<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-57453
Subject To Completion
PRELIMINARY PROSPECTUS SUPPLEMENT Dated February 14, 1995
(To Prospectus Dated February 10, 1995)
4,000,000 SHARES
MERRYLAND
& INVESTMENT COMPANY, INC.
$ SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK
LIQUIDATION PREFERENCE $25.00 PER SHARE
------------------
Dividends on the shares of Series C Cumulative Convertible Preferred Stock
(the "Series C Preferred Stock") will be cumulative from April 1, 1995 and will
be payable quarterly in arrears on the last day of March, June, September and
December of each year in an amount per share equal to the greater of $
per annum or the cash dividends (determined on each of the quarterly dividend
payment dates referred to above) on the number of shares of common stock, no par
value (the "Common Stock"), or portion thereof, into which a share of Series C
Preferred Stock is convertible. The first record date for determination of
shareholders entitled to receive dividends on the Series C Preferred Stock is
expected to be June 15, 1995. See "Description of Series C Preferred
Stock -- Dividends."
Shares of Series C Preferred Stock are convertible at any time at the option
of the holders thereof into shares of Common Stock of the Company at a
conversion price of $ per share of Common Stock (equivalent to a
conversion rate of shares of Common Stock for each share of Series C
Preferred Stock), subject to adjustment in certain circumstances. See
"Description of Series C Preferred Stock -- Conversion Rights." On February 13,
1995, the last reported sale price of the Common Stock on the New York Stock
Exchange (the "NYSE") was $20.63 per share. See "Market Prices of Stock and
Dividends to Shareholders."
The Series C Preferred Stock is not redeemable prior to March 31, 2000 and
at no time will the Series C Preferred Stock be redeemable for cash. On and
after March 31, 2000, the Series C Preferred Stock will be redeemable, in whole
or in part, at the option of the Company, for such number of shares of Common
Stock as are issuable at a conversion rate of shares of Common Stock for
each share of Series C Preferred Stock, subject to adjustment in certain
circumstances. The Company may exercise this option only if for 20 trading days
within any period of 30 consecutive trading days, including the last trading day
of such period, the closing price of the Common Stock on the NYSE equals or
exceeds the conversion price per share, subject to adjustment in certain
circumstances. The Series C Preferred Stock will not be entitled to the benefit
of any sinking fund. See "Description of Series C Preferred
Stock -- Redemption."
The Company expects the shares of Series C Preferred Stock to be approved
for listing on the NYSE under the symbol "MRYPrC."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
PRICE PROCEEDS
TO UNDERWRITING DISCOUNTS TO
PUBLIC AND COMMISSIONS COMPANY(1)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $25.00 $ $
- ------------------------------------------------------------------------------------------------------------------------
Total(2)..................................... $100,000,000.00 $ $
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses of the offering estimated at $250,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Series C Preferred Stock solely to cover
over-allotments, if any. To the extent the option is exercised, the
Underwriters will offer the additional shares of Series C Preferred Stock at
the Price to Public shown above. If the option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to the Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The shares of Series C Preferred Stock are offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by them, and subject to the right of the Underwriters to reject any order in
whole or in part. It is expected that delivery of the shares of Series C
Preferred Stock will be made at the offices of Alex. Brown & Sons Incorporated,
Baltimore, Maryland, on or about March , 1995.
ALEX. BROWN & SONS
INCORPORATED
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
INTERSTATE/JOHNSON LANE
CORPORATION
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH , 1995.
<PAGE> 2
[MAP]
[Map of the Southeast]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF THE
COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus Supplement and the accompanying Prospectus or
incorporated herein or therein by reference. Unless otherwise indicated, the
information in this Prospectus Supplement does not give effect to the
Underwriters' over-allotment option.
THE COMPANY
Merry Land & Investment Company, Inc. ("Merry Land" or the "Company") is
one of the largest owners and operators of upscale garden apartments in the
United States. At December 31, 1994, the Company owned a high quality portfolio
of 71 apartment communities located primarily in the Southern United States,
containing 18,851 units and having an aggregate cost of $796.4 million. At that
date, the communities had an average occupancy of 96% and an average monthly
rental rate of $591 per unit. Merry Land is a self-administered and self-managed
real estate investment trust ("REIT") headquartered in Augusta, Georgia.
Merry Land's objective is to increase funds from operations and
distributions to shareholders using a two-part strategy:
Increase cash flows at its existing apartment communities through
effective management. The Company believes that it possesses a capable
property management organization which has developed operating systems,
financial controls and management procedures which help it to maintain high
occupancy levels, increase rental rates, retain residents and control costs
at its communities. The Company also believes that continued household
growth in its market areas, combined with low levels of apartment
construction, has produced a stronger rental market characterized by high
occupancy and rising rental rates. For those 6,527 units which the Company
owned for all of both 1994 and 1993, average occupancy rose 3%, rental
revenues increased 8% and operating income increased 23%;
Purchase and develop additional apartment properties. In recent
years, Merry Land has conducted an active program of apartment acquisition.
The Company buys properties which it expects will produce attractive
initial rates of return and which have the potential for cash flow growth.
The Company believes that its access to capital, its operating experience
and its ability to quickly negotiate and close purchases give it a
competitive advantage in making new acquisitions at favorable prices. The
Company intends to continue to focus on the acquisition of apartments and
also intends to develop communities in selected locations throughout the
Southern region of the United States, including Texas. Reflecting the
substantial growth of its portfolio, apartment revenues grew 86% from 1993
to 1994, while operating income grew 93%. In 1994, the 25 communities which
the Company acquired in 1993 produced an aggregate return of 9.7% on cost.
Return on cost is defined by the Company as rental income, less operating
expenses, taxes and insurance, divided by average gross investment for the
period.
The Company has increased its quarterly dividend per share of Common Stock
from $0.15 for the first quarter of 1992 to $0.35 for the last quarter of 1994.
On January 16, 1995 the Board of Directors declared a dividend of $0.35 per
share of Common Stock to be paid on March 31, 1995. The current annual dividend
rate is $1.40 per common share. The $0.35 quarterly dividend represents a payout
of 77% of funds from operations available for common shares for the quarter
ended December 31, 1994, a payout ratio which the Company believes is
conservative relative to its REIT peers.
As of December 31, 1994, Peter S. Knox III, Chairman of the Board of Merry
Land, beneficially owned 2,686,000 or 8.7% of the Company's Common Stock. At
that date all directors and executive officers as a group, including Mr. Knox,
beneficially owned 3,396,000 or 11.0% of the outstanding shares of Common Stock.
S-3
<PAGE> 4
THE OFFERING
Securities Offered.........
4,000,000 shares of Series C Preferred Stock.
Dividends..................
Cumulative commencing April 1, 1995 in an amount per
share equal to the greater of $ per annum or the
cash dividends (determined on each of the quarterly
dividend payment dates referred to below) on the number
of shares of the Common Stock, or portion thereof, into
which a share of Series C Preferred Stock is
convertible, payable quarterly in arrears on the last
day of March, June, September and December of each
year, commencing June 30, 1995.
Conversion Rights..........
The Series C Preferred Stock is convertible, in whole
or in part, at the option of the holder at any time,
unless previously redeemed, into shares of Common
Stock, at a conversion price of $ per share of
Common Stock (equivalent to a conversion rate of
shares of Common Stock per share of Series C Preferred
Stock), subject to adjustment in certain circumstances
(the "Conversion Price").
Liquidation Preference.....
$25.00 per share, plus an amount equal to accrued and
unpaid dividends.
Redemption at Option of the
Company..................
The Series C Preferred Stock is not redeemable prior to
March 31, 2000 and at no time will the Series C
Preferred Stock be redeemable for cash. On and after
March 31, 2000, the Series C Preferred Stock will be
redeemable by the Company, in whole or in part, at the
option of the Company, for such number of shares of
Common Stock as are issuable at a conversion rate of
shares of Common Stock for each share of Series C
Preferred Stock, subject to adjustment in certain
circumstances. The Company may exercise this option
only if for 20 trading days within any period of 30
consecutive trading days, including the last trading
day of such period, the closing price of the Common
Stock on the NYSE equals or exceeds the Conversion
Price per share, subject to adjustment in certain
circumstances. In order to exercise its redemption
option, the Company must issue a press release
announcing the redemption prior to the opening of
business on the second trading day after the conditions
described in the preceding sentences have been met.
Voting Rights..............
If dividends on the Series C Preferred Stock or any
Parity Stock (as defined below) are in arrears for six
quarterly dividend periods, holders of the Series C
Preferred Stock (voting as a single class with holders
of shares of any series of Preferred Stock ranking on a
parity with the Series C Preferred Stock with respect,
in each case, to the payment of dividends and amounts
upon liquidation, dissolution and winding up ("Parity
Stock")) will have the right to elect two additional
directors to serve on the Company's Board of Directors
until such dividend arrearage is eliminated. In
addition, certain changes that would be materially
adverse to the rights of holders of the Series C
Preferred Stock or Parity Stock cannot be made without
the affirmative vote of two-thirds of the shares of
Series C Preferred Stock and the shares of any Parity
Stock similarly affected, voting as a single class,
entitled to be cast thereon.
Ranking....................
The Series C Preferred Stock will rank pari passu with
the Company's Series A and Series B Preferred Stock and
senior to the Common Stock with respect to the payment
of dividends and amounts upon liquidation, dissolution
or winding up.
NYSE Listing...............
The Company expects the shares of Series C Preferred
Stock to be approved for listing on the NYSE under the
symbol "MRYPrC".
Use of Proceeds............
The net proceeds from the Offering will be used
primarily to repay outstanding Company debt and to
acquire and develop additional apartment properties.
S-4
<PAGE> 5
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
PRO
FORMA
1990 1991 1992 1993 1994 1994(1)
------ ------ ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND
RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Operating income from
properties................... $6,149 $6,360 $ 9,719 $24,504 $46,883 $56,751
Net income...................... 5,905 8,791 11,445 26,408 36,985 47,563
Preferred dividends............. -- -- -- 4,025 7,934 21,594
Net income available for common
shares....................... 5,905 8,791 11,445 22,383 29,051 25,969
Net income per common share..... $ 0.62 $ 0.94 $ 1.07 $ 1.30 $ 1.10 $ 0.84
Weighted average common shares
outstanding.................. 9,480 9,326 10,652 17,268 26,430 30,744
Weighted average fully diluted
common shares................ 9,606 9,449 10,769 20,381 32,562 43,212
Dividends paid on common
shares....................... $3,779 $4,116 $ 7,285 $16,934 $33,467 $33,467
Dividends paid per common
share........................ $ 0.40 $ 0.44 $ 0.66 $ 0.90 $ 1.25 $ 1.25
Fixed charge coverage ratio..... 1.26x 1.69x 2.98x 5.58x 4.44x 6.04x
Fixed charge and preferred stock
dividend coverage ratio...... 1.26x 1.69x 2.98x 3.29x 2.56x 1.83x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------
ACTUAL PRO FORMA(2)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA
Properties, at cost.......................................... $815,306 $815,306
Total assets................................................. 806,655 827,430
Debt......................................................... 212,810 137,835
Stockholders' equity......................................... 584,851 680,601
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1990 1991 1992 1993 1994
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT AVERAGE MONTHLY RENT)
OTHER DATA
Funds from operations(3).......... $6,316 $10,027 $12,853 $28,790 $54,588
Apartment units acquired.......... 592 986 2,845 7,452 4,872
Total apartment units owned at end
of period...................... 2,722 3,708 6,527 13,979 18,851
Average occupancy(4).............. 95.6% 92.3% 91.0% 92.9% 95.2%
Average monthly rent(5)........... $ 441 $ 456 $ 472 $ 551 $ 591
</TABLE>
- ---------------
(1) The pro forma data gives effect to the 1994 apartment acquisitions, the
Common Stock and Series B Preferred Stock offerings completed during 1994,
and the issuance of the Series C Preferred Stock discussed herein as if such
transactions had occurred at the end of the prior period.
(2) The pro forma data gives effect on December 31, 1994 to the issuance of
4,000,000 shares of Series C Preferred Stock. See "Use of Proceeds."
(3) Funds from operations is defined as net income computed in accordance with
generally accepted accounting principles, excluding nonrecurring costs and
net realized gains, plus depreciation of real property. Funds from
operations in 1990, 1991 and 1992 includes net income from mortgage backed
securities, which was $3,002,000, $4,289,000 and $2,420,000 in 1990, 1991
and 1992, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Selected Financial
Data."
(4) Represents the average of physical occupancy at each month end for the
period held.
(5) Represents the weighted average monthly rent charged for occupied units and
rent asked for unoccupied units at December month end.
S-5
<PAGE> 6
THE COMPANY
Merry Land is one of the largest owners and operators of upscale garden
apartments in the United States. At December 31, 1994, the Company owned a high
quality portfolio of 71 apartment communities located primarily in the Southern
United States, containing 18,851 units and having an aggregate cost of $796.4
million. At that date, the communities had an average occupancy of 96% and an
average monthly rental rate of $591 per unit. Merry Land is a self-administered
and self-managed real estate investment trust ("REIT") headquartered in Augusta,
Georgia.
Merry Land's objective is to increase funds from operations and
distributions to shareholders by increasing cash flows at its existing apartment
communities through effective management and also by purchasing and developing
additional apartment properties.
The following principles guide the Company's operations:
- Operate the Company in the interest of its shareholders, not in the
interest of advisors, related parties or management.
- Control all costs associated with acquiring assets and operating its
business, particularly overhead expenses, in order to deliver as much as
possible of each dollar of revenue to its shareholders.
- Specialize in the ownership and operation of one type of real
estate -- apartments -- located in one part of the nation -- the South.
- Maintain strong financial condition so that it can achieve a low cost of
capital and take advantage of investment opportunities as they arise.
- Hire, train and equip high quality employees, because the Company's
business is one of people, as well as one of assets.
- Operate its apartments in a manner that provides high quality service to
its residents and apartment homes that are as pleasant, comfortable and
appealing as possible.
In recent years, Merry Land has conducted an active program of apartment
acquisition. The Company buys properties which it expects will produce
attractive initial rates of return and which have the potential for cash flow
growth. The following table summarizes the Company's acquisitions in recent
years (dollars in thousands):
<TABLE>
<CAPTION>
1991 1992 1993 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Units acquired.................................. 986 2,845 7,452 4,872
Total units owned at end of period.............. 3,708 6,527(1) 13,979 18,851
Total cost of apartments........................ $121,072 $209,549 $554,444 $796,364
Total apartment rental income................... $ 15,354 $ 22,460 $ 54,565 $101,667
</TABLE>
- ---------------
(1) In 1992 the Company sold 26 of 140 duplex rental units at one of its
properties.
Substantially all of the Company's properties are relatively new, suburban
garden apartments located in the Southern United States. The Company intends to
continue to focus on the acquisition of apartments and also intends to develop
communities in selected locations throughout the entire Southern region of the
United States, including Texas.
1994 Apartment Acquisitions. In 1994, the Company bought 18 apartment
communities containing 4,872 units at an aggregate cost of $226.2 million.
Twelve of these communities containing 3,343 units were acquired in one
portfolio transaction which was closed in November 1994, at a purchase price of
$154.4 million. This transaction brought Merry Land ten communities
S-6
<PAGE> 7
located within its target market areas and two communities in Ohio. The
following table summarizes the 1994 acquisitions.
<TABLE>
<CAPTION>
COMMUNITY LOCATION UNITS
- -------------------------------------------------------- ---------------------------- -----
<S> <C> <C>
Adams Farm.............................................. Greensboro, N.C. 300
Shadow Lake............................................. Atlanta, Ga. 228
Indigo Lakes............................................ Daytona Beach, Fla. 304
Waterford............................................... Delray Beach, Fla. 236
Promenade............................................... Tampa, Fla. 334
Bermuda Cove*........................................... Jacksonville, Fla. 350
Champions' Club*........................................ Richmond, Va. 212
Champions' Park*........................................ Atlanta, Ga. 252
Clarys Crossing*........................................ Columbia, Md. 198
Duraleigh Woods*........................................ Raleigh, N.C. 362
English Hills*.......................................... Charlotte, N.C. 280
Hickory Creek*.......................................... Richmond, Va. 294
Hunters Chase*.......................................... Cleveland, Oh. 244
Landings*............................................... Memphis, Tenn. 292
Sawmill Village*........................................ Columbus, Oh. 340
Steeplechase*........................................... Charlotte, N.C. 247
Windridge*.............................................. Atlanta, Ga. 272
Crystal Springs......................................... Nashville, Tenn. 127
-----
4,872
</TABLE>
- ---------------
* Portfolio acquisition
The apartment communities which the Company acquired in 1994 averaged seven
years of age, 271 units in size and $46,774 per unit in cost at December 31,
1994. At that date, the Company's other apartment communities averaged seven
years of age, 254 units in size and $40,670 per unit in cost. At December 31,
1994, rental rates at the 1994 acquisition communities averaged $629 per month
compared to $578 for the Company's other communities.
Development. In recent years, strong demand for apartment rentals in the
South has caused rent rates and occupancy to rise to the extent that, in the
Company's opinion, construction of new apartment communities has become
financially feasible in certain locations. In order to take advantage of these
conditions, the Company has commenced a program of apartment construction by
engaging experienced apartment developers to provide development and
construction management services to the Company on a project by project basis.
The developers' fees will be computed as a share of the value of the completed
projects, based on agreed upon formulas, less actual costs. Merry Land's
employees will supervise development activities with the assistance of
architects and engineers as required. The Company will own all land and
improvements, will directly contract for construction and will bear essentially
all risks of project development.
While the Company intends to add several individuals to its acquisition and
development department as a result of this program, it does not intend to
establish a large, specialized development organization. The Company believes
that this system of constructing new communities will allow it the flexibility
to develop communities in a number of markets and to expand or contract such
activities as conditions warrant. The Company's present intention is to limit
its total financial commitment to development to no more than 10% of its total
assets. Merry Land will manage these new communities during and after
construction.
In December 1994, the Company purchased three tracts of land on which it
has begun to develop high quality garden apartment communities. The land
acquired included tracts located in Atlanta, 43 acres for $3.7 million;
Nashville, 67 acres for $3.5 million; and Savannah, 37 acres for $1.4 million.
The Company expects to develop these three projects in a series of phases with
construction scheduled to begin in the first half of 1995 and with the first
units expected to be
S-7
<PAGE> 8
available for occupancy late that year. The initial phases of these projects are
described as follows (dollars in thousands):
<TABLE>
<CAPTION>
INITIAL PHASE
-----------------
LOCATION UNITS COST(1)
- -------------------------------------------------------------------------- ----- -------
<S> <C> <C>
Atlanta, Georgia.......................................................... 287 $17,200
Nashville, Tennessee(2)................................................... 244 13,300
Savannah, Georgia......................................................... 300 16,500
----- -------
831 $47,000
</TABLE>
- ---------------
(1) Represents current estimated total cost of the initial phase of each
project, including capitalized interest, allocated land cost and development
fees. Projects are in the planning stages and final costs may vary.
