost
and expense, to indemnify, defend (at trial and appellate levels, and with
attorneys, consultants and experts acceptable to Grantee), and hold Grantee
harmless from and against any and all liens, damages, losses, liabilities,
obligations, settlement payments, penalties, assessments, citations,
directives, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses of any kind or of any nature
whatsoever (including, without limitation, reasonable attorneys',
consultants' and experts' fees and disbursements actually incurred in
investigating, defending, settling or prosecuting any claim, litigation or
proceeding) which may at any time be imposed upon, incurred by or asserted
or awarded against Grantee or the Property, and arising directly or
indirectly from or out of: (i) the presence, release or threat of release
of any Hazardous Substances on, in, under or affecting all or any portion
of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Grantor; (ii) the violation of any
Environmental Laws relating to or affecting the Property, whether or not
caused by or within the control of Grantor; (iii) the failure by Grantor to
comply fully with the terms and conditions of this Section 1.31; (iv) the
breach of any representation or warranty contained in this Section 1.31; or
(v) the enforcement of this Section 1.31, including, without limitation,
the cost of assessment, containment and/or removal of any and all Hazardous
Substances from all or any portion of the Property or any surrounding
areas, the cost of any actions taken in response to the presence, release
or threat of release of any Hazardous Substances on, in, under or affecting
any portion of the Property or any surrounding areas to prevent or minimize
uch release or threat of release so that it does not migrate or otherwise
cause or threaten danger to present or future public health, safety,
welfare or the environment, and costs incurred to comply with the
Environmental Laws in connection with all or any portion of the Property or
any surrounding areas. The indemnity set forth in this Section 1.31(c)
shall also include any diminution in the value of the security afforded by
the Property or any future reduction in the sales price of the Property by
reason of any matter set forth in this Section 1.31(c). Grantee's rights
under this Section shall survive payment in full of the indebtedness
secured hereby and shall be in addition to all other rights of Grantee
under this Security Deed, the Note and the other Loan Documents.
(d) Upon Grantee's request, at any time after the occurrence of
an Event of Default hereunder or at such other time as Grantee has
reasonable grounds to believe that Hazardous Substances are or have been
released, stored or disposed of on or around the Property or that the
Property may be in violation of the Environmental Laws, Grantor shall
provide, at Grantor's sole cost and expense, an inspection or audit of the
Property prepared by a hydrogeologist or environmental engineer or other
appropriate consultant approved by Grantee indicating the presence or
absence of Hazardous Substances on the Property or an inspection or audit
of the Improvements prepared by an engineering or consulting firm approved
by Grantee indicating the presence or absence of friable asbestos or
substances containing asbestos on the Property. If Grantor fails to
provide such inspection or audit within thirty (30) days after such
request, Grantee may order the same, and Grantor hereby grants to Grantee
and its employees and agents access to the Property and a license to
undertake such inspection or audit. The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from the date
incurred by Grantee until actually paid by Grantor, shall be immediately
due and payable to Grantee by Grantor on demand and shall be secured hereby
and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.
(e) Reference is made to that certain Hazardous Substances
Indemnity Agreement of even date herewith by and among Grantor, Merry Land
Properties, Inc. and Grantee (the "Hazardous Indemnity Agreement"). The
provisions of this Security Deed and the Hazardous Indemnity Agreement
shall be read together to maximize the coverage with respect to the subject
matter thereof, as determined by Grantee.
(f) If, prior to the date hereof, it was determined that the
Property contains Lead Based Paint, Grantor had prepared an assessment
report describing the location and condition of the Lead Based Paint (a
"Lead Based Paint Report"). If, at any time hereafter, Lead Based Paint is
suspected of being present on the Property, Grantor agrees, at its sole
cost and expense and within twenty (20) days thereafter, to cause to be
prepared a Lead Based Paint Report prepared by an expert, and in form,
scope and substance, acceptable to Grantee.
(g) Grantor agrees that if it has been, or if at any time
hereafter it is, determined that the Property contains Lead Based Paint, on
or before thirty (30) days following (i) the date hereof, if such
determination was made prior to the date hereof or (ii) such determination,
if such determination is hereafter made, as applicable, Grantor shall, at
its sole cost and expenses, develop and implement, and thereafter
diligently and continuously carry out (or cause to be developed and
implemented and thereafter diligently and continually to be carried out),
an operations, abatement and maintenance plan for the Lead Based Paint on
the Property, which plan shall be prepared by an expert, and be in form,
scope and substance, acceptable to Grantee (together with any Lead Based
Paint Report, the "O&M Plan"). (If an O&M Plan has been prepared prior to
the date hereof, Grantor agrees to diligently and continually carry out (or
cause to be carried out) the provisions thereof). Compliance with the O&M
Plan shall require or be deemed to require, without limitation, the proper
preparation and maintenance of all records, papers and forms required under
the Environmental Laws.
1.32 INDEMNIFICATION; SUBROGATION.
(a) Grantor shall indemnify, defend and hold Grantee harmless
against: (i) any and all claims for brokerage, leasing, finders or similar
fees which may be made relating to the Property or the secured
indebtedness, and (ii) any and all liability, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses (including Grantee's
reasonable attorneys' fees, together with reasonable appellate counsel
fees, if any) of whatever kind or nature which may be asserted against,
imposed on or incurred by Grantee in connection with the secured
indebtedness, this Security Deed, the Property, or any part thereof, or the
exercise by Grantee of any rights or remedies granted to it under this
Security Deed; provided, however, that nothing herein shall be construed to
obligate Grantor to indemnify, defend and hold harmless Grantee from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, suits, costs and expenses enacted against, imposed on or
incurred by Grantee by reason of Grantee's willful misconduct or gross
negligence.
(b) If Grantee is made a party defendant to any litigation or any
claim is threatened or brought against Grantee concerning the secured
indebtedness, this Security Deed, the Property, or any part thereof, or any
interest therein, or the construction, maintenance, operation or occupancy
or use thereof, then Grantor shall indemnify, defend and hold Grantee
harmless from and against all liability by reason of said litigation or
claims, including reasonable attorneys' fees (together with reasonable
appellate counsel fees, if any) and expenses incurred by Grantee in any
such litigation or claim, whether or not any such litigation or claim is
prosecuted to judgment. If Grantee commences an action against Grantor to
enforce any of the terms hereof or to prosecute any breach by Grantor of
any of the terms hereof or to recover any sum secured hereby, Grantor shall
pay to Grantee its reasonable attorneys' fees (together with reasonable
appellate counsel fees, if any) and expenses. The right to such attorneys'
fees (together with reasonable appellate counsel fees, if any) and expenses
shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment.
If Grantor breaches any term of this Security Deed, Grantee may engage the
services of an attorney or attorneys to protect its rights hereunder, and
in the event of such engagement following any breach by Grantor, Grantor
shall pay Grantee reasonable attorneys' fees (together with reasonable
appellate counsel fees, if any) and expenses incurred by Grantee, whether
or not an action is actually commenced against Grantor by reason of such
breach. All references to "attorneys" in this Subsection and elsewhere in
this Security Deed shall include without limitation any attorney or law
firm engaged by Grantee and Grantee's in-house counsel, and all references
to "fees and expenses" in this Subsection and elsewhere in this Security
Deed shall include without limitation any reasonable fees of such attorney
o law firm and any allocation charges and allocation costs of Grantee's
in-house counsel.
(c) A waiver of subrogation shall be obtained by Grantor from its
insurance carrier and, consequently, Grantor waives any and all right to
claim or recover against Grantee, its officers, employees, agents and
representatives, for loss of or damage to Grantor, the Property, Grantor's
property or the property of others under Grantor's control from any cause
insured against or required to be insured against by the provisions of this
Security Deed.
1.33 NEGATIVE COVENANTS WITH RESPECT TO INDEBTEDNESS,
OPERATIONS AND FUNDAMENTAL CHANGES OF GRANTOR. Grantor hereby represents,
warrants and covenants, as of the date hereof and until such time
as the indebtedness secured hereby is paid in full, that Grantor:
(a) will not, nor will any partner, limited or general, member or
shareholder thereof, as applicable, amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of incorporation,
by-laws, operating agreement, articles of organization, or other formation
agreement or document, as applicable, in any manner which adversely affects
Grantor's existence as a single purpose entity;
(b) will not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation
or dissolution), or acquire by purchase or otherwise all or substantially
all the business or assets of, or any stock or other evidence of beneficial
ownership of, any entity;
(c) has not and will not guarantee, pledge its assets for the
benefit of, or otherwise become liable on or in connection with any
obligation of any other person or entity;
(d) does not own and will not own any asset other than (i) the
Property, and (ii) incidental personal property necessary for the operation
of the Property;
(e) is not engaged and will not engage, directly or indirectly,
in any business other than the ownership, management and operation of the
Property;
(f) will not enter into any contract or agreement with any
general partner, member, principal or Affiliate (as hereinafter defined) of
the Grantor or any Affiliate of the general partner, principal or member of
the Grantor except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an
arms-length basis with third parties other than an Affiliate;
(g) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation),
other than (i) the indebtedness secured hereby, and (ii) Affiliate advances
or trade payables or accrued expenses incurred in the ordinary course of
business of operating the Property not outstanding for more than sixty (60)
days with trade creditors and in amounts as are normal and reasonable under
the circumstances, but in no event to exceed five percent of the original
principal balance of the Note in the aggregate; no other debt may be
secured (senior, subordinate or pari passu) by the Property;
(h) has not made and will not make any loans or advances to any
third party (including any Affiliate);
(i) is and will be solvent and pay its debt from its assets as
the same shall become due;
(j) has done or caused to be done and will do all things
necessary to preserve its existence, and will not, nor will any member,
partner, limited or general, or shareholder thereof, amend, modify or
otherwise change its operating agreement, articles of incorporation,
partnership certificate, partnership agreement, articles of incorporation
or bylaws in a manner which adversely affects the Grantor's existence as a
single purpose entity;
(k) will conduct and operate its business as presently conducted
and operated;
(l) will maintain financial statements, books and records and
bank accounts separate from those of its Affiliates, including its general
partners and members, except that Grantor may be included in consolidated
financial statements of another person where required by generally accepted
accounting principals (GAAP), provided that such consolidated financial
statements contain a note indicating that the Grantor is a separate legal
entity and the Grantor's assets and liabilities are neither available to
pay the debt of the consolidated entity nor constitute obligations of the
consolidated entity and that the consolidated entity is not liable for any
of the liabilities of the Grantor except as otherwise provided in the Loan
Documents;
(m) will be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other entity (including
any Affiliate thereof, including any general partner or member, Affiliate
of the general partner or member of the Grantor);
(n) will file its own tax returns;
(o) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light
of its contemplated business operations;
(p) will not seek the dissolution or winding up, in whole or in
part, of the Grantor;
(q) will not commingle the funds and other assets of Grantor with
those of any general partner, member, any Affiliate or any other person;
(r) has and will maintain its assets in such a manner that it is
not costly or difficult to segregate, ascertain or identify its individual
assets from those of any Affiliate or any other person;
(s) does not and will not hold itself out to be responsible for
the debts or obligations of any other person;
(t) will not do any act which would make it impossible to carry
on the ordinary business of Grantor;
(u) will not possess or assign the Property or incidental
personal property necessary for the operation of the Property for other
than a business or company purpose;
(v) will not sell, encumber or otherwise dispose of all or
substantially all of the Property or incidental personal property necessary
for the operation of the Property;
(w) will not hold title to Grantor's assets other than in
Grantor's name; and
(x) will not institute proceedings to be adjudicated bankrupt or
insolvent; or consent to the institution of bankruptcy or insolvency
proceedings against it; or file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law relating
to bankruptcy; or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Grantor
or a substantial part of Grantor's property; or make any assignment for the
benefit of creditors; or admit in writing its inability to pay its debts
generally as they become due; or take any action in furtherance of any such
action.
1.34 COVENANTS REGARDING INDEPENDENT MANAGER. By execution
hereof, ML Apartments III, Inc., a Georgia corporation agrees that it:
(a) shall at all times act as the managing member (such entity
together with its successor or assignee are hereinafter the "Manager") of
Grantor with all of the rights, powers, obligations and liabilities of
managing member under the operating agreement of Grantor and shall take any
and all actions and do any and all things necessary or appropriate to the
accomplishment of same and will engage in no other business.