(2) The Nashville parcel adjoins the 127 unit Crystal Springs apartments
described above.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of the Series C
Preferred Stock are estimated at approximately $ million ($ million if
the Underwriters' over-allotment option is exercised in full). The Company
intends to use approximately $57.6 million to repay unsecured floating rate debt
under its line of credit which has been incurred to acquire apartment
properties. The interest on such indebtedness accrues at the rate of 0.65% above
the thirty day London Interbank Offered Rate and the maturity date on such
indebtedness is September 30, 1995. In addition, the Company intends to repay up
to $17.4 million of indebtedness consisting of daily repurchase agreements
bearing interest at rates adjusted daily. The Company intends to use the
remaining net proceeds to acquire and develop additional apartment properties.
Pending such uses, the Company intends to invest temporarily the excess proceeds
in interest bearing securities.
MARKET PRICES OF STOCK AND DIVIDENDS TO SHAREHOLDERS
COMMON STOCK
Merry Land's Common Stock is traded on the New York Stock Exchange under
the symbol "MRY". The following table sets forth the reported high and low sales
prices of the Common Stock on the NYSE, and the cash dividends declared per
share of Common Stock.
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
<S> <C> <C> <C>
1993
First Quarter.................................................... $17.75 $14.50 $ .20
Second Quarter................................................... 18.00 14.63 .22
Third Quarter.................................................... 21.63 16.38 .22
Fourth Quarter................................................... 22.13 17.50 .26
1994
First Quarter.................................................... 24.38 18.75 .30
Second Quarter................................................... 24.00 20.00 .30
Third Quarter.................................................... 20.75 18.75 .30
Fourth Quarter................................................... 21.88 16.25 .35
1995
First Quarter (through February 13, 1995)........................ $21.88 $19.75 $ .35
</TABLE>
On December 31, 1994, the Company had 3,115 shareholders of record.
On January 16, 1995, the Board of Directors declared a dividend of $0.35
per share of Common Stock to be paid on March 31, 1995 to holders of record on
March 16, 1995. The current annual dividend rate is $1.40 per share. The $0.35
quarterly dividend represents a payout of 77% of funds from operations available
for common shares for the quarter ended December 31, 1994, a payout
S-8
<PAGE> 9
ratio which the Company believes is conservative relative to its REIT peers.
Future dividends will be declared at the discretion of the Board of Directors
after considering the Company's distributable funds, financial requirements, tax
considerations and other factors.
Under the REIT rules of the Internal Revenue Code, the Company must pay at
least 95% of its REIT taxable income as dividends in order to avoid taxation as
a regular corporation. The Board makes decisions with respect to the
distribution of capital gains on a case-by-case basis. A portion of the
Company's dividends paid to its shareholders may be deemed either capital gain,
ordinary income or a return of capital, or all of these. None of the Company's
distributions have yet been classified as returns of capital, though the Company
expects a portion of 1995 distributions on the Common Stock will be so
classified. The Company annually provides its shareholders a statement as to its
designation of the taxability of the dividends.
The federal income tax status of dividends paid to holders of Common Stock
was as follows:
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- -----
<S> <C> <C> <C>
Ordinary income.......................................................... $.51 $.53 $1.24
Capital gains............................................................ .15 .37 .01
Return of capital........................................................ -- -- --
---- ---- -----
Total dividends paid........................................... $.66 $.90 $1.25
==== ==== =====
</TABLE>
The loan agreement for the Company's 6.625% Senior Notes prohibits the
payment of any dividends or other distributions upon the occurrence of an event
of default and otherwise limits dividends and distributions after September 30,
1993 to a cumulative amount which is not more than the Company's net earnings
plus depreciation and amortization after that date, plus or minus, as
applicable, any increase or decrease in stockholders' equity from the issuance
or redemption of stock.
PREFERRED STOCK
Series A Preferred Stock
On June 30, 1993, the Company issued 4,600,000 shares of $1.75 Series A
Cumulative Convertible Preferred Stock at $25.00 per share in a public offering.
The Series A Preferred Stock is traded on the New York Stock Exchange under the
symbol "MRYPr". At December 31, 1994, 2,516,324 shares of Series A Preferred
Stock were outstanding. The following table sets forth the reported high and low
sales prices of the Series A Preferred Stock on the NYSE, and the cash dividends
declared per share of Series A Preferred Stock.
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
<S> <C> <C> <C>
1993
Third Quarter.................................................... $30.50 $25.00 $ .4375
Fourth Quarter................................................... 30.75 26.50 .4375
1994
First Quarter.................................................... 32.88 27.00 .4375
Second Quarter................................................... 31.63 27.00 .4375
Third Quarter.................................................... 27.63 25.25 .4375
Fourth Quarter................................................... 29.63 22.00 .4375
1995
First Quarter (through February 13, 1995)........................ $28.75 $27.50 $ .4375
</TABLE>
S-9
<PAGE> 10
The federal income tax status of dividends paid to holders of Series A
Preferred Stock was as follows:
<TABLE>
<CAPTION>
1993 1994
----- ------
<S> <C> <C>
Ordinary income............................................................. $.550 $1.734
Capital gains............................................................... .325 .016
Return of capital........................................................... -- --
----- ------
Total dividends paid.............................................. $.875 $1.750
</TABLE>
The Series A Preferred Stock has an annual dividend rate of $1.75 per
share, payable quarterly, and is convertible into shares of Common Stock at a
conversion price of $18.65 per share of Common Stock. The Series A Preferred
Stock may not be redeemed for cash at any time, but may be redeemed by the
Company for shares of Common Stock after June 30, 1998, at a rate of 1.34 shares
of Common Stock for each share of Series A Preferred Stock, provided the Common
Stock is trading above the conversion price of $18.65 per share.
Series B Preferred Stock
On November 1, 1994, the Company issued 4,000,000 shares of $2.205 Series B
Cumulative Convertible Preferred Stock at $25.00 per share in a private
placement with a small group of institutional investors. The Series B Preferred
Stock has an annual dividend rate of $2.205 per share, payable quarterly, and is
convertible into shares of Common Stock at a conversion price of $21.04 per
share of Common Stock. The Series B Preferred Stock may not be redeemed for cash
at any time, but may be redeemed by the Company for shares of Common Stock after
October 31, 1999, at a rate of 1.188 shares of Common Stock for each share of
Series B Preferred Stock, provided the Company's Common Stock is trading above
the conversion price of $21.04 per share. The shares of Series B Preferred Stock
were not registered with the Securities and Exchange Commission at the time of
issuance and are not publicly traded. The Company has granted to the holders of
the Series B Preferred Stock certain registration rights which commence on April
2, 1995. On December 31, 1994, the Company paid a dividend of $.370 per share on
the Series B Preferred Stock, of which $.003 was capital gain.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has adopted a Dividend Reinvestment and Stock Purchase Plan
under which any holder of Common Stock or Preferred Stock may reinvest cash
dividends or optional cash payments of up to $5,000 per quarter in additional
shares of Common Stock purchased directly from the Company at a 5% discount.
Optional cash payments are subject to the limitation that the number of shares
of Common Stock which can be purchased with optional cash payments cannot exceed
the number of shares of Common Stock and Preferred Stock owned by the
shareholder. All Common and Preferred shareholders are eligible to join the plan
including shareholders whose shares are held in the name of a nominee or broker.
S-10
<PAGE> 11
CAPITALIZATION
The following table sets forth the capitalization of the Company on
December 31, 1994 and after giving effect to the issuance of the Series C
Preferred Stock offered by this Prospectus Supplement. This table should be read
in conjunction with the financial statements of the Company and related notes.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
(IN THOUSANDS)
Debt:
Repurchase agreements............................................. $ 17,375 $ --
Unsecured bank line(1)............................................ 57,600 --
Mortgage loans.................................................... 17,835 17,835
6.625% Senior Notes............................................... 120,000 120,000
Stockholders' Equity(2):
Preferred Stock, no par value, 20,000,000 shares
authorized;
$1.75 Series A Cumulative Convertible, 2,516,324 shares issued and
outstanding, $25.00 per share liquidation preference........... 62,908 62,908
$2.205 Series B Cumulative Convertible, 4,000,000 shares issued
and outstanding, $25.00 per share liquidation preference....... 100,000 100,000
$ Series C Cumulative Convertible, 4,000,000 shares issued and
outstanding, $25.00 per share liquidation preference........... -- 100,000
Common Stock, no par value, 50,000,000 shares authorized;
30,744,451 shares issued and outstanding....................... 30,744 30,744
Capital surplus................................................... 375,170 370,920
Cumulative undistributed net earnings............................. 23,112 23,112
Notes receivable from stockholders and ESOP....................... (10,283) (10,283)
Unrealized gain on securities..................................... 3,200 3,200
-------- -----------
Total stockholders' equity................................... 584,851 680,601
-------- -----------
Total capitalization.................................... $797,661 $ 818,436
========= ==========
</TABLE>
- ---------------
(1) Outstanding under a $100.0 million line of credit which bears interest at
LIBOR plus 0.65%, and, subject to the bank's approval, is expected to be
renewed annually.
(2) As of December 31, 1994, 2,083,676 shares of Series A Preferred Stock had
been converted into 2,792,126 shares of Common Stock. In addition, during
January 1995, 949,450 shares of Series A Preferred Stock were converted into
1,272,263 shares of Common Stock. The conversions had no effect on total
capitalization.
S-11
<PAGE> 12
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company and
should be read in conjunction with the financial statements and notes thereto
incorporated by reference herein. The following amounts are in thousands, except
for information with respect to per share amounts, coverage ratios and apartment
units.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PRO
---------------------------------------------------- FORMA
1990 1991 1992 1993 1994 1994(1)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Income from property operations:
Rental and mineral royalty revenue...................... $ 13,789 $ 16,447 $ 23,479 $ 56,181 $103,169 $130,393
Rental expenses, property taxes and insurance........... 5,521 7,065 9,604 22,611 38,409 50,340
Depreciation of real estate owned....................... 2,119 3,022 4,156 9,066 17,877 23,302
-------- -------- -------- -------- -------- --------
6,149 6,360 9,719 24,504 46,883 56,751
Income from mortgage backed securities:
Interest income......................................... 20,104 12,832 3,978 -- -- --
Interest expense........................................ 17,102 8,543 1,558 -- -- --
-------- -------- -------- -------- -------- --------
3,002 4,289 2,420 -- -- --
Other income:
Other interest and dividend income...................... 1,701 1,709 1,940 2,463 2,440 1,872
Other................................................... 76 297 196 10 25 25
-------- -------- -------- -------- -------- --------
1,777 2,006 2,136 2,473 2,465 1,897
Expenses:
Interest unrelated to mortgage backed securities........ 5,607 4,261 4,230 5,640 10,394 9,082
General and administrative.............................. 944 1,277 1,304 1,433 1,773 1,807
Depreciation -- other, amortization and other
expenses.............................................. 182 112 44 180 470 470
Other non-recurring costs............................... -- -- -- 1,308 200 200
-------- -------- -------- -------- -------- --------
6,733 5,650 5,578 8,561 12,837 11,559
Gains on sales of assets:
Gains on sales of investments........................... 491 (698) 385 6,960 201 201
Gains on sales of real estate........................... 730 803 460 1,032 273 273
Gains on mortgage backed securities..................... 487 1,681 1,903 0 -- --
-------- -------- -------- -------- -------- --------
1,708 1,786 2,748 7,992 474 474
Income tax (benefit)...................................... (2) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net income................................................ 5,905 8,791 11,445 26,408 36,985 47,563
Preferred dividends paid.................................. -- -- -- 4,025 7,934 21,594
-------- -------- -------- -------- -------- --------
Net income available for common shares.................... $ 5,905 $ 8,791 $ 11,445 $ 22,383 $ 29,051 $ 25,969
========= ========= ========= ========= ========= =========
Weighted average common shares............................ 9,480 9,326 10,652 17,268 26,430 30,744
Weighted average fully diluted common shares.............. 9,606 9,449 10,769 20,381 32,562 42,212
Net income per common share............................... $ .62 $ .94 $ 1.07 $ 1.30 $ 1.10 $ 0.84
Common dividends paid..................................... 3,779 4,116 7,285 16,934 33,467 33,467
Common dividends paid per share........................... $ .40 $ .44 $ .66 $ .90 $ 1.25 $ 1.25
Fixed charge coverage ratio............................... 1.26x 1.69x 2.98x 5.58x 4.44x 6.04x
Fixed charge and preferred stock dividend coverage
ratio................................................... 1.26x 1.69x 2.98x 3.29x 2.56x 1.83x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, PRO
---------------------------------------------------- FORMA
1990 1991 1992 1993 1994 1994(1)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Properties, at cost....................................... $103,981 $132,355 $220,615 $565,111 $815,306 $815,306
Mortgage backed securities................................ 196,620 115,973 -- -- --
Total assets.............................................. 318,947 262,881 235,695 562,172 806,655 827,430
Debt related to mortgage backed securities................ 185,118 112,854 -- -- -- --
Senior Notes.............................................. -- -- -- 120,000 120,000 120,000
Other debt................................................ 61,633 70,939 117,596 37,173 92,810 17,835
Total shareholders' equity................................ $ 66,302 $ 73,919 $106,831 $397,715 $584,851 $680,601
OTHER DATA
Funds from operations(2).................................. $ 6,316 $ 10,027 $ 12,853 $ 28,790 $ 54,588
Funds from operations available to common shares.......... $ 6,316 $ 10,027 12,853 $ 24,765 $ 46,654
Apartment units acquired during year...................... 592 986 2,845 7,452 4,872
Total apartment units at end of year...................... 2,722 3,708 6,527 13,979 18,851
</TABLE>
- ---------------
(1) The unaudited pro forma financial data gives effect to the 1994 apartment
acquisitions, the Common Stock and Series B Preferred Stock offerings
completed during 1994 and the issuance of the Series C Preferred Stock as if
such transactions had occurred at the end of the prior year in the case of
operating data, and as of the end of the current year in the case of balance
sheet data. In the opinion of management, all adjustments necessary to
present fairly such pro forma data have been included. The unaudited pro
forma data is not necessarily indicative of the results of operations of the
Company for the year indicated had the transactions occurred on the date
assumed, nor does such information purport to indicate the future results of
operations.
(2) Funds from operations is defined as net income computed in accordance with
generally accepted accounting principles, excluding nonrecurring costs and
net realized gains, plus depreciation of real property. Funds from
operations in 1990, 1991 and 1992 includes net income from mortgage backed
securities, which was $3,002,000, $4,289,000, and $2,420,000 in 1990, 1991
and 1992, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
S-12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Over the past several years, Merry Land has significantly expanded its
apartment holdings through an active program of acquisitions. The Company
believes that its access to public and private debt and equity, its experience
as an apartment operator, its knowledge of the Southern apartment markets and
its acquisition expertise have allowed it to take advantage of favorable
conditions to make acquisitions at attractive yields. Even though prices of
apartments offered for sale have risen throughout 1993 and 1994, the Company
believes that prices have recently stabilized at levels which present continued
favorable opportunities for both acquisition and development.
The following table describes the growth of the Company's apartment
holdings in recent years:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 INCREASE 1993 INCREASE 1994 INCREASE
------------ -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Units(1)........................ 6,527 76% 13,979 114% 18,851 35%
Cost (in thousands)(1)(2)....... $209,549 73% $554,444 165% $796,364 44%
</TABLE>
- ---------------
(1) Excludes condominium unit held for sale.
(2) Represents the total acquisition cost of the property plus the capitalized
cost of improvements made subsequent to acquisition.
In December 1994, the Company commenced a program of apartment development
by buying three tracts of land on which it intends to build high quality
suburban garden apartments. The Company will build these communities in a series
of phases using experienced apartment developers to provide development and
construction management services. Construction on all three communities is
expected to commence in the first half of 1995 with the first units expected to
be available for occupancy later that year. The Company's present intention is
to limit its financial commitment to development to no more than 10% of total
assets.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
Rental Operations. The operating performance of the Company's apartments
is summarized in the following table (dollars in thousands, except average
monthly rent):
<TABLE>
<CAPTION>
CHANGE FROM
1993 TO
1992 1993 1994 1994
------- ------- -------- -----------
<S> <C> <C> <C> <C>
Rents....................................... $22,460 $54,565 $101,667 86%
Operating expenses.......................... 6,954 16,572 27,578 66
Taxes and insurance......................... 2,596 4,833 9,634 99
Depreciation................................ 4,020 8,924 17,735 99
------- ------- -------- -----
$ 8,890 $24,236 $ 46,720 93
Average occupancy(1)........................ 91.6% 92.9% 95.2% 2.3
Average monthly rent(2)..................... $ 472 $ 551 $ 591 7.3
Expense ratio(3)............................ 42.5% 39.2% 36.6% (2.6)%
</TABLE>
- ---------------
(1) Represents the average of 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 month end.
(3) Represents total of operating expenses, taxes and insurance divided by
rental revenues.
Rental revenues and expenses have risen sharply with the Company's
acquisition of new communities. The weighted average number of apartments owned
rose to 16,415 in 1994 from 10,253 in 1993 and 5,118 in 1992. Most of the rental
markets in which Merry Land operates are experiencing strong job growth and
household formation, and occupancy levels and rent rates have risen. However,
the 7.3% increase in portfolio average rental rates in 1994 from 1993 largely
reflects
S-13
<PAGE> 14
the higher rents charged at the communities the Company acquired in 1993 and
1994, whose monthly rents averaged $626 at December 31, 1994, versus the total
portfolio average of $591.
Although construction starts of new apartment communities have increased in
1993 and 1994, the Company believes demand continues to outstrip supply and
expects a strong rental market to continue throughout 1995, with continued high
occupancy and rising rent rates. The performance of the 6,527 units which the
Company held for all of both 1994 and 1993 ("same store" results), is summarized
in the following table (dollars in thousands, except average monthly rent; see
footnotes above):
<TABLE>
<CAPTION>
CHANGE FROM
1993 TO
1993 1994 1994
------- ------- -----------
<S> <C> <C> <C>
Rents...................................................... $37,339 $40,407 8%
Operating expenses......................................... 12,911 12,225 (5)
Taxes and insurance........................................ 3,426 3,549 4
Depreciation............................................... 6,346 6,676 5
------- ------- -----
$14,656 $17,957 23
Average occupancy.......................................... 92.6% 95.7% 3.1
Average monthly rent....................................... $ 510 $ 530 3.9
Expense ratio.............................................. 43.8% 39.0% (4.8)%
</TABLE>
Reflecting the strong rental markets, rental revenues and operating income
for those properties held for all of both periods rose as a result of 3.1%
higher occupancy and 3.9% higher rental rates. Operating expenses decreased $0.7
million in 1994 as compared to 1993. Of this decrease, $0.5 million came from a
change in capitalization policy which resulted in the capitalization of certain
expenditures which had previously been expensed, including painting the
exteriors of apartment communities, replacement of mini blinds and replacement
of vinyl. The remaining decrease in expenses came from lower personnel costs.
For those 3,360 apartments owned by the Company for both 1993 and 1992,
rental revenues increased $1.0 million or 6% in 1993 over 1992 as monthly rental
rates increased 3.4% to $491 per month from $475 per month, while occupancy for
those units rose to 93.2% for 1993 from 92.2% for 1992. Operating expenses rose
$1.1 million, or 19%, due to charging the cost of ESOP contributions to the
communities, rather than to corporate overhead, and to higher maintenance
expenditures, which included painting the exterior of three more communities
than in the prior year. Taxes and insurance expense rose 8% while depreciation
rose 2%.
Mineral Royalty and Commercial Property Income. These amounts rose to $1.4
million in 1994 and $1.6 in 1993 from $1.0 million in 1992 largely as the result
of the sale of sand under a contract which has now expired. Mineral royalties in
1995 should total less than half of 1994 amounts.
Interest and Dividend Income. Interest and dividend income totaled $2.4
million for 1994 as compared to $2.5 million for 1993 and $5.9 million in 1992.
Interest and dividend income includes interest received on temporary
investments, notes receivable, and dividends earned on equity securities
investments. The 1992 amount included interest on the Company's portfolio of
mortgage backed securities, which was disposed of in that year.
Interest Expense. Interest expense totaled $10.4 million for 1994, up from
$5.6 million for 1993 and $5.8 million for 1992. The increase resulted both from
an increase in the amount of debt outstanding and from higher interest rates.
Average debt outstanding rose to $165.2 million in 1994 from $95.2 million in
1993 and $74.2 million in 1992, primarily as a result of financing apartment
purchases. The 1992 amount included funds used to finance the mortgage backed
securities portfolio. The weighted average interest rate charged on all the
Company's debt increased to 6.4% for 1994 from 5.4% for 1993 and 5.0% for 1992,
primarily as a result of the Company's shift to higher cost fixed rate debt from
variable rate financing and also because of rising short term rates. At
S-14
<PAGE> 15
December 31, 1994, $85.3 million of the Company's $212.8 million of outstanding
debt was at variable interest rates, and $9.9 million of this amount was tax
exempt financing bearing interest at 75% of prime.
General and Administrative Expenses. In 1994, general and administrative
expense totaled $1.8 million, versus $1.4 million for 1993 and $1.3 million in
1992. In 1994, general and administrative expenses equaled 1.7% of rental
revenues, down from 2.6% for 1993 and 5.6% in 1992. The decrease in this ratio
is attributable to increased operating efficiency as the Company's overhead was
spread over more apartment units. The Company expects that as it continues to
grow, even though general and administrative expenses will increase in absolute
terms, such expenses will continue to decline as a percentage of revenues. In
1994, the Company began charging the cost of property management activities
conducted at the regional and corporate level to rental expense. Previously,
such expenses had been included as part of general and administrative expenses.
Results for both 1993 and 1992 have been presented on a basis consistent with
1994 expenses.
Non-Recurring Costs. In 1994, the Company reserved $0.2 million as the
estimated potential cost of its share of a possible environmental investigation
of a landfill located on land the Company owns in Richmond County, Georgia. (See
"Business -- Environmental Matters"). In 1993 the Company sold $120.0 million of
6.625% unsecured senior notes and used the $119.0 net proceeds to repay
substantially all other debt. Prepayment penalties and the cost of closing out
an interest rate swap agreement totaled $1.3 million.
Gains on Sales of Assets. Net gains recognized on the sale of assets
totaled $0.5 million for 1994, $8.0 million for 1993 and $2.7 million in 1992.
Gains in 1994 came from the sale of securities and real estate. Gains in 1993
resulted primarily from the sale of thrift stocks and in 1992 from the sale of
mortgage backed securities.
Net income. Net income totaled $37.0 million for 1994, $26.4 million in
1993, and $11.4 million for 1992. Net income available for common shareholders
totaled $29.1 million for 1994, $22.4 million for 1993, and $11.4 million for
1992. The increases in net income and net income available for common
shareholders for 1994 when compared to 1993 arose principally from substantially
increased operating income from apartments, which were partially offset by lower
levels of gains recognized on sales of assets. Net income per share for 1994
fell to $1.10 from $1.30 in 1993 as a result of various factors, including the
lower level of gains recognized, increased depreciation and the increased number
of shares outstanding. The increase in net income for 1993 as compared to 1992
arose both from increased operating income from apartments and from greater
gains recognized on the sale of assets, principally securities.
Dividends to preferred shareholders. Dividends to preferred shareholders
totaled $7.9 million for 1994 and $4.0 million in 1993. The increase in
dividends arose from the sale of Preferred Stock during the two years. In June
1993, the Company sold 4.6 million shares of Series A Preferred Stock in a
public offering. In November 1994, the Company completed a private placement of
4.0 million shares of its Series B Preferred Stock. During 1994, holders of
Series A Preferred Stock converted 2.1 million shares of the Series A Preferred
Stock into approximately 2.8 million shares of the Company's Common Stock.
Funds From Operations. The Company believes that funds from operations is
an important measure of the Company's operating performance. Funds from
operations does 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. Based on recently
published recommendations of a task force of the National Association of Real
Estate Investment Trusts, the Company defines funds from operations as net
income computed in accordance with GAAP, excluding non-recurring costs and net
realized gains, plus depreciation of real property. This revised definition
eliminates from funds from operations any amortization of debt costs and any
non-real estate
S-15
<PAGE> 16
depreciation, which reduced the Company's funds from operations by $0.5 million
in 1994, $0.2 million in 1993 and $0.04 million in 1992.
Funds from operations rose 90% to $54.6 million for 1994 as compared to
$28.8 million for 1993 and $12.9 million for 1992. These increases were
principally due to increased rental operating income resulting from the growth
of the Company's apartment holdings.
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
<TABLE>
<CAPTION>
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
Net income...................................................... $11,445 $26,408 $36,985
Less preferred dividends paid................................... -- 4,025 7,934
------- ------- -------
Net income available for common shares.......................... 11,445 22,383 29,051
Add depreciation of real estate owned........................... 4,156 9,066 17,877
Add non-recurring costs......................................... -- 1,308 200
Less net realized gains......................................... 2,748 7,992 474
------- ------- -------
Funds from operations available to common shares................ 12,853 24,765 46,654
Add preferred dividends......................................... -- 4,025 7,934
------- ------- -------
Funds from operations -- fully diluted.......................... $12,853 $28,790 $54,588
======== ======== ========
Weighted average common shares outstanding --
primary....................................................... 10,652 17,268 26,430
fully diluted................................................. 10,753 20,381 32,562
Funds from operations per share --
primary....................................................... $ 1.21 $ 1.43 $ 1.77
fully diluted................................................. $ 1.20 $ 1.41 $ 1.68
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Merry Land's financial strategy is to buy apartment communities for cash,
using amounts drawn on its unsecured line of credit, and subsequently to raise
funds in the capital markets to permanently finance these investments. The
Company completed a number of such acquisition and funding cycles in recent
years and expects to continue to fund its acquisition and development activities
in this manner.
In 1994, the Company acquired 4,872 apartment units for $226.2 million and
funded these purchases initially by liquidating temporary investments and
borrowing funds under its line of credit.
On June 30, 1994, the Company completed a public offering of 4.6 million
shares of Common Stock at a price of $20.25 per share, for net proceeds of $87.5
million. Of this amount, $58.7 million was used to repay debt incurred in the
acquisition and improvement of apartments and the remainder was used for further
acquisitions.
On November 1, 1994, the Company completed the private placement of $100.0
million of its $2.205 Series B Cumulative Convertible Preferred Stock for net
proceeds of $96.7 million, and used this amount to pay in part for the $154.4
million apartment portfolio acquired on November 18, 1994. The remainder of the
purchase price was financed with the Company's line of credit. The Series B
Preferred Stock was sold in a private placement at a price of $25.00 per share
to a small group of institutional investors. It has an annual dividend rate of
$2.205 per year, payable quarterly, and is convertible into shares of Common
Stock at a conversion price of $21.04 per share of Common Stock (equivalent to a
conversion rate of 1.188 shares of Common Stock for each share of Series B
Preferred Stock). The Series B Preferred Stock may not be redeemed for cash at
any time,
S-16
<PAGE> 17
but may be redeemed by the Company for Common Stock after October 31, 1999,
provided the Company's Common Stock is trading above the conversion price of
$21.04 per share.
Common Stock Repurchases. In December 1994, the Company's Board of
Directors authorized the repurchase of up to 1.0 million shares of the Company's
Common Stock. The Board took this action because in its judgment the Company's
stock price had fallen significantly below price levels which the Board felt
were appropriate. The Company bought and retired 175,440 shares for
approximately $3.1 million, an average price of $17.94 per share. The Company
discontinued the repurchase program as the stock price rose over the last weeks
of the year.
Financial Structure. At December 31, 1994, debt equaled 27% of total
capitalization at cost, and 20% of total capitalization, with equity valued at
market. At that date, the Company's financial structure was as follows (dollars
in thousands):
<TABLE>
<CAPTION>
% OF MARKET % OF
COST TOTAL VALUE TOTAL
-------- ----- ---------- -----
<S> <C> <C> <C> <C>
Advances under line of credit......................... $ 57,600 8% $ 57,600 5%
Repurchase agreements................................. 17,375 2 17,375 2
Mortgage loans........................................ 17,835 2 17,835 2
6.625% Senior notes................................... 120,000 15 120,000 11
-------- ----- ---------- -----
Total debt.................................. 212,810 27 212,810 20
Common and preferred equity(1)........................ 584,851 73 850,245 80
-------- ----- ---------- -----
Total capitalization........................ $797,661 100% $1,063,055 100%
========= ==== ========== ====
</TABLE>
- ---------------
(1) Assumes conversion of all Preferred Stock outstanding into Common Stock.
Merry Land's primary commercial bank provides the Company with a $100.0
million unsecured line of credit for property acquisitions and other general
corporate purposes. This line bears interest at 0.65% over the 30 day LIBOR
rate, matures on September 30, 1995, and, subject to the bank's approval, is
expected to be renewed annually. At December 31, 1994, the Company had $42.4
million available under this line of credit. The Company is negotiating with a
group of banks to obtain a syndicated credit facility in addition to the
existing line.
It generally is not the practice of the Company to finance its acquisitions
using mortgage debt. At times, however, the Company finds it advantageous to
assume such debt in order to successfully negotiate and close property
acquisitions. During 1994, the Company repaid approximately $19.2 million of
mortgage debt previously assumed in property acquisitions of prior years.
Repurchase agreements are borrowings secured by the Company's temporary
investments in U.S. Treasury Notes. The Company's Preferred Stock, and
implicitly its 6.625% Senior Notes, are rated investment grade by Standard &
Poor's Corporation and Moody's Investors Service, Inc.
Liquidity. Merry Land expects to meet its short-term liquidity
requirements with the net cash flow provided by operating activities and with
its line of credit. The Company believes that its primary short-term liquidity
needs are to fund operating expenses and capital improvements, debt service
payments, dividend payments and current requirements of its program of new
apartment development. The Company expects to meet its long-term liquidity
requirements, including scheduled debt maturities and permanent financing for
property acquisitions and development, with a variety of sources, including
additional borrowings and the issuance and sale of debt or equity securities in
the public and private markets. The Company is limited in the amount of debt it
may incur under the terms of its existing loan agreements. At December 31, 1994,
the Company's loan agreements would have allowed it to borrow an additional $180
million on an unsecured basis.
Cash Flows. Operating cash flow has grown with the expansion of the
Company's apartment holdings. Operating cash flow grew to $56.1 million in 1994
from $30.9 million in 1993 and $14.3 million in 1992. Sales of Common and
Preferred Stock, however, have been the largest source of cash for the past
three years. The primary use of cash has been to finance new apartment
S-17
<PAGE> 18
acquisitions and improvements. Dividends paid in 1994 and 1993 increased from
levels in prior years due to an increase in the average amount of stock
outstanding during 1994 and 1993, and in the case of the Company's Common Stock,
an increase in the quarterly dividend per share from $0.15 for the first quarter
of 1992 to $0.35 for the last quarter of 1994.
The following table summarizes cash flows for 1992, 1993, and 1994:
<TABLE>
<CAPTION>
SOURCES AND USES OF CASH
YEAR ENDED DECEMBER 31,
---------------------------------
1992 1993 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities..................................... $ 14,256 $ 30,911 $ 56,099
Net sales of securities and temporary investments........ 99,913 1,659 --
Sales of Common and Preferred Stock...................... 27,703 283,560 187,939
Net borrowings........................................... -- 1,429 55,637
Other.................................................... 20,724 10,677 576
--------- --------- ---------
Total sources....................................... 162,596 328,236 300,251
Acquisitions of and improvements to properties........... (88,841) (307,048) (250,263)
Dividends paid........................................... (7,666) (20,959) (41,401)
Net repayment of debt.................................... (66,197) -- --
Net purchase of temporary investments.................... -- -- (8,447)
--------- --------- ---------
Total uses.......................................... $(162,704) $(328,007) $(300,111)
</TABLE>
Capital Expenditures. The Company capitalizes the cost of expenditures for
the acquisition or development of additional productive assets and for
expenditures which significantly increase the revenue producing capability or
which reduce the cost of operating such assets. Normal operating costs are
expensed as incurred. Certain items which are replaced on a regular basis, but
which have lives of more than one year, such as carpet, vinyl flooring and
exterior repainting, are capitalized. At newly acquired communities, the Company
often finds it necessary to upgrade the physical appearance of such properties
and to complete maintenance and repair work which had been deferred by prior
owners. These activities often result in heavier capital expenditures in the
early years of Company ownership.
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 rentals in times of rising prices. The Company believes
that this would offset the effect of cost increases stemming from inflation.
S-18
<PAGE> 19
BUSINESS
ORGANIZATION
Merry Land has 577 employees. Of this number, 535 operate its apartment
communities, 21 are employed in accounting, administrative and general
management, 15 in corporate property management and 6 in acquisitions and
development.
Merry Land's apartment communities are operated by on-site Property
Managers and staff who are extensively trained by the Company in sales,
management, accounting, maintenance and other disciplines. Each community
functions as an individual business unit according to well developed policies
and procedures. On-site staff participate in an incentive program under which
cash bonus payments are made to individuals whose communities attain budgeted
levels of cash flow. All full time employees are eligible to participate in the
Company's Employee Stock Ownership Plan.
Property Managers report to eight Regional Property Managers who report to
the Company's two Vice Presidents of Property Management. Regional Property
Managers are located in Raleigh, Charlotte, Augusta, Atlanta, Savannah,
Jacksonville, Orlando and Tampa.
The Company believes it has successfully integrated newly acquired
apartment communities into its portfolio using the property management
organization and expertise developed in its thirteen years of buying and
operating apartments. The Company's operating efficiency has increased as it has
grown. General and administrative expense for 1994 declined to 1.7% of rental
revenues from 2.6% in 1993 as the Company spread its overhead over more
apartment units.
APARTMENT COMMUNITIES
The Company manages all of its properties under the trade name "Merry Land
Apartment Communities". The Company owns a high quality group of apartment
communities, substantially all of which command rental rates in the upper range
of their markets. They are generally newer "garden apartments", in wood-frame
two and three story buildings without elevators, with individually metered
electric and gas service and individual heating and cooling systems. The
Company's apartments are 47% one bedroom units, 48% two bedroom units and 5%
three bedroom units. The units average 900 square feet in area, seven years of
age and are well equipped with modern appliances and other conveniences. The
communities are heavily landscaped and offer extensive amenities, which
generally include swimming pools, tennis courts, club rooms, exercise facilities
and hot tubs. Some of the Company's communities also offer garages, racquetball
courts, saunas, alarm systems and other features.
Merry Land's apartment communities are all located in metropolitan areas
with populations in excess of 250,000, primarily in the Southeastern states of
Florida, Georgia and the Carolinas. The following table summarizes property
information by market:
<TABLE>
<CAPTION>
COST(1) % OF AVERAGE AVERAGE
LOCATION COMMUNITIES UNITS (IN THOUSANDS) TOTAL COST RENT(2) OCCUPANCY(3)
- ------------------------ ----------- ------ -------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jacksonville............ 8 2,550 $102,153 12.8% $ 568 97%
Orlando................. 6 1,902 88,935 11.2 622 92
Ft. Myers............... 3 948 45,462 5.7 638 97
Tampa................... 4 1,301 63,486 8.0 625 94
Ft. Lauderdale.......... 1 304 18,029 2.3 789 96
Melbourne............... 1 326 15,154 1.9 626 96
Delray Beach............ 1 236 13,015 1.6 731 94
Miami................... 1 175 11,837 1.5 851 98
Daytona Beach........... 1 304 11,057 1.4 544 90
Tallahassee............. 1 222 8,110 1.0 593 98
-- ------ -------------- ---------- ------- --
Florida....... 27 8,268 377,238 47.4 618 95
</TABLE>
S-19
<PAGE> 20
<TABLE>
<CAPTION>
COST(1) % OF AVERAGE AVERAGE
LOCATION COMMUNITIES UNITS (IN THOUSANDS) TOTAL COST RENT(2) OCCUPANCY(3)
- ------------------------ ----------- ------ -------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Atlanta................. 10 3,086 126,342 15.9 591 96
Savannah................ 5 865 32,292 4.1 567 97
Augusta................. 4 490 14,714 1.8 431 89
-- ------ -------------- ---------- ------- --
Georgia....... 19 4,441 173,348 21.8 569 96
Charlotte............... 5 1,363 47,950 6.0 547 97
Raleigh................. 5 1,256 45,743 5.7 563 97
Greensboro.............. 2 508 21,572 2.7 570 98
-- ------ -------------- ---------- ------- --
North
Carolina.... 12 3,127 115,265 14.4 557 97
Charleston.............. 4 880 32,818 4.1 507 93
Greenville.............. 1 216 6,769 0.8 511 98
Columbia................ 1 212 6,351 0.8 482 94
-- ------ -------------- ---------- ------- --
South Carolina........ 6 1,308 45,938 5.7 503 94
Columbus................ 1 340 19,651 2.5 699 93
Cleveland............... 1 244 13,884 1.7 708 97
-- ------ -------------- ---------- ------- --
Ohio.................. 2 584 33,535 4.2 703 95
Richmond, Virginia...... 2 506 24,360 3.1 661 92
Memphis................. 1 292 11,301 1.4 546 95
Nashville............... 1 127 3,536 0.4 388 97
-- ------ -------------- ---------- ------- --
Tennessee............. 2 419 14,837 1.9 498 96
Columbia, Maryland...... 1 198 11,843 1.5 782 97
-- ------ -------------- ---------- ------- --
Total......... 71 18,851 $796,364 100.0% $ 591 95%
== ====== ============== ========== ======= ============
</TABLE>
- ---------------
(1) Represents the total acquisition cost of the property plus the capitalized
cost of improvements made subsequent to acquisition.