(b) shall not institute proceedings to be adjudicated bankrupt or
insolvent; or consent to the institution of bankruptcy or insolvency
proceedings against it; or file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law relating
to bankruptcy; or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Manager
or a substantial part of its property; or make any assignment for the
benefit of creditors; or admit in writing its inability to pay its debts
generally as they become due; or take any corporate action in furtherance
of any such action.
(c) shall not (a) liquidate or dissolve the Manager in whole or
in part and (b) consolidate, merge or enter into any form of consolidation
with or into any other entity, nor convey, transfer or lease its assets
substantially as an entirety to any person or entity nor permit any entity
to consolidate, merge or enter into any form of consolidation with or into
the Manager, nor convey, transfer or lease its assets substantially as an
entirety to any person or entity.
(d) shall either (i) maintain its principal executive office
separate from that of any Affiliate, or (ii) if sharing office space,
allocate fairly and reasonably any rent, overhead and other lease charges
for shared office space and shall use telephone and facsimile numbers
separate from that of any Affiliate and shall conspicuously identify such
numbers as its own and shall use its own stationary, invoices and checks
which reflect its address, telephone number and facsimile number, as
appropriate;
(e) shall maintain its corporate records and books and accounts
separate from those of any Affiliate or any other entity and shall prepare
unaudited quarterly and annual financial statements, and said financial
statements shall be in compliance with generally accepted accounting
principles and shall be in form reasonably acceptable to Grantee and its
successors and/or assigns, except that Manager may be included in
consolidated financial statements of another person where required by
generally accepted accounting principals (GAAP), provided that such
consolidated financial statements contain a note indicating that the
Manager is a separate legal entity and the Manager's assets and liabilities
are neither available to pay the debt of the consolidated entity nor
constitute obligations of the consolidated entity and that the consolidated
entity is not liable for any of the liabilities of the Manager except as
otherwise provided in the Loan Documents;
(f) shall maintain its own separate bank accounts and correct,
complete and separate books of account;
(g) shall hold itself out to the public (including any
Affiliate's creditors) under the Manager's own name and as a separate and
distinct corporate entity and not as a department, division or otherwise of
any Affiliate;
(h) shall observe all customary formalities regarding the
corporate existence of the Manager, including holding meetings of or
obtaining the consent of its board of directors, as appropriate, and its
stockholders and maintaining current accurate minute books separate from
those of any Affiliate;
(i) shall act solely in its own corporate name and through its
own duly authorized officers and agents and no Affiliate shall be appointed
or act as agent of the Manager in its capacity as Manager of Grantor;
(j) shall make investments in the name of the Manager directly by
the Manager or on its behalf by brokers engaged and paid by the Manager or
its agents;
(k) except as required by Grantee or any successor to Grantee in
connection with any extension of credit by Grantee or any successor to
Grantee to Grantor (or any refinancing, increase, modification,
consolidation or extension of any such extension of credit), shall not
guaranty or assume or hold itself out or permit itself to be held out as
having guaranteed or assumed any liabilities of any partner of Grantor or
any Affiliate other than Grantor, nor shall the Manager make any loan,
except as permitted in the applicable Operating Agreement of Grantor;
(l) represents and warrants that the Manager is and expects to
remain solvent and shall pay its own liabilities, indebtedness and
obligations of any kind, including all administrative expenses, from its
own separate assets;
(m) represents and warrants that assets of the Manager shall be
separately identified, maintained and segregated and the Manager's assets
shall at all times be held by or on behalf of the Manager and if held on
behalf of the Manager by another entity, shall at all times be kept
identifiable (in accordance with customary usages) as assets owned by the
Manager (this restriction requires, among other things, that corporate
funds shall not be commingled with those of any Affiliate and it shall
maintain all accounts in its own name and with its own tax identification
number, separate from those of any Affiliates);
(n) shall not intentionally take any action if, as a result of
such action, the Manager would be required to register as an investment
company under the Investment Company Act of 1940, as amended;
(o) shall at all times be adequately capitalized to engage in the
transactions contemplated at its formation;
(p) represents and warrants that all data and records (including
computer records) used by the Manager or any Affiliate in the collection
and administration of any loan shall reflect the Manager's ownership
interest therein; and
(q) represents and warrants that none of the Manager's funds
shall be invested in securities issued by any Affiliate.
(r) shall maintain at all times one (1) Independent Director.
"Independent Director" shall mean a person who is not, and has
not at any time during the preceding five years been (i) a member,
shareholder of, or an officer, director, attorney, counsel, partner or
employee of, Grantor or any of its shareholders, subsidiaries or
affiliates, (ii) a customer of, or supplier to, Grantor or any of its
shareholders, subsidiaries or affiliates, (iii) a person or other entity
controlling or under common control with any such shareholder, partner,
supplier or customer, or (iv) a member of the immediate family of any such
shareholder, officer, director, partner, employee, supplier or customer of
any other director of Grantor. As used herein, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether
through ownership of voting securities, by contract or otherwise.
"Affiliate" means any person or entity other than the Manager (i)
which owns beneficially, directly or indirectly, more than 50 percent of
the outstanding shares of Common Stock or which is otherwise in control of
the Manager, (ii) of which more than 50 percent of the outstanding voting
securities are owned beneficially, directly or indirectly, by any entity
described in clause (i) above, or (iii) which is controlled by an entity
described in clause (i) above; provided that for the purposes of this
definition the term "control" and "controlled by" shall have the meanings
assigned to them in Rule 405 under the Securities Act of 1933, as amended.
1.35 INTENTIONALLY OMITTED PRIOR TO EXECUTION.
ARTICLE II
EVENTS OF DEFAULT
2.1 EVENTS OF DEFAULT. The occurrence of any of the following
events (each, an "Event of Default") shall be an Event of Default
hereunder:
(a) Grantor fails to punctually perform any covenant, agreement,
obligation, term or condition under the Note, this Security Deed or any
other Loan Document which requires payment of any money to Grantee at the
time or within any applicable grace period set forth therein or herein, or
if no time or grace period is set forth, then within seven (7) days of the
date such payment is due or following demand if there is no due date.
(b) Grantor fails to provide insurance as required by SECTION 1.4
hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in SECTIONS 1.5, 1.15, 1.31 OR 1.33 hereof.
(c) Grantor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein other than those otherwise
described in this Section 2.1 and, to the extent such failure or default is
susceptible of being cured, the continuance of such failure or default for
thirty (30) days after written notice thereof from Grantee to Grantor;
provided, however, that if such default is susceptible of cure but such
cure cannot be accomplished with reasonable diligence within said period of
time, and if Grantor commences to cure such default promptly after receipt
of notice thereof from Grantee, and thereafter prosecutes the curing of
such default with reasonable diligence, such period of time shall be
extended for such period of time as may be necessary to cure such default
with reasonable diligence, but not to exceed an additional sixty (60) days.
(d) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the loan
evidenced by the Note, or in any of the other Loan Documents to Grantee by
Grantor, by any principal or general partner, manager or member in Grantor
or by any indemnitor or guarantor under any indemnity or guaranty executed
in connection with the loan secured hereby shall in its reasonable
discretion have been materially false or misleading in any material respect
at the time made.
(e) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a
security interest in or other transfer or further encumbrancing of the
Property, Grantor or its general partners or members, or any portion
thereof or any interest therein, in violation of Section 1.13 hereof.
(f) An Event of Default or default occurs under any of the other
Loan Documents which has not been cured within any applicable grace or cure
period therein provided.
(g) Grantor, any managing member or general partner in Grantor or
any indemnitor or guarantor under any indemnity or guaranty executed in
connection with the loan secured hereby becomes insolvent, or shall make a
transfer in fraud of creditors, or shall make an assignment for the benefit
of creditors, shall file a petition in bankruptcy, shall voluntarily be
adjudicated insolvent or bankrupt or shall admit in writing the inability
to pay debts as they mature, shall petition or apply to any tribunal for or
shall consent to or shall not contest the appointment of a receiver,
trustee, custodian or similar officer for Grantor, for any such managing
member or general partner of Grantor or for any such indemnitor or
guarantor or for a substantial part of the assets of Grantor, of any such
managing member or general partner of Grantor or of any such indemnitor or
guarantor, or shall commence any case, proceeding or other action under any
bankruptcy, reorganization, arrangement, readjustment or debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect.
(h) A petition is filed or any case, proceeding or other action
is commenced against Grantor, against any managing member or general
partner of Grantor or against any indemnitor or guarantor under any
indemnity or guaranty executed in connection with the loan secured hereby
seeking to have an order for relief entered against it as debtor or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts or other relief under any law relating to
bankruptcy, insolvency, arrangement, reorganization, receivership or other
debtor relief under any law or statute of any jurisdiction whether now or
hereafter in effect or a court of competent jurisdiction enters an order
for relief against Grantor, against any managing member or general partner
of Grantor or against any indemnitor or guarantor under any indemnity or
guaranty executed in connection with the loan secured hereby, as debtor, or
an order, judgment or decree is entered appointing, with or without the
consent of Grantor, of any such managing member or general partner of
Grantor or of any such indemnitor or guarantor, a receiver, trustee,
custodian or similar officer for Grantor, for any such managing member or
general partner of Grantor or for any such indemnitor or guarantor, or for
any substantial part of any of the properties of Grantor, of any such
principal, managing member or general partner of Grantor or of any such
indemnitor or guarantor, and if any such event shall occur, such petition,
case, proceeding, action, order, judgment or decree shall not be dismissed
within sixty (60) days after being commenced.
(i) The Property or any part thereof shall be taken on execution
or other process of law in any action against Grantor.
(j) Grantor abandons all or a portion of the Property.
(k) The holder of any lien or security interest on the Property
(without implying the consent of Grantee to the existence or creation of
any such lien or security interest), whether superior or subordinate to
this Security Deed or any of the other Loan Documents, declares a default
and such default is not cured within any applicable grace or cure period
set forth in the applicable document or such holder institutes foreclosure
or other proceedings for the enforcement of its remedies thereunder.
(l) The Property, or any part thereof, is subjected to actual or
threatened waste or to removal, demolition or material alteration so that
the value of the Property is materially diminished thereby and Grantee
determines (in its subjective determination) that it is not adequately
protected from any loss, damage or risk associated therewith.
(m) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of Grantor, any of its principals or
any general partner or any managing member.
(n) Managing Member fails to perform any covenant, agreement,
obligation, terms or condition of Section 1.34 hereof.
ARTICLE III
REMEDIES
3.1 REMEDIES AVAILABLE. If there shall occur an Event of Default
under this Security Deed, then this Security Deed is subject to foreclosure
as provided by law and Grantee may, at its option and by or through a
trustee, nominee, assignee or otherwise, to the fullest extent permitted by
law, exercise any or all of the following rights, remedies and recourses,
either successively or concurrently:
(a) ACCELERATION. Accelerate the maturity date of the Note and
declare any or all of the indebtedness secured hereby to be immediately due
and payable without any presentment, demand, protest, notice, or action of
any kind whatever (each of which is hereby expressly waived by Grantor),
whereupon the same shall become immediately due and payable. Upon any such
acceleration, payment of such accelerated amount shall constitute a
prepayment of the principal balance of the Note and any applicable
prepayment fee provided for in the Note shall then be immediately due and
payable.
(b) ENTRY ON THE PROPERTY. Either in person or by agent, with or
without bringing any action or proceeding, or by a receiver appointed by a
court and without regard to the adequacy of its security, enter upon and
take possession of the Property, or any part thereof, without force or with
such force as is permitted by law and without notice or process or with
such notice or process as is required by law unless such notice and process
is waivable, in which case Grantor hereby waives such notice and process,
and do any and all acts and perform any and all work which may be desirable
or necessary in Grantee's judgment to complete any unfinished construction
on the Real Estate, to preserve the value, marketability or rentability of
the Property, to increase the income therefrom, to manage and operate the
Property or to protect the security hereof and all sums expended by Grantee
therefor, together with interest thereon at the Default Interest Rate,
shall be immediately due and payable to Grantee by Grantor on demand and
shall be secured hereby and by all of the other Loan Documents securing all
or any part of the indebtedness evidenced by the Note.
(c) COLLECT RENTS AND PROFITS. With or without taking possession
of the Property, sue or otherwise collect the Rents and Profits, including
those past due and unpaid.