(2) Represents the weighted average of monthly rent charged for occupied units
and rent asked for unoccupied units at December 31, 1994.
(3) Represents the average of physical occupancy at each month end for the
period held during 1994.
The Company owns all of its communities in fee simple. The following table
describes the Company's apartment communities.
<TABLE>
<CAPTION>
AVERAGE RENT(2)
---------------------------- AVERAGE
OCCUPANCY
AVERAGE PER MONTH PER SQ. FT. (3)
DATE COST(1) COST UNIT SIZE ------------ -------------- ------------
NAME LOCATION BUILT UNITS (IN THOUSANDS) PER UNIT(1) (SQ. FT.) 1993 1994 1993 1994 1993 1994
- ------------- ---------------- ----- ------ --------------- ----------- --------- ---- ---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLORIDA
Audubon
Village..... Tampa 1990 447 $ 19,998 $44,738 849 $569 $583 $0.67 $0.69 99% 95%
Augustine
Club........ Tallahassee 1988 222 8,110 36,532 900 581 593 0.65 0.66 93 98
Auvers
Village..... Orlando 1991 480 22,183 46,215 1,021 617 632 0.60 0.62 96 92
Bermuda
Cove........ Jacksonville 1989 350 15,141 43,260 912 (4) 640 (4) 0.70 (4 ) 98
Bishop
Park........ Orlando 1991 324 16,402 50,623 903 582 600 0.64 0.66 92 85
Claire
Point....... Jacksonville 1986 256 11,987 46,824 1,010 594 603 0.59 0.60 100 97
Colony
Place....... Ft. Myers 1991 300 18,023 60,077 1,136 669 689 0.59 0.61 98 97
Conway
Station..... Orlando 1987 242 10,850 44,835 787 554 559 0.70 0.71 (4 ) 90
Copper
Terrace..... Orlando 1989 300 11,723 39,077 902 623 644 0.69 0.71 95 95
Cypress
Cove........ Melbourne 1990 326 15,154 46,488 1,027 608 626 0.59 0.61 93 96
Deerbrook.... Jacksonville 1983 144 6,958 48,319 1,293 630 664 0.49 0.51 96 98
Falls........ Tampa 1985 240 8,085 33,688 658 495 496 0.75 0.75 93 93
Indigo
Lakes....... Daytona Beach 1989 304 11,057 36,372 882 (4) 544 (4) 0.62 (4 ) 90
Lakeridge.... Miami 1991 175 11,837 67,640 970 835 851 0.86 0.88 98 98
Lexington
Park........ Orlando 1988 252 10,924 43,349 799 561 566 0.70 0.71 91 95
Lofton
Place....... Tampa 1988 280 14,559 51,996 953 (4) 615 (4) 0.65 91 95
Mission
Bay......... Orlando 1991 304 16,853 55,438 1,087 692 702 0.64 0.65 97 97
Polos........ Ft. Myers 1991 328 15,074 45,957 955 604 616 0.63 0.65 94 95
Princeton
Square...... Jacksonville 1984 288 8,105 28,146 738 453 477 0.61 0.65 76 95
Promenade.... Tampa 1994 334 20,844 62,407 978 (4) 765 (4) 0.78 (4 ) 92
Royal Oaks... Jacksonville 1991 284 12,229 43,060 816 562 574 0.69 0.70 96 98
</TABLE>
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<PAGE> 21
<TABLE>
<CAPTION>
AVERAGE RENT(2)
---------------------------- AVERAGE
OCCUPANCY
AVERAGE PER MONTH PER SQ. FT. (3)
DATE COST(1) COST UNIT SIZE ------------ -------------- ------------
NAME LOCATION BUILT UNITS (IN THOUSANDS) PER UNIT(1) (SQ. FT.) 1993 1994 1993 1994 1993 1994
- ------------- ---------------- ----- ------ --------------- ----------- --------- ---- ---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spicewood Springs....... Jacksonville 1986 512 16,196 31,633 759
468
4840.620.649597Timberwalk... Jacksonville 1987 284 12,592 44,338 851 540 559 0.63 0.66 97 95
Viridian
Lake........ Ft. Myers 1991 320 12,365 38,641 863 606 614 0.70 0.71 91 95
Waterford.... Jacksonville 1988 432 18,945 43,854 1,066 598 617 0.56 0.58 96 98
Waterford
Village..... Delray Beach 1989 236 13,015 55,148 910 (4) 731 (4) 0.80 (4 ) 94
Welleby Lake
Club........ Ft. Lauderdale 1991 304 18,029 59,306 951 746 789 0.78 0.83 99 96
GEORGIA
Belmont
Crossing.... Atlanta 1988 316 13,151 41,617 1,023 564 587 0.55 0.57 96 96
Belmont
Landing..... Atlanta 1988 424 15,880 37,453 911 544 556 0.60 0.61 95 93
Champions'
Park........ Atlanta 1987 252 11,362 45,087 806 (4) 628 (4) 0.78 (4 ) 98
Downtown..... Augusta (5) 76 3,351 44,092 961 425 442 0.48 0.47 95 94
Greentree.... Savannah 1983 194 7,016 36,165 852 529 533 0.62 0.63 97 93
Gwinnett
Crossing.... Atlanta 1990 314 9,822 31,280 846 529 551 0.63 0.65 98 98
Harvest
Grove....... Atlanta 1986 376 10,943 29,104 927 519 536 0.56 0.58 97 98
Huntington... Savannah 1986 147 5,106 34,735 812 557 570 0.69 0.70 99 99
Lexington
Glen........ Atlanta 1990 480 30,792 64,150 1,095 692 740 0.63 0.68 97 95
Magnolia
Villa....... Savannah 1986 144 5,366 37,264 1,119 550 548 0.49 0.49 98 98
Marsh Cove... Savannah 1983 188 7,818 41,585 1,053 569 587 0.54 0.56 98 97
Shadow
Lake........ Atlanta 1989 228 9,684 42,474 1,018 (4) 579 (4) 0.57 (4 ) 98
South
Augusta..... Augusta 1950 114 1,661 14,570 682 280 289 0.41 0.42 89 82
Sweetwater
Glen........ Atlanta 1986 200 5,830 29,150 802 501 533 0.62 0.66 92 96
West Wind
Landing..... Savannah 1985 192 6,986 36,385 1,124 541 594 0.48 0.53 99 99
Willow
Trail....... Atlanta 1985 224 7,618 34,009 860 511 532 0.59 0.62 86 94
Windridge.... Atlanta 1982 272 11,260 41,397 845 (4) 578 (4) 0.68 (4 ) 98
Woodcrest.... Augusta 1982 248 8,223 33,157 875 475 494 0.54 0.56 80 88
Woodknoll.... Augusta 1975 52 1,479 28,442 900 417 432 0.46 0.48 98 98
MARYLAND
Clarys
Crossing.... Columbia 1984 198 11,843 59,813 938 (4) 782 (4) 0.83 (4 ) 97
NORTH
CAROLINA
Adams Farm... Greensboro 1987 300 14,543 48,477 1,005 (4) 633 (4) 0.63 (4 ) 98
Berkshire
Place....... Charlotte 1982 240 8,632 35,967 882 493 540 0.56 0.61 98 98
Chatham
Wood........ Greensboro 1986 208 7,029 33,793 811 465 479 0.57 0.59 97 98
Duraleigh
Woods....... Raleigh 1987 362 17,670 48,812 784 (4) 625 (4) 0.80 (4 ) 96
English
Hills....... Charlotte 1984 280 9,896 35,343 688 520 520 0.76 0.76 (4 ) 98
Hunt Club.... Charlotte 1990 300 10,561 35,203 891 586 622 0.66 0.70 87 98
Lake Point... Charlotte 1984 296 10,031 33,889 918 484 515 0.53 0.56 87 97
Misty
Woods....... Raleigh 1984 360 10,168 28,244 766 507 532 0.66 0.69 97 98
Sailboat
Bay......... Raleigh 1986 192 6,147 32,016 641 460 492 0.72 0.77 98 98
Sommerset
Place....... Raleigh 1983 144 5,350 37,153 780 532 562 0.68 0.72 98 97
Steeplechase... Charlotte 1986 247 8,830 35,749 724 533 533 0.74 0.74 (4 ) 91
Timber
Hollow...... Raleigh 1986 198 6,408 32,364 735 545 576 0.74 0.78 99 99
OHIO
Hunters
Chase....... Cleveland 1987 244 13,884 56,902 890 (4) 708 (4) 0.80 (4 ) 97
Saw Mill..... Columbus 1987 340 19,651 57,797 1,161 (4) 699 (4) 0.60 (4 ) 93
SOUTH
CAROLINA
Haywood
Pointe...... Greenville 1985 216 6,769 48,812 848 491 511 0.58 0.60 92 98
Hollows...... Columbia 1987 212 6,351 29,958 762 469 482 0.62 0.63 89 94
Quarterdeck... Charleston 1986 230 9,405 40,891 810 519 531 0.64 0.66 85 98
Summit
Place....... Charleston 1985 226 8,015 35,465 892 453 459 0.51 0.51 88 88
Waters
Edge........ Charleston 1985 200 7,644 38,220 911 512 527 0.56 0.58 95 95
Windsor
Place....... Charleston 1984 224 7,754 34,616 953 504 512 0.53 0.54 89 90
TENNESSEE
Crystal
Springs..... Nashville 1986 127 3,536 27,843 676 (4) 388 (4) 0.57 (4 ) 97
The
Landings.... Memphis 1986 292 11,301 38,702 786 (4) 546 (4) 0.70 (4 ) 95
VIRGINIA
Champions'
Club........ Richmond 1988 212 10,0991 47,637 776 (4) 650 (4) 0.84 (4 ) 93
Hickory
Creek....... Richmond 1984 294 14,261 48,507 851 (4) 668 (4) 0.79 (4 ) 92
-
------ --------------- ----------- --------- ---- ---- ----- ----- ----
Totals... 18,851 $ 796,364 $42,245 900 $551 $591 $0.62 $0.66 93% 95%
</TABLE>
- ---------------
(1) Represents the total acquisition cost of the property plus the capitalized
cost of improvements made subsequent to acquisition.
(2) Represents the weighted average of monthly rent charged for occupied units
and rent asked for unoccupied units at December month end.
(3) Represents the average of physical occupancy at each month end for the
period held.
(4) Properties not owned during period indicated.
(5) These units consist of three locations, built and acquired at various times.
Residents at the Company's apartments generally earn middle and upper
middle levels of incomes, and typically include young professionals, white
collar workers, medical personnel,
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<PAGE> 22
teachers, members of the military, single parents, single adults and young
families. These residents often have the means to own homes but choose to live
in apartment communities because of their current employment, family or other
personal circumstances. There is a steady turnover of leases at the Company's
communities, allowing rents to be adjusted upward as demand allows. About 60% of
the Company's units turn over each year, a rate the Company believes is typical
for higher end apartment communities. Leases are generally for either six or
twelve month terms.
MARKET CONDITIONS
The Company believes that investments in apartments in the Southern region
of the U.S. are attractive because of the favorable relationship between supply
and demand for apartment rentals in the region. The twenty-five metropolitan
areas in which the Company operates contain 11% of the country's total
population and as a group have experienced growth in households, a key
determinant of apartment demand, well in excess of national averages during the
1980's and 1990's. U.S. Census data indicates that from 1980 to 1990 total
households increased 27% in these cities as a group versus an increase of 13%
nationally. From 1990 to 1993, households increased 9% in these cities versus an
increase of 3% nationally and from 1993 to 1998 households are expected to
increase 9% in these cities versus 7% nationally. In addition, multi-family
housing starts in the Company's markets fell from a high of 165,200 units in
1987 to 23,905 in 1992, and were 35,213 in 1993 and 52,982 on an annualized
basis for the first ten months of 1994.
In part due to this favorable supply and demand relationship, the Company
is experiencing its highest occupancy in recent years. In addition, the strong
rental market has produced conditions which make the construction of new
apartment communities financially feasible in certain locations. While
construction has begun to rise from historically low levels in recent years, the
Company does not expect added supply of apartments to meet added demand for the
foreseeable future and believes that current prices of existing apartment
properties offer it continued opportunities to acquire additional properties on
favorable terms.
The Company owns apartments in a number of cities with significant military
employment. The reduction of the nation's armed forces has cut military payrolls
in some of these cities and has adversely affected the rental market for some of
the Company's properties. The effect of military cutbacks, which will continue
for some time, are expected to be most severe in Charleston, and the Company
anticipates significant weakness there over the next several years as many of
that city's naval installations are closed. However, at December 31, 1994, the
Company's average occupancy in Charleston was 96%. The Augusta market is weak as
a result of job losses at local defense related industries and the city
experienced 91% occupancy at December 31, 1994. In the Company's other markets,
military employment is expected to either remain stable or rise or it is not a
significant portion of total employment. At December 31, 1994, the percentages
of the Company's occupants serving in the military were as follows: Augusta,
21%; Charleston, 17%; Savannah, 13%; Jacksonville, 6%; Melbourne, 5%; Orlando,
5%; Tampa, 1% and Columbia, 1%. Leases with military personnel account for less
than 4% of the Company's total leases.
ENVIRONMENTAL MATTERS
Landfill Sites. Portions of the Company's land holdings in Richmond
County, Georgia were used by the 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 the Company 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 ("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
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<PAGE> 23
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 the Company believes would
consist principally of additional testing of the site's groundwater and surface
water. The Company has had no 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, 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, the Company'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.
On July 1, 1994, the Environmental Protection Division of the State of
Georgia published its initial hazardous site inventory under the State's 1992
"Superfund" law, which requires investigation, and if appropriate, clean up of
listed sites. The New Savannah Road Landfill was included on this list in a
category of sites identified as having released hazardous substances above
reportable levels. The Company and its environmental consultants have evaluated
the action by the State and have initiated discussions with the State of Georgia
to determine whether it is appropriate for the New Savannah Road Landfill site
to be included on this list.
Should further investigation or remedial action be required for the
landfill sites, the Company believes that 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, and the company that owned the sites at the time of the disposal of
the waste. In the third quarter of 1994, the Company recognized a non-recurring
charge against income of $0.2 million associated with this matter. This is the
amount which the Company believes is the potential cost of its share of any
expenses which may be incurred if further investigation of the New Savannah Road
Landfill is required as a result of the action by the State of Georgia. There
can be no assurances that the Company will not have material liability with
respect to these landfill sites.
Southern Wood Piedmont-Augusta Site. A portion of the Company's land
holdings is located adjacent to a site formerly operated as a wood treatment
facility by Southern Wood Piedmont-Augusta. Southern Wood Piedmont-Augusta was
the subject of a property damage class action lawsuit arising from the alleged
contamination of that site and neighboring properties, including the Company
property. The Company received approximately $0.8 million in a 1990 settlement
of its property damage claim. In June 1992, the Company sold 16 acres of land
which may have been contaminated by Southern Piedmont-Augusta to that company.
The contamination at the Southern Wood Piedmont-Augusta site is the subject of
current remediation by Southern Wood Piedmont-Augusta under state oversight.
This includes remediation of contamination on the remaining Company property in
the area of the former plant. Although the Company expects that the state-
supervised efforts will sufficiently address the contamination on the Company's
property, there is no assurance that some remediation liability may not attach
to the Company.
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<PAGE> 24
MANAGEMENT
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
NAME AGE PRESENT PRINCIPAL OCCUPATION
- ------------------------------ --- ------------------------------------------------
<S> <C> <C>
Peter S. Knox III............. 59 Chairman of the Board
W. Tennent Houston............ 44 President of the Company; Director
W. Hale Barrett............... 66 Secretary; Director; Member of law firm Hull,
Towill, Norman & Barrett, counsel to the Company
Pierce Merry, Jr.............. 70 Director; Former Chairman of Boral Bricks, Inc.
(formerly Merry Companies, Inc.)
Hugh Calvin Long II........... 43 Director; Capital Area President, First Union
National Banks of Virginia, Maryland &
Washington D.C.
Michael N. Thompson........... 46 Vice President -- Acquisitions and Development
Joseph P. Bailey, III......... 36 Vice President -- Property Management
Ralph J. Simons............... 30 Vice President -- Property Management
Ronald J. Benton.............. 37 Vice President -- Accounting
Dorrie E. Green............... 36 Vice President -- Administration
</TABLE>
As of December 31, 1994, Mr. Knox beneficially owned 2,686,000 or 8.7% of
the Company's Common Stock. At that date all directors and executive officers as
a group, including Mr. Knox, beneficially owned 3,396,000 or 11.0% of the
outstanding shares of Common Stock.
DESCRIPTION OF SERIES C PREFERRED STOCK
The summary of certain terms and provisions of the Series C Preferred Stock
contained in this Prospectus Supplement does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the terms and
provisions of the Company's Articles of Incorporation, as amended (the
"Articles"), Bylaws, as amended, and the amendment to the Articles setting forth
the particular terms of the Series C Preferred Stock (the "Series C Amendment").
The Articles authorize the issuance of 20,000,000 shares of Preferred
Stock, without par value (the "Preferred Stock"), of which 2,516,324 shares of
the Company's $1.75 Series A Cumulative Convertible Preferred Stock, liquidation
preference $25.00 per share, and 4,000,000 shares of the Company's $2.205 Series
B Cumulative Convertible Preferred Stock, liquidation preference $25.00 per
share, were outstanding on December 31, 1994. The Preferred Stock may be issued
from time to time in one or more series, without shareholder approval, with such
voting powers (full or limited), designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations, or restrictions thereof as shall be established by the Board of
Directors. Thus, without shareholder approval, the Company could authorize the
issuance of Preferred Stock with voting, conversion and other rights that could
dilute the voting power and other rights of the holders of Common Stock and
Series C Preferred Stock.
GENERAL
On , 1995, the Board of Directors authorized the Company to
classify and issue the Series C Preferred Stock as part of the 20,000,000 shares
of the Company's authorized Preferred Stock.
When issued, the Series C Preferred Stock will be validly issued, fully
paid and nonassessable. The holders of the Series C Preferred Stock will have no
preemptive rights with respect to any shares
S-24
<PAGE> 25
of capital stock of the Company or any other securities of the Company
convertible into or carrying rights or options to purchase any such shares. The
Series C Preferred Stock will not be subject to any sinking fund or other
obligation of the Company to redeem or retire the Series C Preferred Stock.
Unless converted or redeemed by the Company into shares of Common Stock, the
Series C Preferred Stock will have a perpetual term, with no maturity. The
Company has filed a listing application with the NYSE for the listing of the
shares of Series C Preferred Stock under the symbol "MRYPrC."
RANKING
The Series C Preferred Stock will rank senior to the Common Stock with
respect to payment of dividends and amounts upon liquidation, dissolution or
winding up. The Series C Preferred Stock will rank on a parity with the Series A
Preferred Stock and the Series B Preferred Stock with respect to payment of
dividends and amounts upon liquidation, dissolution and winding up.
While any shares of Series C Preferred Stock are outstanding, the Company
may not authorize, create or increase the authorized amount of any class or
series of stock that ranks senior to the Series C Preferred Stock with respect
to the payment of dividends or amounts upon liquidation, dissolution or winding
up without the consent of the holders of two-thirds of the outstanding shares of
Series C Preferred Stock and all other shares of Voting Preferred Shares
(defined below), voting as a single class. However, the Company may create
additional classes of stock, increase the authorized number of shares of
Preferred Stock or issue series of Preferred Stock ranking on a parity with the
Series C Preferred Stock with respect, in each case, to the payment of dividends
and amounts upon liquidation, dissolution and winding up (a "Parity Stock")
without the consent of any holder of Series C Preferred Stock. The Series A
Preferred Stock and the Series B Preferred Stock are both Parity Stock. See
"Voting Rights" below.
DIVIDENDS
Holders of shares of Series C Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available for payment, cumulative cash dividends in an
amount per share equal to the greater of $ per annum or the cash dividends
(determined on each of the quarterly dividend payment dates referred to below)
on the number of shares of Common Stock, or portion thereof, into which a share
of Series C Preferred Stock is convertible. Dividends on the Series C Preferred
Stock will be payable quarterly in arrears on the last calendar day of March,
June, September and December of each year, commencing June 30, 1995 (and, in the
case of any accrued but unpaid dividends, at such additional times and for such
interim periods, if any, as determined by the Board of Directors). Each such
dividend will be payable to holders of record as they appear on the stock
records of the Company at the close of business on such record dates, not
exceeding 60 days preceding the payment dates thereof, as shall be fixed by the
Board of Directors of the Company. Dividends will begin to accrue on April 1,
1995. Dividends will be cumulative from such date, whether or not in any
dividend period or periods there shall be funds of the Company legally available
for the payment of such dividends. Accumulations of dividends on shares of
Series C Preferred Stock will not bear interest. Dividends payable on the Series
C Preferred Stock for any period greater or less than a full dividend period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends payable on the Series C Preferred Stock for each full dividend
period will be computed by dividing the annual dividend rate by four.
Except as provided in the next sentence, no dividend will be declared or
paid on any Parity Stock unless full cumulative dividends have been declared and
paid or are contemporaneously declared and funds sufficient for payment set
aside on the Series C Preferred Stock for all prior dividend periods. If accrued
dividends on the Series C Preferred Stock for all prior dividend periods have
not been paid in full, then any dividend declared on the Series C Preferred
Stock for any dividend period and on any Parity Stock will be declared ratably
in proportion to accrued and unpaid dividends on the Series C Preferred Stock
and such Parity Stock.
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The Company will not (i) declare, pay or set apart funds for the payment of
any dividend or other distribution with respect to any Junior Stock (as defined
below) or (ii) redeem, purchase or otherwise acquire for consideration any
Junior Stock through a sinking fund or otherwise (other than a redemption or
purchase or other acquisition of shares of Common Stock made for purposes of an
employee incentive or benefit plan of the Company or any subsidiary), unless (A)
all cumulative dividends with respect to the Series C Preferred Stock and any
Parity Stock at the time such dividends are payable have been paid or funds have
been set apart for payment of such dividends and (B) sufficient funds have been
paid or set apart for the payment of the dividend for the current dividend
period with respect to the Series C Preferred Stock and any Parity Stock. The
foregoing limitations do not restrict the Company's ability to take the
foregoing actions with respect to any Parity Stock.
As used herein, (i) the term "dividend" does not include dividends payable
solely in shares of Junior Stock on Junior Stock, or in options, warrants or
rights to holders of Junior Stock to subscribe for or purchase any Junior Stock,
and (ii) the term "Junior Stock" means the Common Stock, and any other class of
capital stock of the Company now or hereafter issued and outstanding that ranks
junior as to the payment of dividends or amounts upon liquidation, dissolution
and winding up to the Series C Preferred Stock.
REDEMPTION
Shares of Series C Preferred Stock will not be redeemable by the Company
prior to March 31, 2000, and at no time will the Series C Preferred Stock be
redeemable for cash. On and after March 31, 2000, the shares of Series C
Preferred Stock will be redeemable at the option of the Company, in whole or in
part, for such number of shares of Common Stock as equals the liquidation
preference of the Series C Preferred Stock to be redeemed (without regard to
accrued and unpaid dividends) divided by the Conversion Price (as defined below
under "Conversion Rights") as of the opening of business on the date set for
such redemption (equivalent to a conversion rate of shares of Common
Stock for each share of Series C Preferred Stock), subject to adjustment in
certain circumstances. The Company may exercise this option only if for 20
trading days, within any period of 30 consecutive trading days, including the
last trading day of such period, the closing price of the Common Stock on the
NYSE equals or exceeds the Conversion Price per share, subject to adjustments in
certain circumstances. In order to exercise its redemption option, the Company
must issue a press release announcing the redemption prior to the opening of
business on the second trading day after the conditions in the preceding
sentences have, from time to time, been met, but in no event prior to February
29, 2000.
Notice of redemption will be given by mail or by publication (with
subsequent prompt notice by mail) to the holders of the Series C Preferred Stock
not more than four business days after the Company issues the press release. The
redemption date will be a date selected by the Company not less than 30 nor more
than 60 days after the date on which the Company issues the press release
announcing its intention to redeem the Series C Preferred Stock. If fewer than
all of the shares of Series C Preferred Stock are to be redeemed, the shares to
be redeemed shall be selected by lot or pro rata or in some other equitable
manner determined by the Company.
On the redemption date, the Company must pay on each share of Series C
Preferred Stock to be redeemed any accrued and unpaid dividends, in arrears, for
any dividend period ending on or prior to the redemption date. In the case of a
redemption date falling after a dividend payment record date and prior to the
related payment date, the holders of the Series C Preferred Stock at the close
of business on such record date will be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date, notwithstanding the
redemption of such shares following such dividend payment record date. Except as
provided for in the preceding sentence, no payment or allowance will be made for
accrued dividends on any shares of Series C Preferred Stock called for
redemption or on the shares of Common Stock issuable upon such redemption.
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In the event that full cumulative dividends on the Series C Preferred Stock
and any Parity Stock have not been paid or declared and set apart for payment,
the Series C Preferred Stock may not be redeemed in part and the Company may not
purchase or acquire shares of Series C Preferred Stock otherwise than pursuant
to a purchase or exchange offer made on the same terms to all holders of shares
of Series C Preferred Stock.
On and after the date fixed for redemption, provided that the Company has
made available at the office of the Registrar and Transfer Agent a sufficient
number of shares of Common Stock and an amount of cash to effect the redemption,
dividends will cease to accrue on the Series C Preferred Stock called for
redemption (except that, in the case of a redemption date after a dividend
payment record date and prior to the related dividend payment date, holders of
Series C Preferred Stock on the dividend payment record date will be entitled on
such dividend payment date to receive the dividend payable on such shares), such
shares shall no longer be deemed to be outstanding and all rights of the holders
of such shares of Series C Preferred Stock shall cease except the right to
receive the shares of Common Stock upon such redemption and any cash payable
upon such redemption, without interest from the date of such redemption. At the
close of business on the redemption date, each holder of Series C Preferred
Stock (unless the Company defaults in the delivery of the shares of Common Stock
or cash) will be, without any further action, deemed a holder of the number of
shares of Common Stock for which such Series C Preferred Stock is redeemable.
Fractional shares of Common Stock are not to be issued upon redemption of
the Series C Preferred Stock, but, in lieu thereof, the Company will pay a cash
adjustment based on the current market price of the Common Stock on the day
prior to the redemption date.
LIQUIDATION PREFERENCE
The holders of shares of Series C Preferred Stock will be entitled to
receive in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, $25.00 per share of Series C
Preferred Stock plus an amount per share of Series C Preferred Stock equal to
all dividends (whether or not earned or declared) accrued and unpaid thereon to
the date of final distribution to such holders (the "Liquidation Preference"),
and no more.
Until the holders of the Series C Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of Junior
Stock upon the liquidation, dissolution or winding up of the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series C Preferred Stock are insufficient to pay in full the Liquidation
Preference and the liquidation preference with respect to any other shares of
Parity Stock, then such assets, or the proceeds thereof, will be distributed
among the holders of shares of Series C Preferred Stock and any such Parity
Stock ratably in accordance with the respective amounts which would be payable
on such shares of Series C Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full. Neither a consolidation or merger of
the Company with another corporation, a statutory share exchange by the Company
nor a sale or transfer of all or substantially all of the Company's assets will
be considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
VOTING RIGHTS
Except as indicated below, or except as otherwise from time to time
required by applicable law, the holders of shares of Series C Preferred Stock
will have no voting rights.
If six quarterly dividends payable on the Series C Preferred Stock or any
other Parity Stock are in
arrears, whether or not earned or declared, the number of directors then
constituting the Board of Directors of the Company will be increased by two and
the holders of shares of Series C Preferred Stock, voting together as a class
with the holders of any other series of Parity Stock (any such other series, the
"Voting Preferred Shares"), will have the right to elect two additional
directors to serve on the Company's Board of Directors at an annual meeting of
shareholders or a properly called
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special meeting of the holders of the Series C Preferred Stock and such Voting
Preferred Shares and at each subsequent annual meeting of shareholders until all
such dividends and dividends for the current quarterly period on the Series C
Preferred Stock and such other Voting Preferred Shares have been paid or
declared and set aside for payment.
The approval of two-thirds of the outstanding shares of Series C Preferred
Stock and all other series of Voting Preferred Shares similarly affected, voting
as a single class, will be required in order to amend the Articles to affect
materially and adversely the rights, preferences or voting power of the holders
of the Series C Preferred Stock or the Voting Preferred Shares or to authorize,
create, or increase the authorized amount of, any class of stock having rights
senior to the Series C Preferred Stock with respect to the payment of dividends
or amounts upon liquidation, dissolution or winding up. However, the Company may
create additional classes of Parity and Junior Stock, increase the authorized
number of shares of Parity and Junior Stock and issue additional series of
Parity and Junior Stock without the consent of any holder of Series C Preferred
Stock.
Except as required by law, the holders of Series C Preferred Stock will not
be entitled to vote on any merger or consolidation involving the Company or a
sale of all or substantially all of the assets of the Company. See "Conversion
Price Adjustments" below.
CONVERSION RIGHTS
Shares of Series C Preferred Stock will be convertible, in whole or in
part, at any time, at the option of the holders thereof, into shares of Common
Stock at a conversion price of $ per share of Common Stock (equivalent to
a conversion rate of shares of Common Stock for each share of Series C
Preferred Stock), subject to adjustment as described below ("Conversion Price").
The right to convert shares of Series C Preferred Stock called for redemption
will terminate at the close of business on a redemption date. For information as
to notices of redemption, see "Redemption" above.
Conversion of shares of Series C Preferred Stock, or a specified portion
thereof, may be effected by delivering certificates evidencing such shares,
together with written notice of conversion and a proper assignment of such
certificates to the Company or in blank, to the office or agency to be
maintained by the Company for that purpose. Initially such office will be the
principal corporate trust office of First Union National Bank of North Carolina,
Charlotte, North Carolina.
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
C Preferred Stock shall have been surrendered and notice shall have been
received by the Company as aforesaid (and if applicable, payment of an amount
equal to the dividend payable on such shares shall have been received by the
Company as described below) and the conversion shall be at the Conversion Price
in effect at such time and on such date.
Holders of shares of Series C Preferred Stock at the close of business on a
dividend payment record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date notwithstanding the
conversion of such shares following such dividend payment record date and prior
to such dividend payment date. However, shares of Series C Preferred Stock
surrendered for conversion during the period between the close of business on
any dividend payment record date and the opening of business on the
corresponding dividend payment date (except shares converted after the issuance
of a notice of redemption with respect to a redemption date during such period,
which will be entitled to such dividend) must be accompanied by payment of an
amount equal to the dividend payable on such shares on such dividend payment
date. A holder of shares of Series C Preferred Stock on a dividend payment
record date who (or whose transferee) tenders any such shares for conversion
into shares of Common Stock on such dividend payment date will receive the
dividend payable by the Company on such shares of Series C Preferred Stock on
such date, and the converting holder need not include payment of the amount of
such dividend upon surrender of shares of Series C Preferred Stock for
conversion. Except as provided above, the
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Company will make no payment or allowance for unpaid dividends, whether or not
in arrears, on converted shares or for dividends on the shares of Common Stock
issued upon such conversion.
Fractional shares of Common Stock are not to be issued upon conversion but,
in lieu thereof, the Company will pay a cash adjustment based on the current
market price of the Common Stock on the day prior to the conversion date.
CONVERSION PRICE ADJUSTMENTS
The Conversion Price is subject to adjustment upon certain events,
including (i) dividends (and other distributions) payable in Common Stock or any
class of capital stock of the Company, (ii) the issuance to all holders of
Common Stock of certain rights or warrants entitling them to subscribe for or
purchase Common Stock at a price per share less than the fair market value per
share of Common Stock, (iii) subdivisions, combinations and reclassifications of
Common Stock, and (iv) distributions to all holders of Common Stock of evidences
of indebtedness of the Company or assets (including securities, but excluding
those dividends, rights, warrants and distributions referred to above and
excluding Permitted Common Stock Cash Distributions, as herein defined).
"Permitted Common Stock Cash Distributions" means cash dividends and
distributions paid with respect to the Common Stock after December 31, 1994 not
in excess of the sum of the Company's cumulative undistributed net earnings at
December 31, 1994, plus the cumulative amount of funds from operations, as
determined by the Board of Directors on a basis consistent with the financial
reporting practices of the Company, after December 31, 1994, minus the
cumulative amount of dividends accrued or paid on the Series C Preferred Stock
or any other class of Preferred Stock after the date of this Prospectus
Supplement. In addition to the foregoing adjustments, the Company will be
permitted to make such reductions in the Conversion Price as it considers to be
advisable in order that any event treated for Federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the holders of the
Common Stock, or, if that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
In case the Company shall be a party to any transaction (including without
limitation a merger, consolidation, statutory share exchange, tender offer for
all or substantially all of the shares of Common Stock or sale of all or
substantially all of the Company's assets), in each case as a result of which
shares of Common Stock will be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series C Preferred Stock, if convertible after the consummation of the
transaction, will thereafter be convertible into the kind and amount of shares
of stock and other securities and property receivable (including cash or any
combination thereof) upon the consummation of such transaction by a holder of
that number of shares or fraction thereof of Common Stock into which one share
of Series C Preferred Stock was convertible immediately prior to such
transaction (assuming such holder of Common Stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
plurality of non-electing shares). The Company may not become a party to any
such transaction unless the terms thereof are consistent with the foregoing.
No adjustment of the Conversion Price will be required to be made in any
case until cumulative adjustments amount to 1% or more of the Conversion Price.
Any adjustments not so required to be made will be carried forward and taken
into account in subsequent adjustments.
TRANSFER AGENT, REGISTRAR, DIVIDEND DISBURSING AGENT AND REDEMPTION AGENT
The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of Series C Preferred Stock will be First Union National
Bank of North Carolina, Charlotte, North Carolina.
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TAXATION
This section is a general summary of the material federal income tax
considerations that may be relevant to prospective purchasers of shares of
Series C Preferred Stock under the Internal Revenue Code of 1986, as amended
(the "Code") and is based upon applicable Code provisions, rules and regulations
promulgated thereunder, and reported judicial and administrative interpretations
thereof, all of which are subject to change (possibly on a retroactive basis).
The following discussion does not include all matters that may be relevant
to any particular holder of shares of Series C Preferred Stock in light of such
holder's particular facts and circumstances. Certain holders, such as foreign
persons, tax-exempt entities, insurance companies and financial institutions,
may be subject to special rules not discussed below. In particular, the
following discussion does not discuss issues under the Employee Retirement
Income Security Act of 1974, as amended, the Foreign Investment in Real Property
Tax Act of 1980, and foreign, state and local tax laws.
Each prospective purchaser should consult, and must depend on, his own tax
advisor regarding the specific tax consequences to him of the purchase,
ownership, and sale of the shares of Series C Preferred Stock and of the
Company's election to be taxed as a REIT, including the federal, state, local,
foreign and other tax consequences of such purchase, ownership, sale and
election and of potential changes in applicable tax laws.
TAXATION OF THE COMPANY
Beginning with its taxable year 1987, and for all of its subsequent taxable
years, the Company has elected to be taxed as a REIT under the Code. The Company
has received an opinion of Hull, Towill, Norman & Barrett, P.C., counsel to the
Company, that the Company met the requirements for qualification and taxation as
a REIT for the years 1987 through 1993, subject to the qualification that, with
respect to the taxable year 1989, an issue exists as to whether the Company
satisfied the requirement that it distribute dividends equal to 95% of its REIT
taxable income (other than net capital gain) for such taxable year. Hull,
Towill, Norman & Barrett, P.C. is of the opinion, however, that if such issue
were successfully asserted by the Internal Revenue Service, the Company would be
entitled to pay "deficiency dividends" in compliance with the provisions of
Section 860 of the Code and thus preserve its REIT qualification for the taxable
year 1989 and subsequent taxable years. If a deficiency dividend is required,
the Company has estimated that as of December 31, 1994 the amount of the
dividend and interest thereon (net of related tax refunds) would be
approximately $660,000. The Company also expects to receive an opinion from
Hull, Towill, Norman & Barrett, P.C. that the Company met the requirements for
qualification and taxation as a REIT for 1994 and that the Company's diversity
of stock ownership and proposed method of operation should enable it to meet the
requirements for qualification and taxation as a REIT for the taxable year 1995.