(d) APPOINTMENT OF RECEIVER. Upon, or at any time prior or
after, initiating the exercise of any power of sale, instituting any
judicial foreclosure or instituting any other foreclosure of the liens and
security interests provided for herein or any other legal proceedings
hereunder, make application to a court of competent jurisdiction for
appointment of a receiver for all or any part of the Property, as a matter
of strict right and without notice to Grantor and without regard to the
adequacy of the Property for the repayment of the indebtedness secured
hereby or the solvency of Grantor or any person or persons liable for the
payment of the indebtedness secured hereby, and Grantor does hereby
irrevocably consent to such appointment, waives any and all notices of and
defenses to such appointment and agrees not to oppose any application
therefor by Grantee, but nothing herein is to be construed to deprive
Grantee of any other right, remedy or privilege Grantee may now have under
the law to have a receiver appointed, provided, however, that, the
appointment of such receiver, trustee or other appointee by virtue of any
court order, statute or regulation shall not impair or in any manner
prejudice the rights of Grantee to receive payment of the Rents and Profits
pursuant to other terms and provisions hereof. Any such receiver shall
have all of the usual powers and duties of receivers in similar cases,
including, without limitation, the full power to hold, develop, rent,
lease, manage, maintain, operate and otherwise use or permit the use of the
Property upon such terms and conditions as said receiver may deem to be
prudent and reasonable under the circumstances as more fully set forth in
Section 3.3 below. Such receivership shall, at the option of Grantee,
continue until full payment of all of the indebtedness secured hereby or
until title to the Property shall have passed by foreclosure sale under
this Security Deed or deed in lieu of foreclosure.
(e) FORECLOSURE. Immediately commence an action to foreclose
this Security Deed or to specifically enforce its provisions or any of the
indebtedness secured hereby pursuant to the statutes in such case made and
provided and sell the Property or cause the Property to be sold in
accordance with the requirements and procedures provided by said statutes
in a single parcel or in several parcels at the option of Grantee.
(1) Should Grantee have elected to accelerate the
indebtedness secured hereby, Grantee may initiate
foreclosure of the Property by effectuating a non-judicial
foreclosure sale. Grantee shall then sell, or offer for
sale, the Property at public sale in accordance with the
laws of the State of Georgia then in force and governing
said sales of real property and improvements under powers
conferred by security deeds. Each such sale shall be at the
time, place and in the manner prescribed for holding
sheriff's sales of property of like kind, in the County
where the Property, or a part thereof, is located, after
advertising said sale once in each of the four consecutive
weeks (without regard to the number of days) immediately
preceding the sale in the newspaper in which are advertised
sales by the sheriff of said County, all other notice being
hereby waived by Grantor. Grantor hereby constitutes and
appoints Grantee the agent and attorney-in-fact of Grantor
to conduct such sale and to execute in the name of Grantor a
deed or deeds of conveyance to the purchaser or purchasers,
which deed or deeds shall contain full warranties of title
in the name of Grantor and shall recite default in payment,
advertisement and sale, which shall be conclusive evidence
thereof, and shall convey to the purchaser or purchasers
good and sufficient titles to the Property sold; and Grantee
is authorized to be a bidder and purchaser at all such
sales. Any Grantee purchasing at any such sale shall have
the right to credit the secured indebtedness owing to such
Grantee upon the amount of its bid entered at such sale to
the extent necessary to satisfy such bid. Grantor binds
himself to warrant and forever defend the title of such
purchaser or purchasers when so made by the Grantee, and
agrees to accept proceeds of said sale, if any, which are
payable to Grantor as provided herein. All acts of said
Grantee as attorney-in-fact are hereby ratified and
confirmed. The power of sale referred to above and agency
hereby granted are coupled with an interest and are
irrevocable by death or otherwise, are granted as cumulative
of the remedies provided hereby, and shall not be exhausted
by the exercise thereof, but may be exercised until full
payment of the indebtedness secured hereby.
(2) Should Grantee have not elected to accelerate the
indebtedness secured hereby, Grantee may nonetheless proceed
with foreclosure in satisfaction of such default, either
through the courts or by conducting a sale as hereinbefore
provided, but without declaring the entire indebtedness
secured by this Security Deed due, and provided that if said
sale is made because of such default, such sale may be made
subject to the unmatured part of the secured indebtedness.
Such sale, if so made, shall not in any manner affect the
unmatured part of the debt secured by this Security Deed,
but as to such unmatured part, this Security Deed shall
remain in full force as though no sale had been made.
Several sales may be made without exhausting the right of
sale with respect to any unmatured part of the secured
indebtedness, it being the purpose and intent hereof to
provide for a foreclosure and the sale of the Property for
any matured portion of said secured indebtedness without
exhausting the power of foreclosure.
(3) In the event foreclosure proceedings are instituted
by Grantee, all expenses incident to such proceedings,
including, but not limited to, attorneys' and trustee's fees
and costs, shall be paid by Grantor and secured by this
Security Deed and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by
the Note. The secured indebtedness and all other
obligations secured by this Security Deed, including,
without limitation, interest at the Default Interest Rate
(as defined in the Note), any prepayment charge, fee or
premium required to be paid under the Note in order to
prepay principal (to the extent permitted by applicable
law), attorneys' and trustee's fees and any other amounts
due and unpaid to Grantee under the Loan Documents, may be
bid by Grantee in the event of a foreclosure sale hereunder.
(f) OTHER. Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.
3.2 APPLICATION OF PROCEEDS. To the fullest extent permitted by
law, the proceeds of any sale under this Security Deed shall be applied to
the extent funds are so available to the following items in such order as
Grantee in its discretion may determine:
(a) To payment of the costs, expenses and fees of taking
possession of the Property, and of holding, operating, maintaining, using,
leasing, repairing, improving, marketing and selling the same and of
otherwise enforcing Grantee's right and remedies hereunder and under the
other Loan Documents, including, but not limited to, receivers' fees, court
costs, attorneys', accountants', appraisers', managers' and other
professional fees, title charges and transfer taxes.
(b) To payment of all sums expended by Grantee under the terms of
any of the Loan Documents and not yet repaid, together with interest on
such sums at the Default Interest Rate.
(c) To payment of the secured indebtedness and all other
obligations secured by this Security Deed, including, without limitation,
interest at the Default Interest Rate and, to the extent permitted by
applicable law, any prepayment fee, charge or premium required to be paid
under the Note in order to prepay principal, in any order that Grantee
chooses in its sole discretion.
The remainder, if any, of such funds shall be disbursed to
Grantor or to the person or persons legally entitled thereto.
3.3 RIGHT AND AUTHORITY OF RECEIVER OR GRANTEE IN THE EVENT OF
DEFAULT; POWER OF ATTORNEY. Upon the occurrence of an Event of Default
hereunder, which default is not cured within any applicable grace or cure
period, and entry upon the Property pursuant to Section 3.1(b) hereof or
appointment of a receiver pursuant to Section 3.1(d) hereof, and under such
terms and conditions as may be prudent and reasonable under the
circumstances in Grantee's or the receiver's sole discretion, all at
Grantor's expense, Grantee or said receiver, or such other persons or
entities as they shall hire, direct or engage, as the case may be, may do
or permit one or more of the following, successively or concurrently: (a)
enter upon and take possession and control of any and all of the Property;
(b) take and maintain possession of all documents, books, records, papers
and accounts relating to the Property; (c) exclude Grantor and its agents,
servants and employees wholly from the Property; (d) manage and operate the
Property; (e) preserve and maintain the Property; (f) make repairs and
alterations to the Property; (g) complete any construction or repair of the
Improvements, with such changes, additions or modifications of the plans
and specifications or intended disposition and use of the Improvements as
Grantee may in its sole discretion deem appropriate or desirable to place
the Property in such condition as will, in Grantee's sole discretion, make
it or any part thereof readily marketable or rentable; (h) conduct a
marketing or leasing program with respect to the Property, or employ a
marketing or leasing agent or agents to do so, directed to the leasing or
sale of the Property under such terms and conditions as Grantee may in its
sole discretion deem appropriate or desirable; (i) employ such contractors,
subcontractors, materialmen, architects, engineers, consultants, managers,
brokers, marketing agents, or other employees, agents, independent
contractors or professionals, as Grantee may in its sole discretion deem
appropriate or desirable to implement and effectuate the rights and powers
herein granted; (j) execute an deliver, in the name of Grantee as attorney-
in-fact and agent of Grantor or in its own name as Grantee, such documents
and instruments as are necessary or appropriate to consummate authorized
transactions; (k) enter into such leases, whether of real or personal
property, or tenancy agreements, under such terms and conditions as Grantee
may in its sole discretion deem appropriate or desirable; (l) collect and
receive the Rents and Profits from the Property; (m) eject Tenants or
repossess personal property, as provided by law, for breaches of the
conditions of their Leases; (n) sue for unpaid Rents and Profits, payments,
income or proceeds in the name of Grantor or Grantee; (o) maintain actions
in forcible entry and detainer, ejectment for possession and actions in
distress for rent; (p) compromise or give acquittance for Rents and
Profits, payments, income or proceeds that may become due; (q) delegate or
assign any and all rights and powers given to Grantee by this Security
Deed; and (r) do any acts which Grantee in its sole discretion deems
appropriate or desirable to protect the security hereof and use such
measures, legal or equitable, as Grantee may in its sole discretion deem
appropriate or desirable to implement and effectuate the provisions of this
Security Deed. This Security Deed shall constitute a direction to and full
authority to any lessee, or other third party who has heretofore dealt or
contracted or may hereafter deal or contract with Grantor or Grantee, at
the request of Grantee, to pay all amounts owing under any Lease, contract,
concession, license or other agreement to Grantee without proof of the
Event of Default relied upon. Any such lessee or third party is hereby
irrevocably authorized to rely upon and comply with (and shall be fully
protected by Grantor in so doing) any request, notice or demand by Grantee
for the payment to Grantee of any Rents and Profits or other sums which may
be or thereafter become due under its Lease, contract, concession, license
or other agreement, or for the performance of any undertakings under any
such Lese, contract, concession, license or other agreement, and shall have
no right or duty to inquire whether any Event of Default under this
Security Deed or under any of the other Loan Documents has actually
occurred or is then existing. Grantor hereby constitutes and appoints
Grantee, its assignees, successors, transferees and nominees, as Grantor's
true and lawful attorney-in-fact and agent, with full power of substitution
in the Property, in Grantor's name, place and stead, to do or permit any
one or more of the foregoing described rights, remedies, powers and
authorities, successively or concurrently, and said power of attorney shall
be deemed a power coupled with an interest and irrevocable so long as any
indebtedness secured hereby is outstanding. Any money advanced by Grantee
in connection with any action taken under this Section 3.3, together with
interest thereon at the Default Interest Rate from the date of making such
advancement by Grantee until actually paid by Grantor, shall be a demand
obligation owing by Grantor to Grantee and shall be secured by this
Security Deed and by every other instrument securing the secured
indebtedness.
3.4 OCCUPANCY AFTER FORECLOSURE. In the event there is a
foreclosure sale hereunder and at the time of such sale, Grantor or
Grantor's representatives, successors or assigns, or any other persons
claiming any interest in the Property by, through or under Grantor (except
residential tenants of space in the Improvements subject to Leases entered
into prior to the date hereof), are occupying or using the Property, or any
part thereof, then, to the extent not prohibited by applicable law, each
and all shall, at the option of Grantee or the purchaser at such sale, as
the case may be, immediately become the tenant of the purchaser at such
sale, which tenancy shall be a tenancy from day-to-day, terminable at the
will of either landlord or tenant, at a reasonable rental per day based
upon the value of the Property occupied or used, such rental to be due
daily to the purchaser. Further, to the extent permitted by applicable
law, in the event the tenant fails to surrender possession of the Property
upon the termination of such tenancy, the purchaser shall be entitled to
institute and maintain an action for unlawful detainer of the Property in
the appropriate court of the county in which the Real Estate is located.
3.5 NOTICE TO ACCOUNT DEBTORS. Grantee may, at any time after an
Event of Default notify the account debtors and obligors of any accounts,
chattel paper, negotiable instruments or other evidences of indebtedness,
to Grantor included in the Property to pay Grantee directly. Grantor shall
at any time or from time to time upon the request of Grantee provide to
Grantee a current list of all such account debtors and obligors and their
addresses.
3.6 CUMULATIVE REMEDIES. All remedies contained in this Security
Deed are cumulative and Grantee shall also have all other remedies provided
at law and in equity or in any other Loan Documents. Such remedies may be
pursued separately, successively or concurrently at the sole subjective
direction of Grantee and may be exercised in any order and as often as
occasion therefor shall arise. No act of Grantee shall be construed as an
election to proceed under any particular provisions of this Security Deed
to the exclusion of any other provision of this Security Deed or as an
election of remedies to the exclusion of any other remedy which may then or
thereafter be available to Grantee. No delay or failure by Grantee to
exercise any right or remedy under this Security Deed shall be construed to
be a waiver of that right or remedy or of any Event of Default hereunder.
Grantee may exercise any one or more of its rights and remedies at its
option without regard to the adequacy of its security.
3.7 PAYMENT OF EXPENSES. Grantor shall pay on demand all of
Grantee's expenses incurred in any efforts to enforce any terms of this
Security Deed, whether or not any lawsuit is filed and whether or not
foreclosure is commenced but not completed, including, but not limited to,
legal fees and disbursements, foreclosure costs and title charges, together
with interest thereon from and after the date incurred by Grantee until
actually paid by Grantor at the Default Interest Rate, and the same shall
be secured by this Security Deed and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note.
ARTICLE IV
MISCELLANEOUS TERMS AND CONDITIONS
4.1 TIME OF ESSENCE. Time is of the essence with respect to all
provisions of this Security Deed.
4.2 RELEASE OF SECURITY DEED. If all of the secured indebtedness
be paid, then and in that event only, all rights under this Security Deed
shall terminate except for those provisions hereof which by their terms
survive, and the Property shall become wholly clear of the liens, security
interests, conveyances and assignments evidenced hereby, which shall be
released by Grantee in due form at Grantor's cost. No release of this
Security Deed or the lien hereof shall be valid unless executed by Grantee.
4.3 CERTAIN RIGHTS OF GRANTEE. Without affecting Grantor's
liability for the payment of any of the indebtedness secured hereby,
Grantee may from time to time and without notice to Grantor: (a) release
any person liable for the payment of the indebtedness secured hereby; (b)
extend or modify the terms of payment of the indebtedness secured hereby;
(c) accept additional real or personal property of any kind as security or
alter, substitute or release any property securing the indebtedness secured
hereby; (d) recover any part of the Property; (e) consent in writing to the
making of any subdivision map or plat thereof; (f) join in granting any
easement therein; or (g) join in any extension agreement of the Security
Deed or any agreement subordinating the lien hereof.
4.4 WAIVER OF GRANTOR'S RIGHTS. BY EXECUTION OF THIS SECURITY
DEED AND BY INITIALING THIS PARAGRAPH 4.4, GRANTOR EXPRESSLY: (A)
ACKNOWLEDGES THE RIGHT OF GRANTEE TO ACCELERATE THE INDEBTEDNESS
EVIDENCED BY THE NOTE AND ANY OTHER INDEBTEDNESS SECURED BY THIS SECURITY
DEED AND THE POWER OF ATTORNEY GIVEN HEREIN TO GRANTEE TO SELL THE
PROPERTY BY NONJUDICIAL FORECLOSURE UPON AN EVENT OF DEFAULT BY GRANTOR
WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE
(IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF
THIS SECURITY DEED; (B) WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE
UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA (INCLUDING,
WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE
VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON
OF ANY OTHER APPLICABLE LAW, (1) TO NOTICE AND TO JUDICIAL HEARING PRIOR
TO THE EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO
GRANTEE, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN
UNDER THE PROVISIONS OF THIS SECURITY DEED AND (2) CONCERNING THE
APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION OR ANY
MORATORIUM, REINSTATEMENT, MARSHALLING, FORBEARANCE, APPRAISEMENT,
VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS; (C)
ACKNOWLEDGES THAT GRANTOR HAS READ THIS SECURITY DEED AND ANY AND ALL
QUESTIONS OF GRANTOR REGARDING THE LEGAL EFFECT OF THIS SECURITY DEED AND
ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR, AND GRANTOR HAS
CONSULTED WITH COUNSEL OF GRANTOR'S CHOICE PRIOR TO EXECUTING THIS SECURITY
DEED AND INITIALING THIS PARAGRAPH 4.4; AND (D) ACKNOWLEDGES THAT ALL
WAIVERS OF THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY,
INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART OF A BARGAINED FOR LOAN
TRANSACTION AND THAT THIS SECURITY DEED IS VALID AND ENFORCEABLE BY GRANTEE
AGAINST GRANTOR IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF.
INITIALED BY GRANTOR:
______________
4.5 NOTICES. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required
by law shall be in writing and shall be deemed to have been validly given
or served by delivery of the same in person to the intended addressee, or
by depositing the same with Federal Express or another reputable private
courier service for next business day delivery, or by depositing the same
in the United States mail, postage prepaid, registered or certified mail,
return receipt requested, in any event addressed to the intended addressee
at its address set forth on the first page of this Security Deed or at such
other address as may be designated by such party as herein provided. All
notices, demands and requests to be sent to Grantee shall be addressed to
the attention of the Capital Markets Group. All notices, demands and
requests shall be effective upon such personal delivery, or one (1)
business day after being deposited with the private courier service, or
three (3) business days after being deposited in the United States mail as
required above. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given as herein
required shall be deemed to be receipt of the notice, demand or request
sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their
respective addresses and each shall have the right to specify as its
address any other address within the United States of America.
4.6 SUCCESSORS AND ASSIGNS. The terms, provisions, indemnities,
covenants and conditions hereof shall be binding upon Grantor and the
successors and assigns of Grantor, including all successors in interest of
Grantor in and to all or any part of the Property, and shall inure to the
benefit of Grantee, its directors, officers, shareholders, employees and
agents and their respective successors and assigns and shall constitute
covenants running with the land. All references in this Security Deed to
Grantor or Grantee shall be deemed to include all such parties' successors
and assigns, and the term "Grantee" as used herein shall also mean and
refer to any lawful holder or owner, including pledgees and participants,
of any of the indebtedness secured hereby. If Grantor consists of more
than one person or entity, each will be jointly and severally liable to
perform the obligations of Grantor.
4.7 SEVERABILITY. A determination that any provision of this
Security Deed is unenforceable or invalid shall not affect the
enforceability or validity of any other provision, and any determination
that the application of any provision of this Security Deed to any person
or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
4.8 GENDER. Within this Security Deed, words of any gender shall
be held and construed to include any other gender, and words in the
singular shall be held and construed to include the plural, and vice versa,
unless the context otherwise requires.
4.9 WAIVER: DISCONTINUANCE OF PROCEEDINGS. Grantee may waive any
single Event of Default by Grantor hereunder without waiving any other
prior or subsequent Event of Default. Grantee may remedy any Event of
Default by Grantor hereunder without waiving the Event of Default remedied.
Neither the failure by Grantee to exercise, nor the delay by Grantee in
exercising, any right, power or remedy upon any Event of Default by Grantor
hereunder shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise by Grantee of any right, power or
remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder
may be exercised at any time and from time to time. No modification or
waiver of any provision hereof nor consent to any departure by Grantor
therefrom shall in any event be effective unless the same shall be in
writing and signed by Grantee, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose given.
No notice to nor demand on Grantor in any case shall of itself entitle
Grantor to any other or further notice or demand in similar or other
circumstances. Acceptance by Grantee of any payment in an amount less than
the amount then due on any of the secured indebtedness shall be deemed an
acceptance on account only and shall not in any way affect the existence of
an Event of Default hereunder. In case Grantee shall have proceeded to
invoke any right, remedy or recourse permitted hereunder or under the other
Loan Documents and shall thereafter elect to discontinue or abandon the
same for any reason, Grantee shall have the unqualified right to do so and,
in such an event, Grantor and Grantee shall be restored to their former
positions with respect to the indebtedness secured hereby, the Loan
Documents, the Property and otherwise, and the rights, remedies, recourses
and powers of Grantee shall continue as if the same ad never been invoked.
4.10 SECTION HEADINGS. The headings of the sections and
paragraphs of this Security Deed are for convenience of reference only, are
not to be considered a part hereof and shall not limit or otherwise affect
any of the terms hereof.
4.11 GOVERNING LAW. This Security Deed will be governed by and
construed in accordance with the laws of the State in which the Real Estate
is located provided that to the extent any of such laws may now or
hereafter be preempted by Federal law, in which case such Federal law shall
so govern and be controlling; and provided further that the laws of the
state in which the Real Estate is located shall govern as to the creation,
priority and enforcement of liens and security interests in property
located in such state.
4.12 COUNTING OF DAYS. The term "days" when used herein shall
mean calendar days. If any time period ends on a Saturday, Sunday or
holiday officially recognized by the state within which the Real Estate is
located, the period shall be deemed to end on the next succeeding business
day. The term "business day" when used herein shall mean a weekday, Monday
through Friday, except a legal holiday or a day on which banking
institutions in Georgia are authorized by law to be closed.
4.13 RELATIONSHIP OF THE PARTIES. The relationship between
Grantor and Grantee is that of a borrower and a lender only and neither of
those parties is, nor shall it hold itself out to be, the agent, employee,
joint venturer or partner of the other party.
4.14 APPLICATION OF THE PROCEEDS OF THE NOTE. To the extent that
proceeds of the Note are used to pay indebtedness secured by any
outstanding lien, security interest, charge or prior encumbrance against
the Property, such proceeds have been advanced by Grantee at Grantor's
request and Grantee shall be subrogated to any and all rights, security
interests and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, irrespective of whether said
liens, security interests, charges or encumbrances are released.
4.15 UNSECURED PORTION OF INDEBTEDNESS. If any part of the
secured indebtedness cannot be lawfully secured by this Security Deed or if
any part of the Property cannot be lawfully subject to the lien and
security interest hereof to the full extent of such indebtedness, then all
payments made shall be applied on said indebtedness first in discharge of
that portion thereof which is unsecured by this Security Deed.
4.16 CROSS DEFAULT. An Event of Default hereunder shall be a
default under each of the other Loan Documents.
4.17 INTEREST AFTER SALE. In the event the Property or any part
thereof shall be sold upon foreclosure as provided hereunder, to the extent
permitted by law, the sum for which the same shall have been sold shall,
for purposes of redemption (pursuant to the laws of the state in which the
Property is located), bear interest at the Default Interest Rate.
4.18 INCONSISTENCY WITH OTHER LOAN DOCUMENTS. In the event of
any inconsistency between the provisions hereof and the provisions in any
of the other Loan Documents, it is intended that the provisions selected by
Grantee in its sole subjective discretion shall be controlling.
4.19 CONSTRUCTION OF THIS DOCUMENT. This document may be
construed as a mortgage, security deed, deed of trust, chattel mortgage,
conveyance, assignment, security agreement, pledge, financing statement,
hypothecation or contract, or any one or more of the foregoing, in order to
fully effectuate the liens and security interests created hereby and the
purposes and agreements herein set forth.
4.20 NO MERGER. It is the desire and intention of the parties
hereto that this Security Deed and the lien hereof do not merge in fee
simple title to the Property. It is hereby understood and agreed that
should Grantee acquire any additional or other interests in or to the
Property or the ownership thereof, then, unless a contrary intent is
manifested by Grantee as evidenced by an appropriate document duly
recorded, this Security Deed and the lien hereof shall not merge in such
other or additional interests in or to the Property, toward the end that
this Security Deed may be foreclosed as if owned by a stranger to said
other or additional interests.
4.21 RIGHTS WITH RESPECT TO JUNIOR ENCUMBRANCES. Any person or
entity purporting to have or to take a junior mortgage or other lien upon
the Property or any interest therein shall be subject to the rights of
Grantee to amend, modify, increase, vary, alter or supplement this Security
Deed, the Note or any of the other Loan Documents and to extend the
maturity date of the indebtedness secured hereby and to increase the amount
of the indebtedness secured hereby and to waive or forebear the exercise of
any of its rights and remedies hereunder or under any of the other Loan
Documents and to release any collateral or security for the indebtedness
secured hereby, in each and every case without obtaining the consent of the
holder of such junior lien and without the lien or security interest of
this Security Deed losing its priority over the rights of any such junior
lien.
4.22 GRANTEE MAY FILE PROOFS OF CLAIM. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other proceedings affecting Grantor or the
principals or general partners in Grantor, or their respective creditors or
property, Grantee, to the extent permitted by law, shall be entitled to
file such proofs of claim and other documents as may be necessary or
advisable in order to have the claims of Grantee allowed in such
proceedings for the entire secured indebtedness at the date of the
institution of such proceedings and for any additional amount which may
become due and payable by Grantor hereunder after such date.
4.23 FIXTURE FILING. This Security Deed shall be effective from
the date of its recording as a financing statement filed as a fixture
filing with respect to all goods constituting part of the Property which
are or are to become fixtures.