The opinions referred to above are based upon (i) representations made by
officers of the Company with respect to various factual matters relating to the
Company's operations and stock ownership, (ii) current law, including relevant
statutes, regulations, judicial and administrative precedent (which law is
subject to change on a retroactive basis), and (iii) the assumption that the
Company will continue to meet certain ownership tests and operate in the manner
described in this Prospectus Supplement. In particular, the Company's ability to
continue to qualify as a REIT under the requirements of the Code and the
regulations promulgated thereunder is dependent upon the Company's ability to
meet the stock ownership tests and, through actual annual operating results, the
various other qualification tests discussed below. No assurance can be given
that the actual results of the Company's operations and its stock ownership for
the current or any future taxable year will satisfy such requirements.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain requirements relating to its assets, income, stock ownership and
distributions to shareholders. Generally, at the end of each calendar quarter,
(i) at least 75% of the value of the total assets of the
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Company must consist of real estate assets, cash or government securities, (ii)
not more than 25% of the value of its total assets may consist of securities
(other than government securities), and (iii) the Company may not own more than
10% of the outstanding voting securities of any one issuer and may not own
securities of any one issuer whose value represents more than 5% of the total
value of the Company's assets (shares of qualified REITs and of certain
wholly-owned subsidiaries are exempt from the requirements described in clauses
(ii) and (iii)).
The Company must also satisfy three gross income tests. First, at least 75%
of a REIT's gross income must be derived from specified real estate sources for
each taxable year. Income that qualifies under the 75% test includes certain
qualified rents from real property, gains from the sale of real property not
held primarily for sale to customers in the ordinary course of business,
dividends on REIT shares, interest on loans secured by mortgages on real
property, income from foreclosure property, and certain qualified temporary
investment income attributable to the investment of new capital received by the
REIT in exchange for either stock or certain debt instruments during the one-
year period following the receipt of such new capital. In order for rents to
qualify under the 75% test, they may not be derived from tenants having certain
relationships with the Company and may not be based on the income or profits of
any person, except that they may be based on a fixed percentage or percentages
of gross income or receipts. Further, the REIT may not manage the property or
furnish services to the tenants from whom the rents are received unless either
(i) the property is managed by an independent contractor which is paid an
arm's-length fee for its services and from which the REIT derives no income or
(ii) any services performed are of a type customarily rendered in connection
with the rental of space for occupancy only. In this regard, it should be noted
that the Company manages its rental properties directly. The Company, however,
has received a favorable ruling from the Internal Revenue Service with respect
to the customary nature of most of the services that it currently provides in
connection with its residential and commercial rental properties. The Company
will be entitled to rely on the ruling only to the extent that its management
operations do not differ materially from those described in its request for the
ruling.
Second, at least 95% of the Company's gross income for each taxable year
must be derived from income that qualifies under the 75% test (other than
qualified temporary investment income), plus dividends, interest or gains from
disposition of certain stock or securities.
Third, gross income from the sale or other disposition (i) of stock and
securities held for less than one year (ii) of property in certain prohibited
transactions and (iii) of real property held for less than four years must
comprise less than 30% of the gross income for each taxable year of the Company.
In order to qualify as a REIT, the Company must also satisfy certain
ownership requirements with respect to its shares of capital stock, including
both Common Stock and Preferred Stock. The shares of capital stock of the
Company must be held by at least 100 shareholders, and no more than 50% in value
of the outstanding shares may be owned, actually or constructively, by five or
fewer individuals (including certain types of entities that are treated as
individuals for this purpose) at any time during the last half of the Company's
taxable year. There are no restrictions in the Company's Articles that would
limit the ability of a holder of Series B Preferred Stock, Series C Preferred
Stock or Common Stock to transfer shares if such transfer would cause or
contribute to a violation of the stock ownership requirements. Thus, while the
Company intends to monitor carefully the diversity of its stock ownership and
expects to be able to meet the ownership requirements in the future, there can
be no assurance that transfers of shares of capital stock beyond the control of
the Company, or changes in the relative values of the Preferred Stock and the
Common Stock, could not result in the Company's failure to satisfy the stock
ownership requirements.
Finally, the Company must distribute to its shareholders annually an amount
(determined without regard to capital gains dividends) at least equal to (i) 95%
of its REIT taxable income (computed without regard to net capital gains and the
dividends received deduction), plus (ii) 95% of the after-tax income from any
foreclosure property, minus (iii) certain noncash income. If the
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Company were to fail the 95%-distribution requirement as to a particular taxable
year, then, provided certain conditions are met, the Company generally would be
entitled to cure the deficiency retroactively by paying deficiency dividends to
its shareholders. However, the Company would be liable for interest charges on
such deficiency dividends.
So long as the Company satisfies the above described requirements and thus
qualifies for taxation as a REIT, it generally will not be subject to federal
income tax on that portion of its taxable income and capital gain that is
currently distributed to its shareholders. Any undistributed taxable income or
capital gain, however, will be taxed to the Company at regular corporate rates.
In addition, the Company may be subject to other special income and excise taxes
(including the alternative minimum tax) in certain circumstances.
If the Company fails to qualify as a REIT for any taxable year and certain
relief provisions do not apply, the Company will be subject to federal income
tax (including the alternative minimum tax) on its taxable income at regular
corporate rates, and it will not receive a deduction for dividends paid to its
shareholders. Additionally, any distributions to shareholders will still be
taxable as ordinary income to the extent of current and accumulated earnings and
profits (although such dividends will be eligible, subject to certain
limitations, for the corporate dividends-received deduction as to a corporate
shareholder). Thus, the Company's income would be subject to "double
taxation" -- at the corporate level and the shareholder level -- to the extent
such income is distributed to shareholders. Failure to qualify as a REIT could
force the Company to reduce significantly its distributions and to incur
substantial indebtedness or liquidate substantial investments in order to pay
the resulting corporate taxes. In addition, the Company would not be eligible to
elect REIT status for the four subsequent taxable years, unless its failure to
qualify was due to reasonable cause and not willful neglect, and certain other
requirements were satisfied. In order to elect again to be taxed as a REIT, the
Company would be required to distribute all of its earnings and profits
accumulated in any non-REIT taxable year. Because the Company had substantial
earnings and profits attributable to pre-1987 taxable years, it could be
required to incur substantial indebtedness or liquidate substantial investments
in order to make such distributions which would be taxable as ordinary income to
its shareholders. Further, the Company might be subject to taxation on any
unrealized gain inherent in its assets at the time of such election.
TAXATION OF THE SHAREHOLDERS OF THE COMPANY
Distributions to Holders. Distributions with respect to the Series C
Preferred Stock will be taxable as dividends to the extent of the Company's
current or accumulated earnings and profits as determined for federal income tax
purposes. Distributions with respect to Common Stock out of its current or
accumulated earnings and profits that remain after an appropriate allocation of
such earnings and profits to distributions made to holders of the Series C
Preferred Stock will generally be taxed to the holders of Common Stock as
ordinary income. Distributions with respect to the Series C Preferred Stock or
Common Stock in excess of earnings and profits will be treated first as a
tax-free return of capital to the holder, to the extent of the holder's basis in
such stock (and will correspondingly reduce such basis) and then as a capital
gain, to the extent of any excess over such basis (assuming the holder holds the
Series C Preferred Stock or Common Stock as a capital asset). If distributions
to holders of Preferred Stock exceed the Company's current and accumulated
earnings and profits, the Company will allocate such earnings and profits among
distributions to the holders of all classes of the Preferred Stock in proportion
to the total distributions for such year with respect to such shares (but will
allocate no part of the earnings and profits to holders of Common Stock).
Dividends will be taxed as ordinary income to the holder except to the
extent that the dividend is a distribution of the Company's net capital gain and
is properly designated by the Company as a capital gain dividend. The Company
presently intends to designate the respective dividends paid by the Company to
the holders of all classes of the Preferred Stock and Common Stock in such a
manner that the aggregate dividends paid to the holders of each such class of
stock annually will
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have the same relative proportions of capital gain dividends (if any are so
designated) and ordinary income dividends. The Company will notify each holder
of the Series C Preferred Stock or Common Stock as to the portions of each
distribution which, in its judgment and consistent with the intention stated in
the preceding sentence, constitute ordinary income and capital gain.
Capital gain distributions to corporate holders are generally taxed in the
same manner as ordinary income, except that capital losses of such holders are
deductible only to the extent of capital gains. Under sec.291 of the Code,
however, corporate holders may be required to treat up to 20% of any such
capital gain as ordinary income. For noncorporate shareholders, net capital
gains are taxed at a maximum rate of 28%, while short-term capital gains and
ordinary income are taxed at a maximum rate of 39.6%. However, because of
certain limitations on itemized deductions and personal exemptions, the
effective rate may be higher in certain circumstances. Except to a very limited
extent, capital losses of noncorporate shareholders are deductible only to the
extent of capital gains.
Ordinary and capital gain dividends are not eligible for the
dividends-received deduction that is generally allowed to corporate
shareholders.
Sale of Series C Preferred Stock or Common Stock. Upon the sale or
exchange of Series C Preferred Stock or Common Stock, the holder will recognize
gain or loss equal to the difference between the amount realized on such sale
and the tax basis of such Series C Preferred Stock or Common Stock. Assuming
such stock is held as a capital asset, such gain or loss will be a long-term
capital gain or loss if the Series C Preferred Stock or Common Stock have been
held for more than one year. However, any loss recognized by a holder on the
sale of a share of Series C Preferred Stock or Common Stock held for not more
than six months and with respect to which a capital gain dividend was received
will be treated as a long-term capital loss to the extent of the amount of
distributions from the Company with respect to such share that was required to
be treated by such holder as long-term capital gain.
Redemption or Conversion of Series C Preferred Stock to Common Stock. No
gain or loss generally will be recognized upon redemption or conversion of
Series C Preferred Stock into Common Stock except with respect to any cash paid
in lieu of fractional shares of Common Stock. The tax basis of the Common Stock
received upon redemption or conversion will be equal to the tax basis of the
Series C Preferred Stock redeemed or converted and, provided the Series C
Preferred Stock is held as a capital asset, the holding period of the Common
Stock will include the holding period of the Series C Preferred Stock redeemed
or converted.
Additionally, if a conversion takes place when there is a dividend
arrearage on the Series C Preferred Stock and the fair market value of the
Common Stock exceeds the issue price of the Series C Preferred Stock, a portion
of the Common Stock received might be treated as a dividend distribution taxable
as ordinary income.
Adjustment of Conversion Price. Under Section 305 of Code, holders of
preferred stock may be deemed to have received a constructive distribution of
stock that is taxable as a dividend where the conversion ratio is adjusted to
reflect a cash or property distribution with respect to the common stock into
which it is convertible. An adjustment to the conversion price made pursuant to
a bona fide, reasonable adjustment formula which has the effect of preventing
dilution of the interest of the holders, however, will generally not be
considered to result in a constructive distribution of stock. Certain of the
possible adjustments provided in the Series C Preferred Stock may not qualify as
being pursuant to a bona fide, reasonable adjustment formula. If a nonqualifying
adjustment were made, the holders of Series C Preferred Stock might be deemed to
have received a taxable stock dividend.
Unrelated Business Income Tax of Pension Trusts. If any exempt pension
trust described in Section 401(a) becomes the owner of more than 10% (by value)
of the outstanding stock of the Company and certain other conditions (generally
related to the existence of a high concentration of ownership of Company stock
in the hands of such pension trusts) are satisfied, a portion of the
S-33
<PAGE> 34
dividends received by the pension trust with respect to its Company stock may be
subject to the unrelated business income tax. Exempt pension trusts should
consult their tax advisors regarding the advisability of acquiring more than 10%
(by value) of the outstanding stock of the Company.
Backup Withholding. Under the backup withholding provisions of the Code
and applicable Treasury regulations thereunder a holder of Series C Preferred
Stock or Common Stock may be subject to backup withholding at the rate of 31%
with respect to dividends paid on, or the proceeds of a sale or redemption of,
such stock unless (i) such holder is a corporation or comes within certain other
exempt categories and when required demonstrates this fact, or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with the applicable requirements of the
backup withholding rules. The amount of any backup withholding from a payment to
a holder will be allowed as a credit against the holder's federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
Other Tax Matters. Holders of Series C Preferred Stock or Common Stock
will not be permitted to deduct any losses of the Company (whether ordinary or
capital) on their own income tax returns. In addition, under regulations to be
promulgated by the Treasury Department, holders of Series C Preferred Stock or
Common Stock may be required to report as tax preference items or adjustments
certain items and adjustments of the Company for purposes of determining the
holders' alternative minimum tax liability, if any.
S-34
<PAGE> 35
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Goldman, Sachs & Co., PaineWebber Incorporated
and Interstate/Johnson Lane Corporation, have severally agreed to purchase from
the Company the following respective number of shares of Series C Preferred
Stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus Supplement:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated..................................................
Goldman, Sachs & Co..............................................................
PaineWebber Incorporated.........................................................
Interstate/Johnson Lane Corporation..............................................
---------
Total............................................................................ 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase the total number of shares of Series C Preferred
Stock offered hereby if any such shares of Series C Preferred Stock are
purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Series C Preferred Stock directly to the public
at the public offering price set forth on the cover of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
public offering, the public offering price and other selling terms may be
changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus Supplement, to purchase up
to 600,000 additional shares of Series C Preferred Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus Supplement. To the extent that the Underwriters exercise
such option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof which the number of shares of Series C
Preferred Stock to be purchased by it shown in the table above bears to
4,000,000, and the Company will be obligated, pursuant to the option, to sell
such shares to the Underwriters. The Underwriters may exercise such option only
to cover over-allotments made in connection with the sale of the shares of
Series C Preferred Stock offered hereby. If purchased, the Underwriters will
offer such additional shares on the same terms as those on which the 4,000,000
shares are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Company and its Executive Officers and Directors have entered into
agreements prohibiting the sale of their shares of Common Stock and Preferred
Stock, if any, for 90 days after the date of this Prospectus Supplement without
the prior consent of the Representatives of the Underwriters.
EXPERTS
The audited financial statements of the Company incorporated by reference
in this Prospectus Supplement and elsewhere in the registration statement of
which this Prospectus Supplement is a part, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in
S-35
<PAGE> 36
their reports with respect thereto, and are incorporated herein in reliance upon
the authority of said firm as experts in giving said reports.
LEGAL OPINIONS
Certain legal opinions relating to tax matters and the shares of the Series
C Preferred Stock offered hereby will be passed upon for the Company by Hull,
Towill, Norman & Barrett, P.C., Augusta, Georgia. Certain legal matters relating
to the validity of the Series C Preferred Stock offered hereby will be passed
upon for the Underwriters by Piper & Marbury, Baltimore, Maryland. W. Hale
Barrett, a member of the firm of Hull, Towill, Norman & Barrett, P.C., is a
director and secretary of the Company. He and members of his firm own 25,751
shares of Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the documents incorporated by reference pursuant to the
accompanying Prospectus dated February 10, 1995, there is incorporated by
reference herein the Company's current report on Form 8-K filed by the Company
with the Securities and Exchange Commission on February 14, 1995. For additional
information with respect to documents incorporated by reference herein, see
"Incorporation Of Certain Documents By Reference" in the accompanying
Prospectus.
S-36
<PAGE> 37
PROSPECTUS
$400,000,000
MERRYLAND
& INVESTMENT COMPANY, INC.
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES,
COMMON STOCK AND COMMON STOCK WARRANTS
------------------
Merry Land & Investment Company, Inc. ("Merry Land" or the "Company") may
from time to time offer in one or more series (i) its unsecured senior or
subordinated debt securities (the "Debt Securities"), (ii) shares or fractional
shares of its preferred stock, without par value (the "Preferred Stock"), (iii)
shares of Preferred Stock represented by depositary shares (the "Depositary
Shares"), (iv) shares of its common stock, without par value (the "Common
Stock"), or (v) warrants to purchase Common Stock (the "Common Stock Warrants"),
with an aggregate public offering price of up to $400,000,000 on terms to be
determined at the time of offering. The Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Common Stock Warrants (collectively, the
"Offered Securities") may be offered, separately or together, in separate series
in amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Company, as defined. See "Description of Debt Securities."
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the Holder, terms for sinking fund payments, terms
for conversion into Preferred Stock, Common Stock or other Company securities,
additional covenants, and any initial public offering price; (ii) in the case of
Preferred Stock, the specific title and stated value, any dividend, liquidation,
redemption, conversion, voting and other rights, and any initial public offering
price; (iii) in the case of Depositary Shares, the fractional share of Preferred
Stock represented by each such Depositary Share; (iv) in the case of Common
Stock, any initial public offering price; and (v) in the case of Common Stock
Warrants, the duration, offering price, exercise price and detachability. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Offered Securities, in each case
as may be appropriate to preserve the status of the Company as a real estate
investment trust for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly by the Company, through
agents designated from time to time by the Company, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the Offered Securities and the method and terms of the offering.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 10, 1995.
<PAGE> 38
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and its Regional Offices located at: 75 Park Place, New York, New
York 10017; and 500 West Madison Street, Chicago, Illinois 60661; and can also
be inspected and copied at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has filed a registration statement with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities (the "Registration Statement"). As permitted by the rules
and regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement. For further information,
reference is made to such Registration Statement and to the exhibits, which may
be inspected and copied at or obtained from the Commission's public reference
facilities, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the
prescribed fees. Each statement made in this Prospectus with respect to a
document that is filed as an exhibit to the Registration Statement is qualified
by reference to such exhibit for a complete statement of the terms and
conditions thereof.
There are incorporated herein by reference the following documents
heretofore filed by the Company with the Commission:
(i) the Company's annual report on Form 10-K for the year ended
December 31, 1993;
(ii) the Company's current reports on Form 8-K/A filed on March 1,
1994 and March 2, 1994, amending the Company's current reports on Form 8-K
filed on November 19, 1993 and December 30, 1993, respectively;
(iii) the Company's current reports on Form 8-K filed June 6, 1994,
June 16, 1994, June 29, 1994, August 15, 1994 (as amended on Forms 8-K/A
filed on September 27, 1994 and February 7, 1995), November 3, 1994 (as
amended on Form 8-K/A filed on January 24, 1995, which contains a
description of the Company's $2.205 Series B Cumulative Convertible
Preferred Stock) and December 2, 1994;
(iv) the Company's quarterly reports on Form 10-Q for the quarters
ended March 31, 1994, June 30, 1994 and September 30, 1994;
(v) the description of the Company's Common Stock and $1.75 Series A
Cumulative Convertible Preferred Stock contained in the Company's
registration statements on Form 8-A filed under the Exchange Act, including
any amendments or reports filed for the purpose of updating such
descriptions; and
(vi) the Company's definitive proxy statement dated March 22, 1994
relating to the annual meeting of shareholders held on April 18, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing such
documents.