4.24 AFTER-ACQUIRED PROPERTY. All property acquired by Grantor
after the date of this Security Deed which by the terms of this Security
Deed shall be subject to the lien and the security interest created hereby,
shall immediately upon the acquisition thereof by Grantor and without
further mortgage, conveyance or assignment become subject to the lien and
security interest created by this Security Deed. Nevertheless, Grantor
shall execute, acknowledge, deliver and record or file, as appropriate, all
and every such further mortgages, security agreements, financing
statements, assignments and assurances, as Grantee shall require for
accomplishing the purposes of this Security Deed.
4.25 NO REPRESENTATION. By accepting delivery of any item
required to be observed, performed or fulfilled or to be given to Grantee
pursuant to the Loan Documents, including, but not limited to, any
officer's certificates balance sheet, statement of profit and loss or other
financial statement, survey, appraisal or insurance policy, Grantee shall
not be deemed to have warranted, consented to, or affirmed the sufficiency,
legality, effectiveness or legal effect of the same, or of any term,
provision or condition thereof, and such acceptance of delivery thereof
shall not be or constitute any warranty, consent or affirmation with
respect thereto by Grantee.
4.26 COUNTERPARTS. This Security Deed may be executed in any
number of counterparts, each of which shall be effective only upon delivery
and thereafter shall be deemed an original, and all of which shall be taken
to be one and the same instrument, for the same effect as if all parties
hereto had signed the same signature page. Any signature page of this
Security Deed may be detached from any counterpart of this Security Deed
without impairing the legal effect of any signatures thereon and may be
attached to another counterpart of this Security Deed identical in form
hereto but having attached to it one or more additional signature pages.
4.27 PERSONAL LIABILITY. Notwithstanding anything to the
contrary contained in this Security Deed, the liability of Grantor and its
officer, directors, general partners, managers, members and principals for
the indebtedness secured hereby and for the performance of the other
agreements, covenants and obligations contained herein and in the other
Loan Documents shall be limited as set forth in Section 2.04 of the Note.
4.28 RECORDING AND FILING. Grantor will cause the Loan Documents
and all amendments and supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and re-filed in such manner and in such places
as Grantee shall reasonably request, and will pay on demand all such
recording, filing, re-recording and re-filing taxes, fees and other
charges. Grantor shall reimburse Grantee, or its servicing agent, for the
costs incurred in obtaining a tax service company to verify the status of
payment of taxes and assessments on the Property.
4.29 ENTIRE AGREEMENT AND MODIFICATION. This Security Deed and
the other Loan Documents contain the entire agreements between the parties
relating to the subject matter hereof and thereof and all prior agreements
relative hereto and thereto which are not contained herein or therein are
terminated. This Security Deed and the other Loan Documents may not be
amended, revised, waived, discharged, released or terminated orally but
only by a written instrument or instruments executed by the party against
which enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted. Any alleged amendment, revision, waiver,
discharge, release or termination which is not so documented shall not be
effective as to any party.
4.30 MAXIMUM INTEREST. The provisions of this Security Deed and
of all agreements between Grantor and Grantee, whether now existing or
hereafter arising and whether written or oral, are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of demand
or acceleration of the maturity of the Note or otherwise, shall the amount
paid, or agreed to be paid ("Interest"), to Grantee for the use,
forbearance or retention of the money loaned under the Note exceed the
maximum amount permissible under applicable law. If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between Grantor and Grantee shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for Interest
prescribed by law or otherwise transcend the limit of validity prescribed
by applicable law, then ipso facto the obligation to be performed or
fulfilled shall be reduced to such limit and if, from any circumstance
whatsoever, Grantee shall ever receive anything of value deemed Interest by
applicable law in excess of the maximum lawful amount, an amount equal to
any excessive Interest shall be applied to the reduction of the principal
balance owing under the Note in the inverse order of its maturity (whether
or not then due) or at the option of Grantee be paid over to Grantor, and
not to the payment of Interest. All Interest (including any amounts or
payments deemed to be Interest) paid or agreed to be paid to Grantee shall,
to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of
the principal balance of the Note so that the Interest thereon for such
full period will not exceed the maximum amount permitted by applicable law.
This paragraph will control all agreements between Grantor and Grantee.
4.31 INTEREST PAYABLE BY GRANTEE. Grantee shall cause funds in
the Replacement Reserve to be deposited into an interest bearing account of
the type customarily maintained by Grantee or its servicing agent for the
investment of similar reserves, which account may not yield the highest
interest rate then available. Interest payable on such amounts shall be
computed based on the daily outstanding balance in the Replacement Reserve.
Such interest shall be calculated on a simple, non-compounded interest
basis based solely on contributions made to the Replacement Reserve by
Grantor. All interest earned on amounts contributed to the Replacement
Reserve shall be retained by Grantee and added to the balance in the
Replacement Reserve and shall be disbursed for payment of the items for
which other funds in the Replacement Reserve are to be disbursed.
4.32 SECONDARY MARKET. Grantee may sell, transfer and deliver
the Loan Documents to one or more investors in the secondary mortgage
market. In connection with such sale, may retain or assign responsibility
for servicing the loan or may delegate some or all of such responsibility
and/or obligations to a servicer, including, but not limited to, any
subservicer or master servicer, on behalf of the investors. All references
to Grantee herein shall refer to and include, without limitation, any such
servicer, to the extent applicable.
4.33 ATTORNEYS' FEES. Notwithstanding anything to the contrary
contained in this Security Deed, in the event Grantor has an obligation to
pay attorneys' fees or legal fees under this Security Deed or any of the
other Loan Documents, such obligation shall be in an amount equal to
reasonable attorneys' fees actually incurred.
4.34 FURTHER STIPULATIONS. The additional covenants, agreements
and provisions set forth in EXHIBITS B AND C attached hereto and made a
part hereof, if any, shall be a part of this Security Deed and shall, in
the event of any conflict between such further stipulations and any of the
other provisions of this Security Deed, be deemed to control.
<PAGE>
IN WITNESS WHEREOF, Grantor has executed this Security Deed as of
the day and year first above written.
Signed, sealed and delivered ML HAMMOCKS AT LONG POINT, L.L.C., a
in the presence of Georgia limited liability company
By: ML Apartments III, Inc., a Georgia
_______________________________ corporation, its Member Manager
UNOFFICIAL WITNESS
/s/ Dorrie E. Green
By: _____________________
Name: Dorrie E. Green
Title: Vice President
_______________________________
NOTARY PUBLIC
My Commission Expires:
_______________________________
[SEAL]
Consented and Agreed to Signed, sealed and delivered
as to the provisions of in the presence of
Section 1.34
ML Apartments III, Inc.,
a Georgia corporation _________________________________
UNOFFICIAL WITNESS
/s/ Dorrie E. Green
By: ________________________
Name: Dorrie E. Green _________________________________
Title: Vice President NOTARY PUBLIC
My Commission Expires:
_________________________________
[SEAL]
<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
<PAGE>
EXHIBIT B
GRANTOR'S CERTIFICATE
The undersigned is the _____________ of ________, the general
partner of _________________ (the "Grantor") and has made due investigation
as to the matters hereinafter set forth and does hereby certify the
following to induce FIRST UNION NATIONAL BANK, (the "Grantee") to advance
the aggregate sum of $__________________ (the "Disbursement") [from the
Replacement Reserve or Repair and Remediation Reserve or Environmental
Reserve] to the Grantor pursuant to the terms of that certain Deed to
Secure Debt and Security Agreement, dated as of _____ __, 199_, between the
Grantee and the Grantor (together with any amendments, modifications,
supplements and replacements thereof or therefor, the "Security Deed"),
dated ____________, pursuant to that certain Disbursement request which is
being submitted to the Grantee. (Capitalized terms used and not otherwise
define shall have the respective meanings given to them in the Security
Deed.)
1. No default beyond any applicable notice and/or grace period
exists under the Security Deed or under any of the other Loan Documents.
2. The [Repairs, Deferred Maintenance or Environmental Work]
relative to the Disbursement have been delivered or provided to Grantor and
are properly, completely and permanently installed on or about the Property
or otherwise properly completed, as applicable.
3. All of the statements, invoices, receipts and information
delivered in connection with the Disbursement request being submitted to
the Grantee in connection herewith are true and correct as of the date
hereof, and the amount requested in said Disbursement request accurately
reflects the precise amounts due and payable during the period covered by
such Disbursement request. All of the funds to be received pursuant to
such Disbursement request shall be used solely for the purpose of
reimbursing the Grantor for items previously paid.
4. Nothing has occurred subsequent to the date of the Security
Deed which has or may result in the creation of any lien, charge or
encumbrance upon the Real Estate or the Improvements or any part thereof,
or anything affixed thereto or used in connection therewith, or which has
or may substantially and adversely impair the ability of the Grantor to
make any payments of principal and interest on the Note or the ability of
the Grantor to meet its obligations under the Security Deed.
5. None of the labor, materials, overhead or other items of
expense specified in the Disbursement request submitted herewith has
previously been the basis of any Disbursement request by the Grantor or any
payment by the Grantee and, when added to all sums previously disbursed by
Grantee on account of the [Deferred Maintenance, Repairs or Environmental
Work], do not exceed the costs of all [Deferred Maintenance, Repairs or
Environmental Work] services completed, installed and/or delivered, as
applicable, to the date of that certificate.
6. The amount remaining in the [Account] allocated to the payment
of items on the [Deferred Maintenance, Repairs or Environmental Work] will
be sufficient to pay in full the entire remaining cost of [Deferred
Maintenance, Repairs or Environmental Work] required to be completed in
accordance with the Security Deed.
7. All work required permits and approvals required to complete
the work which work is now in process or was previously completed have been
obtained.
8. All conditions to the Disbursement to be made in accordance
with the Disbursement request submitted herewith have been met in
accordance with the terms of the Security Deed.
By:__________________________
<PAGE>
EXHIBIT C
"PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than
par, including those issued by Beneficiary, Servicer, REMIC Trustee or any
of their respective affiliates:
(i) direct obligations of, or obligations fully guaranteed
as to payment of principal and interest by, (a) the United States or
any agency or instrumentality thereof provided such obligations are
backed by the full faith and credit of the United States of America,
or (b) FHLMC, FNMA, the Federal Farm Credit System or the Federal Home
Loan Banks provided such obligations at the time of purchase or
contractual commitment for purchase are qualified by the Rating
Agencies as a Permitted Investment hereunder as evidenced in writing;
(ii) fully FDIC-insured demand and time deposits in or
certificates of deposit of, or bankers' acceptances issued by, any
bank or trust company, savings and loan association or savings bank,
provided that the commercial paper and long-term unsecured debt
obligations of such depository institution or trust company have the
highest rating available for such securities by the Rating Agencies,
or such lower rating as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any
Rating Agency as evidenced in writing;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a depository
institution or trust company (acting as principal) described in clause
(ii) above;
(iv) general obligations of or obligations guaranteed by any
State of the United States or the District of Columbia receiving the
highest long-term unsecured debt rating available for such securities
by the Rating Agencies, or such lower rating as will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency as evidenced in writing;
(v) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the
United States of America or any State thereof or the District of
Columbia and is rated by the Rating Agencies in their highest long-
term unsecured rating categories at the time of such investment or
contractual commitment providing for such investment; PROVIDED,
HOWEVER, that securities issued by any such corporation will not be
Permitted Investments to the extent that investment therein will cause
the then outstanding principal amount of securities issued by such
corporation and held as part of the Central Account to exceed 20% of
the aggregate principal amount of all Permitted Investments held in
the Central Account;
(vi) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) that is rated by the Rating
Agencies in their highest short-term unsecured debt rating available
at the time of such investment or contractual commitment providing for
such investment, and is issued by a corporation the outstanding senior
long-term debt obligations of which are then rated by the Rating
Agencies in their highest rating available in their short-term and
long-term unsecured debt ratings, or such lower rating as will not
result in the downgrading or withdrawal of the rating then assigned to
the Certificates by any Rating Agency as evidenced in writing;
(vii) guaranteed reinvestment agreements acceptable to the
Rating Agencies issued by any bank, insurance company or other
corporation rated in the highest long-term unsecured rating levels
available to such issuers by the Rating Agencies throughout the
duration of such agreements, or such lower rating as will not result
in the downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency as evidenced in writing;
(viii) units of taxable money market funds, which funds are
regulated investment companies, seek to maintain a constant net asset
value per share and invest solely in obligations backed by the full
faith and credit of the United States, which funds have been
designated in writing by the Rating Agencies as Permitted Investments
with respect to this definition; and
(ix) if previously confirmed in writing to the REMIC
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, that may be acceptable to the
Rating Agencies as a permitted investment of funds backing securities
having ratings equivalent to their initial rating of the Certificates;
PROVIDED, HOWEVER, that no instrument or security shall be a Permitted
Investment if (y) such instrument or security evidences a right to receive
only interest payments or (z) the right to receive principal and interest
payments derived from the underlying investment provide a yield to maturity
in excess of 120% of the yield to maturity at par of such underlying
investment.
PROMISSORY NOTE
$18,787,000.00 August 23, 1999
FOR VALUE RECEIVED, the undersigned, ML HAMMOCKS AT LONG POINT,
L.L.C., a Georgia limited liability company ("Borrower"), whose address is
c/o Dorrie E. Green, 624 Ellis Street, Second Floor, Augusta, Georgia
30901, promises to pay to the order of FIRST UNION NATIONAL BANK, a
national banking association ("Lender"), at the office of Lender at One
First Union Center, DC6, 301 South College Street, Charlotte, North
Carolina 28288-0166, or at such other place as Lender may designate to
Borrower in writing from time to time, the principal sum of Eighteen
Million Seven Hundred Eighty-Seven Thousand and 00/100 DOLLARS
($18,787,000.00) together with interest on so much thereof as is from time
to time outstanding and unpaid, from the date of the advance of the
principal evidenced hereby, at the rate of seven and ninety-nine hundredths
(7.99%) percent per annum (the "Note Rate"), in lawful money of the United
States of America, which shall at the time of payment be legal tender in
payment of all debts and dues, public and private.
ARTICLE 1TERMS AND CONDITIONS
1.01 COMPUTATION OF INTEREST. Interest shall be computed hereunder
based on a 360-day year and paid for on the actual number of days elapsed
for any whole or partial month in which interest is being calculated.
Interest shall accrue from the date on which funds are advanced (regardless
of the time of day) through and including the day on which funds are
credited pursuant to Section 1.02 hereof.
1.02 PAYMENT OF PRINCIPAL AND INTEREST. Payments in federal funds
immediately available in the place designated for payment received by
Lender prior to 2:00 p.m. local time on a day on which Lender is open for
business at said place of payment shall be credited prior to close of
business, while other payments may, at the option of Lender, not be
credited until immediately available to Lender in federal funds at the
place designated for payment prior to 2:00 p.m. local time at said place of
payment on a day on which Lender is open for business. Such principal and
interest shall be payable in equal consecutive monthly installments of
$137,721.41 each, beginning on the first day of the second full calendar
month following the date of this Note (or on the first day of the first
full calendar month following the date hereof, in the event the advance of
the principal amount evidenced by this Note is the first day of a calendar
month)(the "First Payment Date"), and continuing on the first day of each
and every month thereafter (each, a "Payment Date") through and including
September 1, 2011 (the "Maturity Date"), at which time the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon, shall be due and payable in full.
1.03 APPLICATION OF PAYMENTS. So long as no Event of Default (as
hereinafter defined) exists hereunder or under any other Loan Document,
each such monthly installment shall be applied first, to any amounts
hereafter advanced by Lender hereunder or under any other Loan Document,
second, to any late fees and other amounts payable to Lender, third, to the
payment of accrued interest and last to reduction of principal.
1.04 PAYMENT OF SHORT INTEREST. If the advance of the principal
amount evidenced by this Note is made on a date other than the first day of
a calendar month, then Borrower shall pay to Lender contemporaneously with
the execution hereof interest at the Note Rate for a period from the date
hereof through and including the last day of this calendar month.
1.05 PREPAYMENT; DEFEASANCE
(a) This Note may not be prepaid, in whole or in part (except as
otherwise specifically provided herein), at any time. In the event that
Borrower wishes to have the Security Property (as hereinafter defined)
released from the lien of the Security Instrument (as hereinafter defined),
Borrower's sole option shall be a Defeasance (as hereinafter defined) upon
satisfaction of the terms and conditions set forth in Section 1.05(d)
hereof. This Note may be prepaid in whole but not in part without premium
or penalty on any Payment Date occurring within three (3) months prior to
the Maturity Date provided (i) written notice of such prepayment is
received by Lender not more than ninety (90) days and not less than thirty
(30) days prior to the date of such prepayment, and (ii) such prepayment is
accompanied by all interest accrued hereunder through and including the
date of such prepayment and all other sums due hereunder or under the other
Loan Documents. If, upon any such permitted prepayment on a Payment Date
occurring during the three (3) months prior to the Maturity Date, the
aforesaid prior written notice has not been timely received by Lender,
there shall be due a prepayment fee equal to, an amount equal to the lesser
of (i) thirty (30) days' interest computed at the Note Rate on the
outstanding principal balance of this Note so prepaid and (ii) interest
computed at the Note Rate on the outstanding principal balance of this Note
so prepaid that would have been payable for the period from, and
including, the date of prepayment through the Maturity Date of this Note as
though such prepayment had not occurred. Notwithstanding the foregoing, in
the event that Borrower makes a prepayment in accordance with this Section
on a date other than a Payment Date such prepayment must include all
interest through and including the following Payment Date.
Prepayments of this Note shall not be permitted, except for
partial or whole prepayments resulting from Lender's election to apply
insurance or condemnation proceeds to reduce the outstanding principal
balance of this Note as provided in the Security Instrument, in which event
no prepayment fee or premium shall be due unless, at the time of either
Lender's receipt of such proceeds or the application of such proceeds to
the outstanding principal balance of this Note, an Event of Default, or an
event which, with notice or the passage of time, or both, would constitute
an Event of Default, shall have occurred, which default or Event of Default
is unrelated to the applicable casualty or condemnation, in which event the
applicable prepayment fee or premium shall be due and payable based upon
the amount of the prepayment. No notice of prepayment shall be required
under the circumstances specified in the preceding sentence. No principal
amount repaid may be reborrowed. Any such partial prepayments of principal
shall be applied to the unpaid principal balance evidenced hereby but such
application shall not reduce the amount of the fixed monthly installments
required to be paid pursuant to Section 1.02 above except as otherwise
provided in the Security Instrument. Except as otherwise expressly
provided in this Section 1.05(b), the prepayment fees provided in the
immediate following paragraph shall be due, to the extent permitted by
applicable law, under any and all circumstances where all or any portion of
this Note is paid prior to the Maturity Date, whether such prepayment is
voluntary or involuntary, including, without limitation, if such prepayment
results from Lender's exercise of its rights upon Borrower's default and
acceleration of the Maturity Date of this Note (irrespective of whether
foreclosure proceedings have been commenced), and shall be in addition to
any other sums due hereunder or under any of the other Loan Documents. No
tender of a prepayment of this Note with respect to which a prepayment fee
is ue shall be effective unless such prepayment is accompanied by the
applicable prepayment fee.
If, prior to the fourth (4th) anniversary of the First Payment
Date (the "LOCKOUT EXPIRATION DATE"), the indebtedness evidenced by this
Note shall have been declared due and payable by Lender pursuant to Article
2 hereof or the provisions of any other Loan Document due to a default by
Borrower, then, in addition to the indebtedness evidenced by this Note
being immediately due and payable, there shall also then be immediately due
and payable a sum equal to the interest which would have accrued on the
principal balance of this Note at the Note Rate from the date of such
acceleration to the Lock-out Expiration Date, together with a prepayment
fee in an amount equal to the Yield Maintenance Premium (as hereinafter
defined) based on the entire indebtedness on the date of such acceleration.
If such acceleration is on or following the Lockout Expiration Date, the
Yield Maintenance Premium shall also then be immediately due and payable as
though Borrower were prepaying the entire indebtedness on the date of such
acceleration. In addition to the amounts described in the two preceding
sentences, in the event any such acceleration or tender of payment of such
indebtedness occurs or is made on or prior to the Lockout Expiration Date,
there shall also then be immediately due and payable an additional
prepayment fee of three percent (3%) of the principal balance of this Note.
The term "YIELD MAINTENANCE PREMIUM" shall mean an amount equal to the
greater of (A) two percent (2.0%) of the principal amount being prepaid,
and (B) the present value of a series of payments each equal to the Payment
Differential (as hereinafter defined) and payable on each Payment Date over
the remaining original term of this Note and on the Maturity Date,
discounted at the Reinvestment Yield (as hereinafter defined) for the
number of months remaining as of the date of such prepayment to each such
Payment Date and the Maturity Date. The term "PAYMENT DIFFERENTIAL" shall
mean an amount equal to (i) the Note Rate less the Reinvestment Yield,
divided by (ii) twelve (12) and multiplied by (iii) the principal sum
outstanding under this Note after application of the constant monthly
payment due under this Note on the date of such prepayment, provided that
the Payment Differential shall in no event be less than zero. The term
"REINVESTMENT YIELD" shall mean an amount equal to the lesser of (i) the
yield on the U.S. Treasury issue (primary issue) with a maturity date
closest to the Maturity Date, or (ii) the yield on the U.S. Treasury issue
(primary issue) with a term equal to the remaining average life of the
indebtedness evidenced by this Note, with each such yield being based on
the bid price for such issue as published in the WALL STREET JOURNAL on the
date that is fourteen (14) days prior to the date of such prepayment set
forth in the notice of prepayment (or, if such bid price is not published
on that date, the next preceding date on which such bid price is so
published) and converted to a monthly compounded nominal yield. In the
event that any prepayment fee is due hereunder, Lender shall deliver to
Borrower a statement setting forth the amount and determination of the
prepayment fee, and, provided that Lender shall have in good faith applied
the formula described above, Borrower shall not have the right to challenge
the calculation or the method of calculation set forth in any such
statement in the absence of manifest error, which calculation may be made
by Lender on any day during the fifteen (15) day period preceding the date
of such prepayment. Lender shall not be obligated or required to have
actually reinvested the prepaid principal balance at the Reinvestment Yield
or otherwise as a condition to receiving the prepayment fee.
(d) (i) At any time after the later of (x) the Lockout
Expiration Date, and (y) the date which is two (2) years after the "startup
day," within the meaning of Section 860G(a) (9) of the Internal Revenue
Code of 1986, as amended from time to time or any successor statue (the
"CODE"), of the "real estate mortgage investment conduit," within the
meaning of Section 860D of the Code, that holds this Note provided no Event
of Default has occurred hereunder or under any of the other Loan Documents,
Lender shall cause the release of the Security Property from the lien of
the Security Instrument and the other Loan Documents (a "DEFEASANCE") upon
the satisfaction of the following conditions:
(A) Borrower shall give not more than ninety (90) days or
less than sixty (60) days prior written notice to Lender
specifying the date Borrower intends for the Defeasance to be
consummated (the "RELEASE DATE"), which date shall be a Payment
Date.
(B) All accrued and unpaid interest and all other sums due
under this Note and under the other Loan Documents up to and
including the Release Date shall be paid in full on or prior to
the Release Date.
(C) Borrower shall deliver to Lender on or prior to the
Release Date:
(1) a sum of money in immediately available funds (the
"DEFEASANCE DEPOSIT") equal to the outstanding
principal balance of this Note plus an amount, if
any, which together with the outstanding principal
balance of this Note, shall be sufficient to
enable Lender to purchase, through means and
sources customarily employed and available to
Lender, for the account of Borrower, direct, non-
callable obligations of the United States of
America that provide for payments prior, but as
close as possible, to all successive monthly
Payment Dates occurring after the Release Date and
to the Maturity Date, with each such payment being
equal to or greater than the amount of the
corresponding installment of principal and/or
interest required to be paid under this Note
(including, but not limited to, all amounts due on
the Maturity Date) for the balance of the term
hereof ("the "DEFEASANCE COLLATERAL"), each of
which shall be duly endorsed by the holder thereof
as directed by Lender or accompanied by a written
instrument of transfer in form and substance
satisfactory to Lender in its reasonable
discretion (including, without limitation, such
instruments as may be required by the depository
institution holding such securities or the issuer
thereof, as the case may be, to effectuate book-
entry transfers and pledges through the book-entry
facilities of such institution) in order to
perfect upon the delivery of the Defeasance
Security Agreement (as hereinafter defined) the
first priority security interest in the Defeasance
Collateral in favor of Lender in conformity with
all applicable state and federal laws governing
granting of such security interests.