Any statement contained herein or in a document incorporated herein by
reference or deemed to be incorporated herein by reference shall be modified or
superseded for purposes of this
2
<PAGE> 39
Prospectus to the extent that a statement contained herein, in any accompanying
Prospectus Supplement relating to a specific offering of Offered Securities or
in any other amendment or supplement hereto or document subsequently
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates), will be
provided without charge to each person who receives a copy of this Prospectus on
the written or oral request of such person directed to W. Hale Barrett, the
Company's Secretary, 624 Ellis Street, Augusta, Georgia 30901, telephone number
(706) 722-6756.
3
<PAGE> 40
THE COMPANY
Merry Land is one of the largest owners and operators of upscale garden
apartments in the Southern region of the United States. Merry Land became an
independent publicly owned company in 1981 and has been managing apartment
communities since 1982. It is a self-administered and self-managed real estate
investment trust ("REIT") headquartered in Augusta, Georgia. At December 31,
1994, the Company owned 71 apartment communities containing 18,851 units and
having an aggregate cost of $796.4 million. At that date, the communities had an
average occupancy of 96% and an average monthly rental rate of $591. The
Company's apartment communities are located in Florida, Georgia, Maryland, North
Carolina, Ohio, South Carolina, Tennessee and Virginia.
Merry Land is a Georgia corporation. The Company's principal office is
located at 624 Ellis Street, Augusta, Georgia 30901 and its telephone number is
(706) 722-6756.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for general
corporate purposes, which may include repayment of indebtedness, making
improvements to apartment properties, the acquisition of additional apartment
properties and the development and construction of new apartment properties.
CERTAIN RATIOS
The following table sets forth the Company's ratio of earnings to fixed
charges and ratio of earnings to combined fixed charges and Preferred Stock
dividends for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.................... 1.26x 1.69x 2.98x 5.58x 4.44x
Ratio of earnings to combined fixed charges and
Preferred Stock dividends........................... 1.26x 1.69x 2.98x 3.29x 2.56x
</TABLE>
The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. The ratio of earnings to combined fixed charges and Preferred
Stock dividends was computed by dividing earnings by fixed charges and Preferred
Stock dividends. For the purpose of computing these ratios, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest on
borrowed funds and amortization of debt discount and expense. Preferred Stock
dividends consist of those dividends paid on the Company's $1.75 Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") and
$2.205 Series B Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock") during the respective periods set forth in the preceding table.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture dated as of
February 1, 1995, as supplemented from time to time (the "Senior Indenture"),
between the Company and First Union National Bank of Georgia (the "Senior
Indenture Trustee"), and the Subordinated Securities are to be issued under an
indenture dated as of February 1, 1995, as supplemented from time to time (the
"Subordinated Indenture"), between the Company and First Union National Bank of
Georgia (the "Subordinated Indenture Trustee"). The term "Trustee," as used
herein, shall refer to the Senior Indenture Trustee or the Subordinated
Indenture Trustee, as appropriate. The forms of the Senior Indenture and the
Subordinated Indenture (being sometimes referred to herein collectively as the
"Indentures" and individually as an "Indenture") are filed as exhibits to the
Registration Statement
4
<PAGE> 41
and are available for inspection at the corporate trust office of the Senior
Indenture Trustee in Atlanta, Georgia and the corporate trust office of the
Subordinated Indenture Trustee in Atlanta, Georgia or as described under
"Available Information." The Indentures are subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made herein
relating to the Indentures and the Debt Securities are summaries of certain
provisions thereof, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indentures
and the Debt Securities. All section references appearing herein are to sections
of the Indentures, and capitalized terms used but not defined herein have the
respective meanings set forth in the Indentures and the Debt Securities.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Company, as
described under "Subordination".
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued; all Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608 of each Indenture). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee
(Sections 101 and 609 of each Indenture), and, except as otherwise indicated
herein, any action described herein to be taken by the Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the applicable
Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities that is convertible into Capital
Stock (as defined in the Indentures), or the method by which any such
portion will be determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of the Capital Stock into which such Debt Securities are
convertible;
5
<PAGE> 42
(5) the date or dates, or the method by which such date or dates will
be determined, on which the principal of such Debt Securities will be
payable and the amount of principal payable thereon;
(6) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method by which such
rate or rates will be determined, the date or dates from which such
interest will accrue or the method by which such date or dates will be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Dates, if any, for such Interest payable on
any Registered Security on any Interest Payment Dates, or the method by
which such Dates will be determined, and the basis upon which interest will
be calculated if other than that of a 360-day year consisting of twelve
30-day months;
(7) the place or places where the principal of (and premium or
Make-Whole Amount (as defined), if any), interest, if any, on, and
Additional Amounts, if any, payable in respect of, such Debt Securities
will be payable, where such Debt Securities may be surrendered for
registration of transfer, conversion or exchange and where notices or
demands to or upon the Company in respect of such Debt Securities and the
applicable Indenture may be served;
(8) the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and
other terms and conditions upon which such Debt Securities may be redeemed
in whole or in part, at the option of the Company, if the Company is to
have the option;
(9) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which or the date or dates on which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and other terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(10) whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and, if other than $1,000 and
any integral multiple thereof, the denominations in which any registered
Debt Securities will be issuable and, if other than $5,000, the
denomination or denominations in which any bearer Debt Securities will be
issuable;
(11) if other than United States dollars, the currency or currencies
in which such Debt Securities will be denominated and payable, which may be
a foreign currency or units of two or more foreign currencies or a
composite currency or currencies;
(12) whether the amount of payment of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts will be
determined;
(13) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Company or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are
6
<PAGE> 43
denominated or stated to be payable and the currency or currencies,
currency unit or units or composite currency or currencies in which such
Debt Securities are to be so payable;
(14) provisions, if any, granting special rights to the Holders of
such Debt Securities upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to such Debt
Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth in the
applicable Indenture;
(16) whether such Debt Securities will be issued in certificated or
book-entry form and terms and conditions related thereto;
(17) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the applicable Indenture;
(18) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the Indenture on such Debt Securities
to any Holder who is not a United States person in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities rather than pay such Additional
Amounts (and the terms of any such option);
(19) the obligation, if any, of the Company to permit the conversion
of the Debt Securities of such series into shares of Capital Stock of the
Company and the terms and conditions upon which such conversion shall be
effected; and
(20) any other terms of such Debt Securities, which terms shall not be
inconsistent with the provisions of the applicable Indenture (Section 301
of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture). Any
special United States federal income tax, accounting and other considerations
applicable to Original Issue Discount Securities will be described in the
applicable Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Senior Securities will be payable at the corporate trust office of the
Senior Indenture Trustee located at Corporate Trust Administration, 999
Peachtree Street, N.E., Suite 1100, Atlanta, Georgia 30309, and the principal of
(and premium or Make-Whole Amount, if any) and interest on any series of
Subordinated Securities will be payable at the corporate trust office of the
Subordinated Indenture Trustee located at Corporate Trust Administration, 999
Peachtree Street, N.E., Suite 1100, Atlanta, Georgia 30309; provided that at the
option of the Company payment of interest on any series of Debt Securities may
be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register for such series or by wire transfer of funds to
such Person at an account maintained within the United States (Sections 301,
305, 306, 307 and 1002 of each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the
7
<PAGE> 44
applicable Regular Record Date and may either be paid to the Person in whose
name such Debt Security is registered at the close of business on a special
record date (the "Special Record Date") for the payment of such Defaulted
Interest to be fixed by the Trustee, in which case notice thereof shall be given
to the Holder of such Debt Security not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner, all as more
completely described in the applicable Indenture (Section 307 of each
Indenture).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee referred to above.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the corporate trust office of
the Trustee referred to above. Every Debt Security surrendered for conversion,
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305 of each Indenture). If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which such transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each Place of Payment for such series. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities (Section 1002 of each Indenture).
Neither the Company nor the Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing or publication of the relevant notice of redemption; (ii)
register the transfer of or exchange any Registered Security, or portion
thereof, called for redemption, except the unredeemed portion of any Registered
Security being redeemed in part; (iii) exchange any Bearer Security selected for
redemption, except that such a Bearer Security may be exchanged for a Registered
Security of that series and like tenor, provided that such Registered Security
shall be simultaneously surrendered for redemption; or (iv) issue, register the
transfer of or exchange any Debt Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such Debt
Security not to be so repaid (Section 305 of each Indenture).
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets is a Person organized and existing under the laws of the United States or
any State thereof and shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, if any) and interest (including all Additional
Amounts, if any) on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
each Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or any
Subsidiary as a result thereof as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default under an
Indenture, and no event which, after notice or the lapse of time, or both, would
become such an Event of Default, shall have occurred and be continuing; and (c)
an Officers' Certificate and legal opinion covering such conditions shall be
delivered to the Trustee (Sections 801 and 803 of each Indenture).
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CERTAIN COVENANTS
Existence. Except as described above under "Merger, Consolidation or
Sale," the Company will do or cause to be done all things necessary to preserve
and keep in full force and effect the existence, rights (charter and statutory)
and franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders of the
Debt Securities of any series (Section 1005 of each Indenture).
Maintenance of Properties. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Company and its Subsidiaries shall not be prevented
from selling or otherwise disposing of for value their properties in the
ordinary course of business (Section 1006 of each Indenture).
Insurance. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage in an amount
at least equal to their then full insurable value with financially sound and
reputable insurance companies (Section 1007 of each Indenture).
Payment of Taxes and other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) 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 1008 of each Indenture).
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 and 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections and (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective Holder (Section 1009 of each Indenture).
Waiver of Certain Covenants. The Company may omit to comply with any term,
provision or condition of the foregoing covenants, and with any other term,
provision or condition with respect to the Debt Securities of any series
specified in Section 301 of the Indentures (except any such term,
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<PAGE> 46
provision or condition which could not be amended without the consent of all
Holders of Debt Securities of such series), if before or after the time for such
compliance the Holders of at least a majority in principal amount of all
outstanding Debt Securities of such series, 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 and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect (Section 1012 of each Indenture).
Additional Covenants. The Prospectus Supplement for a particular series of
Debt Securities may contain additional covenants of the Company with respect to
such series of Debt Securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or Additional Amounts
payable on any Debt Security of such series; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series at its Maturity; (c) default in making any sinking fund payment as
required for any Debt Security of such series; (d) default in the performance of
any other covenant of the Company contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor) having an aggregate principal amount outstanding
of at least $10,000,000, whether such indebtedness now exists or shall hereafter
be created, which default shall have resulted in such indebtedness being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such acceleration having been rescinded or
annulled within 10 days after written notice to the Company as provided in the
Indenture; (f) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any Subsidiary in an
aggregate amount (excluding amounts fully covered by insurance) in excess of
$10,000,000 and such judgments, orders or decrees remain undischarged, unstayed
and unsatisfied in an aggregate amount (excluding amounts fully covered by
insurance) in excess of $10,000,000 for a period of 30 consecutive days; (g)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Company or any Significant
Subsidiary or for all or substantially all of the property of the Company or any
Significant Subsidiary; and (h) any other Event of Default provided with respect
to such series of Debt Securities (Section 501 of each Indenture). The term
"Significant Subsidiary" means each significant subsidiary (as defined in
Regulations S-X promulgated under the Securities Act) of the Company.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of, and premium or Make-Whole Amount,
if any, on, all of the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Company (and to the Trustee if
given by the Holders). However, at any time after such declaration of
acceleration with respect to Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of not less than a majority in
principal amount of the
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Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (a) the Company shall have
deposited with the Trustee all required payments of the principal of (and
premium or Make-Whole Amount, if any) and interest, and any Additional Amounts,
on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events of
Default, other than the nonpayment of accelerated principal (or specified
portion thereof and the premium or Make-Whole Amount, if any) or interest, with
respect to the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in the Indenture (Section 502 of each Indenture). Each
Indenture also provides that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series (or of all
Debt Securities then Outstanding under the applicable Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium or
Make-Whole Amount, if any) or interest or Additional Amounts payable on any Debt
Security of such series or (y) in respect of a covenant or provision contained
in the applicable Indenture that cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security affected thereby
(Section 513 of each Indenture).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that such Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium or Make-Whole Amount, if any) or
interest or Additional Amounts payable on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601 of each
Indenture).
Each Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of reasonable indemnity (Section 507 of each
Indenture). This provision will not prevent, however, any Holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any), interest on and Additional
Amounts payable with respect to, such Debt Securities at the respective due
dates or redemption dates thereof (Section 508 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of either Indenture may be made with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture that are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the stated Maturity of the principal of (or premium
or Make-Whole Amount, if any), or any installment of principal of or interest or
Additional Amounts payable on, any such Debt Security; (b) reduce the principal
amount of, or the rate or amount of interest on, or any premium or Make-Whole
Amount payable on redemption of, or any Additional Amount payable with respect
to, any such Debt Security, or reduce the amount of principal of an Original
Issue Discount Security or Make-Whole Amount, if any, that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security; (c) change the Place of Payment, or the coin or
currency, for payment of principal of (and premium or Make-Whole Amount,
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if any), or interest on, or any Additional Amounts payable with respect to, any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
percentage of Outstanding Debt Securities of any series, the consent of whose
Holders is necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to provide
that certain other provisions may not be modified or waived without the consent
of the Holder of each such Debt Security (Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Company with certain covenants in such Indenture (Section 1012 of each
Indenture).
Modifications and amendments of either Indenture may be made by the Company
and the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes: (i) to evidence the succession of
another Person to the Company as obligor under such Indenture; (ii) to add to
the covenants of the Company for the benefit of the Holders of all or any series
of Debt Securities or to surrender any right or power conferred upon the Company
in such Indenture; (iii) to add Events of Default for the benefit of the Holders
of all or any series of Debt Securities; (iv) to add or change any provisions of
either Indenture to facilitate the issuance of, or to liberalize certain terms
of, Debt Securities in bearer form, or to permit or facilitate the issuance of
Debt Securities in uncertificated form provided that such action shall not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect; (v) to add, change or eliminate any provisions
of either Indenture, provided that any such addition, change or elimination
shall become effective only when there are no Debt Securities Outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series, including the provisions and procedures,
if applicable, for the conversion of such Debt Securities into Common Stock or
Preferred Stock of the Company; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under either Indenture by more than one Trustee; (ix) to cure any
ambiguity, defect or inconsistency in either Indenture, provided that such
action shall not adversely affect the interests of Holders of Debt Securities of
any series issued under such Indenture; (x) to close either Indenture with
respect to the authentication and delivery of additional series of Debt
Securities or to qualify, or maintain qualification of, either Indenture under
the Trust Indenture Act; or (xi) to supplement any of the provisions of either
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, provided that such action shall
not adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect (Section 901 of each Indenture).
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution, bankruptcy, insolvency or reorganization, the payment of the
principal of and interest on the Subordinated Securities will be subordinated to
the extent provided in the Subordinated Indenture in right of payment to the
prior payment in full of all Senior Debt (Sections 1601 and 1602 of the
Subordinated Indenture), but the obligation of the Company to make payment of
the principal and interest on the Subordinated Securities will not otherwise be
affected (Section 1608 of the Subordinated Indenture). No payment of principal
or interest may be made on the Subordinated Securities at any time if a default
on Senior Debt exists that permits the holders of such Senior Debt to accelerate
its maturity and the default is the subject of judicial proceedings or the
Company receives notice of the default (Section 1603 of the Subordinated
Indenture). The Company may resume payments on the Subordinated Securities when
the default is cured or waived, or 120 days pass after the notice is
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<PAGE> 49
given if the default is not the subject of judicial proceedings, if the
subordination provisions of the Subordinated Indenture otherwise permit payment
at that time (Section 1603 of the Subordinated Indenture). After all Senior Debt
is paid in full and until the Subordinated Securities are paid in full, holders
will be subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Company may recover more, ratably, than holders of the
Subordinated Securities.
Senior Debt is defined in the Subordinated Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations, (b) indebtedness of the Company evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other instrument, (c) obligations of the Company as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Company is a party or otherwise, (d) indebtedness of
partnerships and joint ventures that is included in the consolidated financial
statements of the Company, (e) indebtedness, obligations and liabilities of
others in respect of which the Company is liable contingently or otherwise to
pay or advance money or property or as guarantor, endorser or otherwise or which
the Company has agreed to purchase or otherwise acquire, and (f) any binding
commitment of the Company to fund any real estate investment or to fund any
investment in any entity making such real estate investment, in each case other
than (1) any such indebtedness, obligation or liability referred to in clauses
(a) through (f) above as to which, in the instrument creating or evidencing the
same pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment to the
Subordinated Securities or ranks pari passu with the Subordinated Securities,
(2) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Company to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated, and (3) the
Subordinated Securities (Section 101 of the Subordinated Indenture). At December
31, 1994, Senior Debt aggregated approximately $212.8 million. There are no
restrictions in the Subordinated Indenture upon the creation of additional
Senior Debt or other indebtedness.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Company may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium or Make-Whole Amount, if any)
and interest and any Additional Amounts payable to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
section 301 of such Indenture, the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
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("defeasance") (Section 1402 of each Indenture) or (b) to be released from its
obligations with respect to such Debt Securities under provisions of each
Indenture described under "Certain Covenants," or, if provided pursuant to
Section 301 of each Indenture, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event or Default with respect to such Debt Securities ("covenant
defeasance") (Section 1403 of each Indenture), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or currency units or
composite currency or currencies in which such Debt Securities are payable at
Stated Maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
each Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable United States federal income tax laws occurring after the date of
such Indenture (Section 1404 of each Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect to such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium or Make-Whole Amount, if any) and interest on such Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a
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result of such election or such cessation of usage based on the applicable
market exchange rate (Section 1405 of each Indenture).
"Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency issued by the government of one or more countries
other than the United States (other than the ECU or other currency unit) both by
the government of the country that issued such currency and for the settlement
of transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or (iii) any currency unit or composite currency
other than the ECU for the purposes for which it was established (Section 101 of
each Indenture). Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium or Make-Whole Amount, if
any) and interest on any Debt Security that is payable in a Foreign Currency
that ceases to be used by its government of issuance shall be made in United
States dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (d) under "Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1009, inclusive, of either Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (h) under
"Events of Default, Notice and Waiver" with respect to a covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the Trustee, will be sufficient to pay amounts due
on such Debt Securities at the time of their Stated Maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Capital Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include whether such Debt
Securities are convertible into Capital Stock, the conversion price (or manner
of calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the Holders or the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such Debt Securities.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with the Depository
Trust Company, as Depository. Global Securities may be issued in fully
registered form and may be issued in either temporary or permanent form. Unless
and until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Security may not be transferred except as a whole
by the Depository for such Global Security to a nominee of such Depository or by
a nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any nominee of such Depository to a
successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless
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otherwise indicated in the applicable Prospectus Supplement, the following
provisions will apply to depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depository for such Global Security or its nominee (with respect to
beneficial interests of Participants) and records of Participants (with respect
to beneficial interests of persons who hold through Participants). The laws of
some states require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and laws may impair the
ability to own, pledge or transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depository for any Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount,
interest or Additional Amounts in respect of the Global Security representing
such Debt Securities, will immediately credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name. Such payments will be the
responsibility of such Participants.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
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TRUSTEES
First Union National Bank of North Carolina, the Senior Indenture Trustee
and the Subordinate Indenture Trustee, also provides the Company's revolving
line of credit facility and from time to time directly or through affiliates
performs other services for the Company in the normal course of business.
GOVERNING LAW
The Indentures are governed by and shall be construed in accordance with
the laws of the State of Georgia.
DESCRIPTION OF COMMON STOCK
This summary of certain terms and provisions of the Company's Common Stock
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the terms and provisions of the Company's Articles of
Incorporation, as amended (the "Articles"), and By-laws, as amended, which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
The Company has 50,000,000 shares of Common Stock authorized and 30,744,451
shares were outstanding at December 31, 1994. All outstanding shares of Common
Stock are fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina, Charlotte, North Carolina. The Company's Common
Stock is traded on the New York Stock Exchange under the symbol "MRY".
The holders of Common Stock are entitled to receive such dividends as are
declared by the Board of Directors, after payment of, or provision for, full
cumulative dividends for outstanding Preferred Stock. Each share of Common Stock
is entitled to one vote on all matters submitted to a vote of shareholders,
including the election of directors. Cumulative voting for directors is not
permitted, which means that holders of more than 50% of all of the shares of
Common Stock voting can elect all of the directors if they choose to do so, and,
in such event, the holders of the remaining shares of Common Stock will not be
able to elect any directors. Holders of Common Stock and Preferred Stock, when
outstanding and when entitled to vote, vote as a class, except with respect to
matters that relate only to the rights, terms or conditions of the Preferred
Stock, that affect only the holders of the Preferred Stock, or that relate to
the rights of the holders of the Preferred Stock if the Company fails to fulfill
any of its obligations regarding the Preferred Stock. Upon any dissolution,
liquidation or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata all of the Company's assets and funds remaining
after payment of, or provision for, creditors and distribution of, or provision
for, preferential amounts and unpaid accumulated dividends to holders of
Preferred Stock. Holders of Common Stock have no preemptive right to purchase or
subscribe for any shares of capital stock of the Company.
DESCRIPTION OF PREFERRED STOCK
This summary of certain terms and provisions of the Company's Preferred
Stock does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the terms and provisions of the Company's Articles and
By-laws, as amended, which are filed as exhibits to the Registration Statement
of which this Prospectus is a part.
The Articles authorize the issuance of 20,000,000 shares of Preferred
Stock, without par value, of which 2,516,324 shares of Series A Preferred Stock
and 4,000,000 shares of Series B Preferred Stock were issued and outstanding at
December 31, 1994. All outstanding shares of the Series A Preferred Stock and
the Series B Preferred Stock are fully paid and nonassessable.
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The transfer agent and registrar for the Series A Preferred Stock and the
Series B Preferred Stock is First Union National Bank of North Carolina,
Charlotte, North Carolina.
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Articles of Amendment to the Articles fixing the
preferences, limitations and relative rights of a particular series of Preferred
Stock.
GENERAL
Under the Articles, the Board of Directors of the Company is authorized,
without further shareholder action, to provide for the issuance of up to
20,000,000 shares of Preferred Stock, in one or more series, with such voting
powers and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as the Board of Directors shall approve. At December 31, 1994 the
Company had 6,516,324 shares of Preferred Stock issued and outstanding of its
20,000,000 authorized shares of Preferred Stock.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (i) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (ii) the price at which such series of Preferred Stock will be
issued; (iii) the dividend rate (or method of calculation), the dates on which
dividends shall be payable and the dates from which dividends shall commence to
accumulate; (iv) any redemption or sinking fund provisions of such series of
Preferred Stock; (v) any conversion provisions of such series of Preferred
Stock; and (vi) any additional dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions of such
series of Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the Common Stock.
DIVIDEND RIGHTS
Holders of Preferred Stock of each series will be entitled to receive, when
as and if declared by the Board of Directors, out of assets of the Company
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Such rate may be fixed or variable or both and may be cumulative,
noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
Common Stock, unless the accrued dividends on each series of Preferred Stock
have been fully paid or declared and set apart for payment and the Company shall
have set apart all amounts, if any, required to be set apart for all sinking
funds, if any, for each series of Preferred Stock.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all dividends declared upon such series of Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of Preferred Stock and such
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other series will in all cases bear to each other the same ratio that accrued
dividends per share on such series of Preferred Stock and such other series bear
to each other.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate in the
earnings or assets of the Company.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of the assets of the Company available for distribution
to shareholders, the amount stated or determined on the basis set forth in the
Prospectus Supplement relating to such series, which may include accrued
dividends, if such liquidation, dissolution or winding up is involuntary or may
equal the current redemption price per share (otherwise than for the sinking
fund, if any, provided for such series) provided for such series set forth in
such Prospectus Supplement, if such liquidation, dissolution or winding up is
voluntary, and on such preferential basis as is set forth in such Prospectus
Supplement. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the amounts payable with respect to Preferred Stock
of any series and any other shares of stock of the Company ranking as to any
such distribution on a parity with such series of Preferred Stock are not paid
in full, the holders of Preferred Stock of such series and of such other shares
will share ratably in any such distribution of assets of the Company in
proportion to the full respective preferential amounts to which they are
entitled or on such other basis as is set forth in the applicable Prospectus
Supplement. The rights, if any, of the holders of any series of Preferred Stock
to participate in the assets of the Company remaining after the holders of other
series of Preferred Stock have been paid their respective specified liquidation
preferences upon any liquidation, dissolution or winding up of the Company will
be described in the Prospectus Supplement relating to such series.
REDEMPTION
A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times and the redemption prices
and for the types of consideration set forth in the Prospectus Supplement
relating to such series. The Prospectus Supplement relating to a series of
Preferred Stock which is subject to mandatory redemption shall specify the
number of shares of such series that shall be redeemed by the Company in each
year commencing after a date to be specified, at a redemption price per share to
be specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption. Except as indicated in the applicable
Prospectus Supplement, the Preferred Stock is not subject to any mandatory
redemption at the option of the holder.
SINKING FUND
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, of a sinking fund for the purchase or redemption of that series.
CONVERSION RIGHTS
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of Preferred Stock. The Preferred Stock will have
no preemptive rights.
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VOTING RIGHTS
Except as indicated in the Prospectus Supplement relating to a particular
series of Preferred Stock, or except as expressly required by Georgia law, a
holder of Preferred Stock will not be entitled to vote. Except as indicated in
the Prospectus Supplement relating to a particular series of Preferred Stock, in
the event the Company issues full shares of any series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of Preferred Stock are entitled to vote.
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursement agent for a series
of Preferred Stock will be selected by the Company and be described in the
applicable Prospectus Supplement. The registrar for shares of Preferred Stock
will send notices to shareholders of any meetings at which holders of Preferred
Stock have the right to vote on any matter.
OUTSTANDING PREFERRED STOCK
Series A Preferred Stock. The Series A Preferred Stock ranks senior to the
Common Stock, and pari passu with the Series B Preferred Stock, with respect to
payment of dividends and amounts upon liquidation, dissolution or winding up.
Holders of Series A Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available for payment, cumulative cash dividends at the rate per annum of $1.75
per share of Series A Preferred Stock. Dividends on the Series A Preferred Stock
are payable quarterly in arrears on the last calendar day of March, June,
September and December of each year.
Shares of Series A Preferred Stock are not redeemable by the Company prior
to June 30, 1998, and at no time are the shares of Series A Preferred Stock
redeemable for cash. On and after June 30, 1998, the shares of Series A
Preferred Stock are redeemable at the option of the Company, in whole or in
part, for such number of shares of Common Stock as equals the liquidation
preference of the Series A Preferred Stock to be redeemed divided by the
applicable conversion price as of the opening of business on the date set for
such redemption, subject to adjustment in certain circumstances. The Company may
exercise this option only if for 20 trading days, within any period of 30
consecutive trading days, including the last trading day of such period, the
closing price of the Common Stock on the New York Stock Exchange equals or
exceeds the conversion price per share, subject to adjustments in certain
circumstances.
The holders of Series A Preferred Stock are entitled to receive in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, $25.00 per share of Series A Preferred Stock plus an
amount per share of Series A Preferred Stock equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders, and no more. Except under certain circumstances or
except as otherwise from time to time required by applicable law, the holders of
Series A Preferred Stock have no voting rights.
Series B Preferred Stock. The Series B Preferred Stock ranks senior to the
Common Stock, and pari passu with the Series A Preferred Stock, with respect to
payment of dividends and amounts upon liquidation, dissolution or winding up.
Holders of Series B Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available for payment, cumulative cash dividends at the rate per annum of $2.205
per share of Series B Preferred Stock. Dividends on the Series B Preferred Stock
are payable quarterly in arrears on the last calendar day of March, June,
September and December of each year.
Shares of Series B Preferred Stock are not redeemable by the Company prior
to October 31, 1999, and at no time are the shares of Series B Preferred Stock
redeemable for cash. On and after October 31, 1999, the shares of Series B
Preferred Stock are redeemable at the option of the Company, in whole or in
part, for such number of shares of Common Stock as equals the liquidation
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preference of the Series B Preferred Stock to be redeemed divided by the
applicable conversion price as of the opening of business on the date set for
such redemption, subject to adjustment in certain circumstances. The Company may
exercise this option only if for 20 trading days, within any period of 30
consecutive trading days, including the last trading day of such period, the
closing price of the Common Stock on the New York Stock Exchange equals or
exceeds the conversion price per share, subject to adjustments in certain
circumstances.
The holders of Series B Preferred Stock are entitled to receive in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, $25.00 per share of Series B Preferred Stock plus an
amount per share of Series B Preferred Stock equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of final
distributions to such holders, and no more. Except under certain circumstances
or except as otherwise from time to time required by applicable law, the holders
of Series B Preferred Stock have no voting rights.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Common Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Common Stock Warrants. The following sets forth certain general terms and
provisions of the Common Stock Warrants offered hereby. Further terms of the
Common Stock Warrants and the applicable Warrant Agreements will be set forth in
the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (1) the title of such Common Stock
Warrants; (2) the aggregate number of such Common Stock Warrants; (3) the price
or prices at which such Common Stock Warrants will be issued; (4) the
designation, number and terms of the shares of Common Stock purchasable upon
exercise of such Common Stock Warrants; (5) the designation and terms of the
other Offered Securities with which such Common Stock Warrants are issued and
the number of such Common Stock Warrants issued with each such Offered Security;
(6) the date, if any, on and after which such Common Stock Warrants and the
related Common Stock will be separately transferable; (7) the price at which
each share of Common Stock purchasable upon exercise of such Common Stock
Warrants may be purchased; (8) the date on which the right to exercise such
Common Stock Warrants shall commence and the date on which such right shall
expire; (9) the minimum or maximum amount of such Common Stock Warrants which
may be exercised at any one time; (10) information with respect to book-entry
procedures, if any; (11) a discussion of certain federal income tax
considerations; and (12) any other terms of such Common Stock Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Common Stock Warrants.
DESCRIPTION OF DEPOSITARY SHARES
The Company may, at its option, elect to offer receipts for fractional
interests ("Depositary Shares") in Preferred Stock. In such event, receipts
("Depositary Receipts") for Depositary Shares, each of which will represent a
fraction (to be set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock) of a share of a particular series of Preferred Stock,
will be issued as described below.
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The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and the depositary named in the Prospectus Supplement
relating to such shares (the "Preferred Stock Depositary"). Subject to the terms
of the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption, subscription
and liquidation rights). The following summary of certain provisions of the
Deposit Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Deposit
Agreement, including the definitions therein of certain terms. Whenever
particular sections of the Deposit Agreement are referred to, it is intended
that such sections shall be incorporated herein by reference. Copies of the
forms of Deposit Agreement and Depositary Receipt are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of Depositary Shares relating to such Preferred Stock in proportion to
the numbers of such Depositary Shares owned by such holders. (Deposit Agreement,
Section 4.01)
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares in an equitable manner, unless the Preferred Stock Depositary
determines that it is not feasible to make such distribution, in which case the
Preferred Stock Depositary may sell such property and distribute the net
proceeds from such sale to such holders. (Deposit Agreement, Section 4.02)
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary and upon payment of the taxes, charges and fees
provided for in the Deposit Agreement and subject to the terms thereof, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office, to or upon his or her order, of the number of whole shares of the
related series of Preferred Stock and any money or other property, if any,
represented by such Depositary Shares.
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Preferred Stock Depositary resulting from the redemption, in whole or in
part, of such series of Preferred Stock held by the Preferred Stock Depositary.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Preferred Stock Depositary, the Preferred Stock Depositary will
redeem as of the same redemption date the number of Depositary Shares
representing shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot, pro rata or by any other equitable method as may be
determined by the Preferred Stock Depositary. (Deposit Agreement, Section 2.08)
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
the Preferred Stock represented by such holder's Depositary Shares. The
Preferred Stock Depositary will endeavor, insofar as practicable, to vote the
amount of the Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do
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so. The Preferred Stock Depositary will abstain from voting shares of the
Preferred Stock to the extent it does not receive specific instructions from the
holder of Depositary Shares representing such Preferred Stock. (Deposit
Agreement, Section 4.05)
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Preferred Stock Depositary. However, any amendment
which materially and adversely alters the rights of the holders of Depositary
Shares will not be effective unless such amendment has been approved by the
holders of at least a majority of the Depositary Shares then outstanding.
(Deposit Agreement, Section 6.01) The Deposit Agreement will only terminate if
(i) all outstanding Depositary Shares have been redeemed or (ii) there has been
a final distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding-up of the Company and such distribution has
been distributed to the holders of Depositary Receipts. (Deposit Agreement,
Section 6.02)
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Preferred Stock Depositary in connection with the
initial deposit of the Preferred Stock and issuance of Depositary Receipts, all
withdrawals of shares of Preferred Stock by owners of Depositary Shares and any
redemption of the Preferred Stock. Holders of Depositary Receipts will pay other
transfer and other taxes and governmental charges and such other charges as are
expressly provided in the Deposit Agreement to be for their accounts. (Deposit
Agreement, Section 5.07)
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary and its
acceptance of such appointment. Such successor Preferred Stock Depositary must
be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
(Deposit Agreement, Section 5.04)
The Preferred Stock Depositary will forward all reports and communications
from the Company which are delivered to the Preferred Stock Depositary and which
the Company is required or otherwise determines to furnish to the holders of the
Preferred Stock. (Deposit Agreement, Section 4.07)
Neither the Preferred Stock Depositary nor the Company will be liable under
the Deposit Agreement to holders of Depositary Receipts other than for its
negligence, willful misconduct or bad faith. Neither the Company nor the
Preferred Stock Depositary will be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Preferred Stock
Depositary may rely upon written advice of counsel or accountants, or upon
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Receipts or other persons believed to be competent and on
documents believed to be genuine. (Deposit Agreement, Section 5.03)
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to or through underwriters or
may sell the Offered Securities to investors directly or through designated
agents. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as agents to offer and sell the Offered Securities upon the
terms and conditions set forth in any Prospectus Supplement. In connection with
the sale of Offered Securities,
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underwriters may be deemed to have received compensation from the Company in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of Offered Securities for whom they may act as agent.
Underwriters may sell Offered Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
(which may be changed from time to time) from the underwriters and from the
purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities may be deemed
to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less nor more than, the respective amounts
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Offered Securities covered by its
Contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
the Company shall have sold to such underwriters the total principal amount of
the Offered Securities less the principal amount thereof covered by Contracts. A
commission indicated in the Prospectus Supplement will be paid to agents and
underwriters soliciting purchases of Offered Securities pursuant to Contracts
accepted by the Company. Agents and underwriters shall have no responsibility in
respect of the delivery or performance of Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Company in the
ordinary course of business.
EXPERTS
The audited financial statements and schedules of the Company incorporated
by reference in this Prospectus and elsewhere in the registration statement of
which this Prospectus is a part, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in giving said reports.
LEGAL OPINIONS
Certain legal opinions relating to tax matters and the Offered Securities
will be passed upon for the Company by Hull, Towill, Norman & Barrett, P.C.,
Augusta, Georgia. Certain legal matters relating to the validity of the Offered
Securities will be passed upon for the Underwriters by Piper & Marbury,
Baltimore, Maryland. W. Hale Barrett, a member of the firm of Hull, Towill,
Norman & Barrett, P.C., is a director and secretary of the Company. He and
members of his firm own 25,751 shares of the Company's Common Stock.
24
<PAGE> 61
(Photo)
PROMENADE, Tampa, Florida
(Photo)
WATERFORD VILLAGE, Delray Beach, Florida
(Photo)
CHAMPIONS' CLUB, Richmond, Virginia
(Photo)
BERMUDA COVE, Jacksonville, Florida
(Photo)
LOFTON PLACE, Tampa, Florida
<PAGE> 62
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the Prospectus in
connection with the offer made by this Prospectus Supplement and the Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Underwriters. Neither the
delivery of this Prospectus Supplement or the Prospectus nor any sale made
hereunder shall, under any circumstance, create any implication that there has
been no change in the facts set forth in this Prospectus Supplement or in the
Prospectus or in affairs of the Company since the date hereof. This Prospectus
Supplement and the Prospectus do not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary...................... S-3
The Company............................. S-6
Use of Proceeds......................... S-8
Market Prices of Stock and Dividends to
Shareholders.......................... S-8
Capitalization.......................... S-11
Selected Financial Data................. S-12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ S-13
Business................................ S-19
Management.............................. S-24
Description of Series C Preferred
Stock................................. S-24
Taxation................................ S-30
Underwriting............................ S-35
Experts................................. S-35
Legal Opinions.......................... S-36
Incorporation of Certain Documents by
Reference............................. S-36
PROSPECTUS
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
The Company............................. 4
Use of Proceeds......................... 4
Certain Ratios.......................... 4
Description of Debt Securities.......... 4
Description of Common Stock............. 17
Description of Preferred Stock.......... 17
Description of Common Stock Warrants.... 21
Description of Depositary Shares........ 21
Plan of Distribution.................... 23
Experts................................. 24
Legal Opinions.......................... 24
</TABLE>
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4,000,000 SHARES
MERRYLAND
& INVESTMENT COMPANY, INC.
$ SERIES C CUMULATIVE
CONVERTIBLE
PREFERRED STOCK
---------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------
ALEX. BROWN & SONS
INCORPORATED
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
INTERSTATE/JOHNSON LANE
CORPORATION
MARCH , 1995
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