(2) A pledge and security agreement, in form and
substance satisfactory to Lender in its reasonable
discretion, creating a first priority security
interest in favor of Lender in the Defeasance
Collateral (the "DEFEASANCE SECURITY AGREEMENT"),
which shall provide, among other things, that any
excess received by Lender from the Defeasance
Collateral over the amounts payable by Borrower
hereunder shall be refunded to Borrower promptly
after each monthly Payment Date.
(3) A certificate of Borrower certifying that all of
the requirements set forth in this
subsection 1.05(d)(i) have been satisfied.
An opinion of counsel for Borrower in form and
substance and delivered by counsel satisfactory to
Lender (subject to customary assumptions and carve
outs) in its sole discretion stating, among other
things, that (x) Lender has a perfected first
priority security interest in the Defeasance
Collateral and that the Defeasance Security
Agreement is enforceable against Borrower in
accordance with its terms, (y) that any REMIC
Trust formed pursuant to a securitization will not
fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of
Section 860D of the Code as a result of such
defeasance.
Borrower shall deliver evidence in writing from the
applicable rating agencies to the effect that the
collateral substitution will not result in a
downgrading, withdrawal or qualification of the
respective ratings in effect immediately prior to
such defeasance event for any securities issued in
connection with the securitization which are then
outstanding.
A certificate from a firm of independent public
accountants acceptable to Lender certifying that
the Defeasance Collateral is sufficient to satisfy
the provisions of subparagraph (1) above.
Such other certificates, documents or instruments as
Lender may reasonably require.
Payment of all fees, costs, expenses and charges
incurred by Lender in connection with the
Defeasance of the Security Property and the
purchase of the Defeasance Collateral, including,
without limitation, reasonable legal fees and all
costs and expenses incurred by Lender or its
agents in connection with release of the Security
Property, review of the proposed Defeasance
Collateral and preparation of the Defeasance
Security Agreement and related documentation, any
revenue, documentary, stamp, intangible or other
taxes, charges or fees due in connection with
transfer of the Note, assumption of the Note, or
substitution of collateral for the Security
Property. Without limiting Borrower's obligations
with respect thereto, Lender shall be entitled to
deduct all such fees, costs, expenses and charges
from the Defeasance Deposit to the extent of any
excess of the Defeasance Deposit.
(D) In connection with the Defeasance Deposit, Borrower
hereby authorizes and directs Lender using the means and sources
customarily employed and available to Lender to use the
Defeasance Deposit to purchase for the account of Borrower the
Defeasance Collateral. Furthermore, the Defeasance Collateral
shall be arranged such that payments received from such
Defeasance Collateral shall be paid directly to Lender to be
applied on account of the indebtedness of this Note. Any part of
the Defeasance Deposit in excess of the amount necessary to
purchase the Defeasance Collateral and to pay the other and
related costs Borrower is obligated to pay under this Section
1.05 shall be refunded to Borrower.
(ii) Upon compliance with the requirements of subsection
1.05(d)(i), the Security Property shall be released from the lien of the
Security Instrument and the other Loan Documents, and the Defeasance
Collateral shall constitute collateral which shall secure this Note and all
other obligations under the Loan Documents. Lender will, at Borrower's
expense, execute and deliver any agreements reasonably requested by
Borrower to release the lien of the Security Instrument from the Security
Property.
(iii) Upon the release of the Security Property in accordance
with this Section 1.05(d), Borrower shall assign all its obligations and
rights under this Note, together with the pledged Defeasance Collateral, to
a newly created entity which complies with the terms of Section 1.33 of the
Security Instrument designated by Borrower and approved by Lender in its
reasonable discretion. Such successor entity shall execute an assumption
agreement in form and substance satisfactory to Lender in its reasonable
discretion pursuant to which it shall assume Borrower's obligations under
this Note and the Defeasance Security Agreement. As conditions to such
assignment and assumption, Borrower or the successor entity shall
(x) deliver to Lender an opinion of counsel in form and substance and
delivered by counsel satisfactory to Lender in its reasonable discretion
stating, among other things, that such assumption agreement is enforceable
against Borrower and such successor entity in accordance with its terms and
that this Note and the Defeasance Security Agreement as so assumed, are
enforceable against such successor entity in accordance with their
respective terms, and (y) pay all costs and expenses (including, but not
limited to, legal fees) incurred by Lender or its agents in connection with
such assignment and assumption (including, without limitation, the review
of the proposed transferee and the preparation of the assumption agreement
and related documentation). Upon such assumption, Borrower shall be
relieved of its obligations hereunder, under the other Loan Documents other
than the Hazardous Substances Indemnity Agreement (as hereinafter defined)
and under the Defeasance Security Agreement.
1.06 SECURITY. The indebtedness evidenced by this Note and the
obligations created hereby are secured by, among other things, that certain
Deed to Secure Debt and Security Agreement (the "Security Instrument") from
Borrower to Lender, dated as of the date hereof, concerning property
located in Chatham County, Georgia. The Security Instrument together with
this Note and all other documents to or of which Lender is a party or
beneficiary now or hereafter evidencing, securing, guarantying, modifying
or otherwise relating to the indebtedness evidenced hereby, are herein
referred to collectively as the "Loan Documents". All of the terms and
provisions of the Loan Documents are incorporated herein by reference.
ARTICLE 2 DEFAULT
2.01 EVENT OF DEFAULT. It is hereby expressly agreed that should any
default occur in the payment of principal or interest as stipulated above
and such payment is not made within seven (7) days of the date such payment
is due (except that no grace or notice period is provided for the payment
of principal and interest due on the Maturity Date), or should any other
"Event of Default" or any default not cured within any applicable grace or
notice period occur under any other Loan Document, then an event of default
(an "Event of Default") shall exist hereunder, and in such event the
indebtedness evidenced hereby, including all sums advanced or accrued
hereunder or under any other Loan Document, and all unpaid interest accrued
thereon, shall, at the option of Lender and without notice to Borrower, at
once become due and payable and may be collected forthwith, whether or not
there has been a prior demand for payment and regardless of the stipulated
date of maturity.
2.02 LATE CHARGES AND DEFAULT INTEREST RATE. In the event that any
payment is not received by Lender on the date when due (subject to the
applicable grace period), then in addition to any default interest payments
due hereunder, Borrower shall also pay to Lender a late charge in an amount
equal to five percent (5.0%) of the amount of such overdue payment. So
long as any Event of Default exists, regardless of whether or not there has
been an acceleration of the indebtedness evidenced hereby, and at all times
after maturity of the indebtedness evidenced hereby (whether by
acceleration or otherwise), interest shall accrue on the outstanding
principal balance of this Note from the date of default at a rate per annum
equal to the lesser of (a) four percent (4.0%) in excess of the Note Rate,
or (b) the maximum rate of interest, if any, which may be charged or
collected from Borrower under applicable law (the "Default Interest Rate"),
and such default interest shall be immediately due and payable. Borrower
acknowledges that it would be extremely difficult or impracticable to
determine Lender's actual damages resulting from any late payment or
default, and such late charges and default interest are reasonable
estimates of those damages and do not constitute a penalty.
2.03 CUMULATIVE REMEDIES. The remedies of Lender in this Note or in
the Loan Documents, or at law or in equity, shall be cumulative and
concurrent, and may be pursued singly, successively or together in Lender's
discretion. In the event this Note, or any part hereof, is collected by or
through an attorney-at-law, Borrower agrees to pay all costs of collection
including, but not limited to, reasonable attorneys' fees.
2.04 EXCULPATION. Notwithstanding anything in the Loan Documents to
the contrary, but subject to the qualifications hereinbelow set forth,
Lender agrees that:
a. Borrower shall be liable upon the
indebtedness evidenced hereby and for the other
obligations arising under the Loan Documents to the
full extent (but only to the extent) of the security
therefor, the same being all properties (whether real
or personal), rights, estates and interests now or at
any time hereafter securing the payment of this Note
and/or the other obligations of Borrower under the Loan
Documents (collectively, the "Security Property");
b. if an Event of Default occurs, any
judicial or other proceedings brought by Lender against
Borrower shall be limited to the preservation,
enforcement and foreclosure, or any thereof, of the
liens, security titles, estates, assignments, rights
and security interests now or at any time hereafter
securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, and
no attachment, execution or other writ of process shall
be sought, issued or levied upon any assets, properties
or funds of Borrower other than the Security Property,
except with respect to the liability described below in
this section; and
c. in the event of a foreclosure of such
liens, security titles, estates, assignments, rights or
security interests securing the payment of this Note
and/or the other obligations of Borrower under the Loan
Documents, no judgment for any deficiency upon the
indebtedness evidenced hereby shall be sought or
obtained by Lender against Borrower, except with
respect to the liability described below in this
section; provided, however, that, notwithstanding the
foregoing provisions of this section, Borrower shall be
fully and personally liable and subject to legal action
(i) for proceeds paid to Borrower under any insurance
policies (or paid to Borrower as a result of any other
claim or cause of action against any person or entity)
by reason of damage, loss or destruction to all or any
portion of the Security Property, to the full extent of
such proceeds not previously delivered by Borrower to
Lender, but which, under the terms of the Loan
Documents, should have been delivered by Borrower to
Lender, (ii) for proceeds or awards received by
Borrower resulting from the condemnation or other
taking in lieu of condemnation of all or any portion of
the Security Property, or any of them, to the full
extent of such proceeds or awards not previously
delivered by Borrower to Lender, but which, under the
terms of the Loan Documents, should have been delivered
to Lender by Borrower, (iii) for all tenant security
deposits or other refundable deposits paid to or held
by Borrower or on Borrower's behalf in connection with
leases of all or any portion of the Security Property
which are not applied by Borrower in accordance with
the terms of the applicable lease or other agreement,
(iv) for rent and other payments received by Borrower
from tenants under leases of all or any portion of the
Security Property paid more than one month in advance,
(v) for rents, issues, profits and revenues of all or
any portion of the Security Property received or
applicable to a period after the occurrence of any
Event of Default or any event which, with notice or the
passage of time, or both, would constitute an Event of
Default hereunder or under the Loan Documents which are
not either applied by Borrower or its managing agent to
the ordinary and necessary expenses of owning and
operating the Security Property or paid to Lender, (vi)
for waste committed on the Security Property by, or
damage to the Security Property as a result of the
intentional misconduct or gross negligence of, Borrower
or any of its principals, officers, general partners or
members, any guarantor, any indemnitor, or any managing
agent or any removal of the Security Property in
violation of the terms of the Loan Documents, to the
full extent of the losses or damages incurred by Lender
on account of such occurrence, (vii) for failure of
Borrower to pay any valid taxes, assessments,
mechanic's liens, materialmen's liens or other liens
which could create liens on any portion of the Security
Property which would be superior to the lien or
security title of the Security Instrument or the other
Loan Documents, to the full extent of the amount
claimed by any such lien claimant except, with respect
to any such taxes or assessments, to the extent that
funds have been deposited with Lender pursuant to the
terms of the Security Instrument specifically for the
applicable taxes or assessments and not applied by
Lender to pay such taxes and assessments, (viii) for
all obligations and indemnities of Borrower under the
Loan Documents relating to hazardous or toxic subsances
or radon or compliance with environmental laws and
regulations to the full extent of any losses or damages
(including, but not limited to, those resulting from
diminution in value of any Security Property) incurred
by Lender as a result of the existence of such
hazardous or toxic substances or failure to comply with
environmental laws or regulations, and (ix) for fraud
or material misrepresentation or failure of Borrower to
disclose a material fact by Borrower or any of its
principals, officers, general partners or members, any
guarantor, any indemnitor or any managing agent or
other person authorized to make statements,
representations or disclosures on behalf of Borrower,
any principal, officer, general partner or member of
Borrower, any guarantor or any indemnitor, to the full
extent of any losses, damages and expenses of Lender on
account thereof. Nothing contained in this section
shall (A) be deemed to be a release or impairment of
the indebtedness evidenced by this Note or the other
obligations of Borrower under the Loan Documents or the
lien of the Loan Documents upon the Security Property,
or (B) preclude Lender from foreclosing the Loan
Documents in case of any default or from enforcing any
of the other rights of Lender except as stated in this
section, or (C) release, relieve, reduce, waive, limit
or impair in any way whatsoever, any obligation of any
party to the Indemnity and Guaranty Agreement and
Hazardous Substances Indemnity Agreement each of even
date executed and delivered in connection with the
indebtedness evidenced by this Note.
Notwithstanding anything to the contrary in this Note, the
Security Instrument or any of the other Loan Documents, Lender shall not be
deemed to have waived any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file
a claim for the full amount of the indebtedness evidenced hereby or secured
by the Security Instrument or any of the other Loan Documents or to require
that all collateral shall continue to secure all of the indebtedness owing
to Lender in accordance with this Note, the Security Instrument and the
other Loan Documents.
ARTICLE 3 GENERAL CONDITIONS
3.01 No Waiver: Amendment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a partial or
past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of such right of acceleration
or of the right of Lender thereafter to insist upon strict compliance with
the terms of this Note, or (b) to prevent the exercise of such right of
acceleration or any other right granted hereunder or by any applicable
laws; and Borrower hereby expressly waives the benefit of any statute or
rule of law or equity now provided, or which may hereafter be provided,
which would produce a result contrary to or in conflict with the foregoing.
No extension of the time for the payment of this Note or any installment
due hereunder, made by agreement with any person now or hereafter liable
for the payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this Note, either
in whole or in part unless Lender agrees otherwise in writing. This Note
may not be changed orally, but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
3.02 WAIVERS. Presentment for payment, demand, protest and notice of
demand, intent to accelerate, acceleration, protest and nonpayment and all
other notices are hereby waived by Borrower. Borrower hereby further
waives and renounces, to the fullest extent permitted by law, all rights to
the benefits of any moratorium, reinstatement, marshalling, forbearance,
valuation, stay, extension, redemption, appraisement, exemption and
homestead now or hereafter provided by the Constitution and laws of the
United States of America and of each state thereof, both as to itself and
in and to all of its property, real and personal, against the enforcement
and collection of the obligations evidenced by this Note or the other Loan
Documents.
3.03 LIMIT OF VALIDITY. The provisions of this Note and of all
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that
in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of this Note or otherwise, shall the amount
paid, or agreed to be paid ("Interest"), to Lender for the use, forbearance
or detention of the money loaned under this Note exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
performance or fulfillment of any provision hereof or of any agreement
between Borrower and Lender shall, at the time performance or fulfillment
of such provision shall be due, exceed the limit for Interest prescribed by
law or otherwise transcend the limit of validity prescribed by applicable
law, then ipso facto the obligation to be performed or fulfilled shall be
reduced to such limit and if, from any circumstance whatsoever, Lender
shall ever receive anything of value deemed Interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive
Interest shall be applied to the reduction of the principal balance owing
under this Note in the inverse order of its maturity (whether or not then
due) or at the option of Lender be paid over to Borrower, and not to the
payment of Interest. All Interest (including, but not limited to, any
amounts or payments deemed to be Interest) paid or agreed to be paid to
Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in
full of the principal balance of this Note so that the Interest thereof for
such full period will not exceed the maximum amount permitted by applicable
law. This Section 3.03 will control all agreements between Borrower and
Lender.
3.04 USE OF FUNDS. Borrower hereby warrants, represents and covenants
that no funds disbursed hereunder shall be used for personal, family or
household purposes.
3.05 UNCONDITIONAL PAYMENT. Borrower is and shall be obligated to pay
principal, interest and any and all other amounts which become payable
hereunder or under the other Loan Documents absolutely and unconditionally
and without any abatement, postponement, diminution or deduction and
without any reduction for counterclaim or setoff. In the event that at any
time any payment received by Lender hereunder shall be deemed by a court of
competent jurisdiction to have been a voidable preference or fraudulent
conveyance under any bankruptcy, insolvency or other debtor relief law,
then the obligation to make such payment shall survive any cancellation or
satisfaction of this Note or return thereof to Borrower and shall not be
discharged or satisfied with any prior payment thereof or cancellation of
this Note, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof, and such payment shall be
immediately due and payable upon demand.
3.06 SECONDARY MARKET. Lender may sell, transfer and deliver the Loan
Documents to one or more investors in the secondary mortgage market. In
connection with such sale, Lender may retain or assign responsibility for
servicing the loan evidenced by this Note or may delegate some or all of
such responsibility and/or obligations to a servicer, including, but not
limited to, any subservicer or master servicer, on behalf of the investors.
All references to Lender herein shall refer to and include, without
limitation, any such servicer, to the extent applicable.
3.07 MISCELLANEOUS. (a) This Note shall be interpreted, construed and
enforced according to the laws of the State of Georgia. The terms and
provisions hereof shall be binding upon and inure to the benefit of
Borrower and Lender and their respective heirs, executors, legal
representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. As used herein,
the terms "Borrower" and "Lender" shall be deemed to include their
respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties
or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the
obligations of Borrower under this Note. All personal pronouns used
herein, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural and vice
versa. Titles of articles and sections are for convenience only and in no
way define, limit, amplify or describe the scope or intent of any
provisions hereof. Time is of the essence with respect to all provisions
of this Note. This Note and the other Loan Documents contain the entire
agreements between the parties hereto relating to the subject matter hereof
and thereof and all prior agreements relative hereto and thereto which are
not contained herein or therein are terminated.
(b) Notwithstanding anything to the contrary contained in
this Note, in the event Borrower has an obligation to pay attorneys' fees
or legal fees under this Note or any of the other Loan Documents, such
obligation shall be in an amount equal to reasonable attorneys' fees and
expenses actually incurred.
Borrower's Tax Identification No.: __________________
FUNB Loan No.: 26-5330594
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as
of the date first above written.
Signed, sealed and delivered ML HAMMOCKS AT LONG POINT, L.L.C.,
in the presence of a Georgia limited liability company
By: ML Apartments III, Inc., a Georgia
_______________________________ corporation, its Member Manager
UNOFFICIAL WITNESS
/s/ Dorrie E. Green
By: _____________________
Name: Dorrie E. Green
_______________________________ Title: Vice President
NOTARY PUBLIC
My Commission Expires:
_______________________________
[SEAL]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) _______
__________________
FIRST UNION NATIONAL BANK
(Exact name of trustee as specified in its charter)
58-1079889
(I.R.S. employer identification no.)
TWO FIRST UNION CENTER, CHARLOTTE, 28288
NORTH CAROLINA (Zip Code)
(Address of principal executive
offices)
___________________
TERESA L. DAVIS
FIRST UNION NATIONAL BANK
1100 FIRST UNION PLAZA
999 PEACHTREE STREET N.E.
ATLANTA, GEORGIA 30309
(404) 827-7346
(Name, Address and Telephone Number of Agent for Service)
___________________
MERRY LAND PROPERTIES, INC.
(Exact name of obligor as specified in its charter)
GEORGIA XX-XXXXXXX
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
624 ELLIS STREET, AUGUSTA, GEORGIA 30901
(Address of principal executive (Zip code)
offices)
____________________
9.0% CONVERTIBLE SUBORDINATED DEBENTURES DUE _______, 1999
GUARANTEE OF 9.0% CONVERTIBLE TRUST PREFERRED SECURITIES OF MERRY
LAND
CAPITAL TRUST
(Title of the indenture securities)
REGISTRATION NO. 333-
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee--
(a) Name and address of each examining or supervising authority to
which it is subject.
COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C.
FEDERAL RESERVE BANK OF ATLANTA
104 MARIETTA STREET, N.W.
ATLANTA, GEORGIA
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
SECURITIES AND EXCHANGE COMMISSION
DIVISION OF MARKET REGULATION
WASHINGTON, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
YES.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
NONE. (SEE NOTE ON PAGE 4.)
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of
eligibility. Note: Exhibits identified in parentheses are filed with
the Commission and are incorporated herein by reference as exhibits
hereto pursuant to Rule 7a-29 under the Trust Indenture Act of 1939,
as amended, and Rule 24 of the Commission's Rules of Practice.
(1) A copy of the articles of association of the trustee as now in
effect. (See Exhibit 1 of the Form T-1 filed in connection with
Registration Statement No. 333-31863, which is incorporated herein by
reference)
(2) A copy of the certificate of authority of the trustee to commence.
(See Exhibit 2 of the Form T-1 filed in connection with Registration
Statement No. 333-31863, which is incorporated herein by reference)
(3) A copy of the authorization of the trustee to exercise corporate
trust powers. (Incorporated in Exhibit 4)
(4) A copy of the existing By-laws of the trustee. (See Exhibit 4 of
the Form T-1 filed in connection with Registration Statement No.333-
31863, which is incorporated herein by reference)
(5) Not applicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included on Page 6 of this Form T-1 Statement.
(7) A copy of the latest report of condition of the trustee published
pursuant to law or the requirement of its supervising or examining
authority.
(8) Not applicable.
(9) Not applicable.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility and qualification to
be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Atlanta, and State of Georgia on the 21st day of
October, 1999.
FIRST UNION NATIONAL BANK
(Trustee)
By: /s/ TERESA L. DAVIS
---------------------
Teresa L. Davis
Vice President
<PAGE>
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939 and in
connection with the proposed issuance of obligations of Merry Land
Properties, Inc., First Union National Bank, as the Trustee herein named,
hereby consents that reports of examinations of said Trustee by Federal,
State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests
therefor.
FIRST UNION NATIONAL BANK
By: /s/ TERESA L. DAVIS
---------------------
Teresa L. Davis
Vice President
Dated: October 21, 1999
-----------------
<PAGE>
EXHIBIT 7 TO FORM T-1
REPORT OF CONDITION OF TRUSTEE
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) _______
__________________
FIRST UNION NATIONAL BANK
(Exact name of trustee as specified in its charter)
58-1079889
(I.R.S. employer identification no.)
TWO FIRST UNION CENTER, CHARLOTTE, 28288
NORTH CAROLINA (Zip Code)
(Address of principal executive
offices)
___________________
TERESA L. DAVIS
FIRST UNION NATIONAL BANK
1100 FIRST UNION PLAZA
999 PEACHTREE STREET N.E.
ATLANTA, GEORGIA 30309
(404) 827-7346
(Name, Address and Telephone Number of Agent for Service)
___________________
MERRY LAND CAPITAL TRUST
(Exact name of obligor as specified in its charter)
DELAWARE XX-XXXXXXX
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
624 ELLIS STREET, AUGUSTA, GEORGIA 30901
(Address of principal executive (Zip code)
offices)
____________________
9.0% CONVERTIBLE TRUST PREFERRED SECURITIES
(Title of the indenture securities)
REGISTRATION NO. 333-
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee--
(a) Name and address of each examining or supervising authority to
which it is subject.
COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C.
FEDERAL RESERVE BANK OF ATLANTA
104 MARIETTA STREET, N.W.
ATLANTA, GEORGIA
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
SECURITIES AND EXCHANGE COMMISSION
DIVISION OF MARKET REGULATION
WASHINGTON, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
YES.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
NONE. (SEE NOTE ON PAGE 4.)
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of
eligibility. Note: Exhibits identified in parentheses are filed with
the Commission and are incorporated herein by reference as exhibits
hereto pursuant to Rule 7a-29 under the Trust Indenture Act of 1939,
as amended, and Rule 24 of the Commission's Rules of Practice.
(1) A copy of the articles of association of the trustee as now in
effect. (See Exhibit 1 of the Form T-1 filed in connection with
Registration Statement No. 333-31863, which is incorporated herein by
reference)
(2) A copy of the certificate of authority of the trustee to commence.
(See Exhibit 2 of the Form T-1 filed in connection with Registration
Statement No. 333-31863, which is incorporated herein by reference)
(3) A copy of the authorization of the trustee to exercise corporate
trust powers. (Incorporated in Exhibit 4)
(4) A copy of the existing By-laws of the trustee. (See Exhibit 4 of
the Form T-1 filed in connection with Registration Statement No.333-
31863, which is incorporated herein by reference)
(5) Not applicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included on Page 6 of this Form T-1 Statement.
(7) A copy of the latest report of condition of the trustee published
pursuant to law or the requirement of its supervising or examining
authority.
(8) Not applicable.
(9) Not applicable.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility and qualification to
be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Atlanta, and State of Georgia on the 21st day of
October, 1999.
FIRST UNION NATIONAL BANK
(Trustee)
By: /s/ TERESA L. DAVIS
---------------------
Teresa L. Davis
Vice President
<PAGE>
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939 and in
connection with the proposed issuance of obligations of Merry Land Capital
Trust, First Union National Bank, as the Trustee herein named, hereby
consents that reports of examinations of said Trustee by Federal, State,
Territorial or District authorities may be furnished by such authorities to
the Securities and Exchange Commission upon requests therefor.
FIRST UNION NATIONAL BANK
By: /s/ TERESA L. DAVIS
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Teresa L. Davis
Vice President
Dated: October 21, 1999
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<PAGE>
EXHIBIT 7 TO FORM T-1
REPORT OF CONDITION OF TRUSTEE
