<PAGE> 1
Filed Pursuant to Rule 424B(2)
Registration No. 33-65067
PROSPECTUS SUPPLEMENT SUBJECT TO COMPLETION
(To Prospectus Dated January 22, 1996) MAY 29, 1996
2,500,000 SHARES
[MERRY LAND & INVESTMENT COMPANY, INC. LOGO]
COMMON STOCK
------------------
The shares of common stock (the "Shares") of Merry Land & Investment
Company, Inc. ("Merry Land" or the "Company") are listed on the New York Stock
Exchange (the "NYSE") under the symbol "MRY." On May 28, 1996, the last reported
sale price of the Shares on the NYSE was $22.25 per share. On April 15, 1996,
the Board of Directors declared a dividend of $.37 to be paid on June 28, 1996
to shareholders of record on June 14, 1996. Purchasers of the Shares in this
offering will receive this dividend.
------------------
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 SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. 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.................................... $ $ $
- ------------------------------------------------------------------------------------------------------------------------
Total(2)..................................... $ $ $
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</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
375,000 additional Shares solely to cover over-allotments, if any. To the
extent the option is exercised, the Underwriters will offer the additional
Shares 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 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 will be made at the offices of Alex. Brown & Sons
Incorporated, Baltimore, Maryland, on or about June , 1996.
ALEX. BROWN & SONS
INCORPORATED
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
INTERSTATE/JOHNSON LANE
CORPORATION
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JUNE , 1996.
<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
THE COMPANY
Merry Land & Investment Company, Inc. is one of the nation's largest real
estate investment trusts and is one of the country's largest owners and
operators of upscale garden apartments. At May 28, 1996, the Company had total
equity market capitalization of over $1 billion and owned a high quality
portfolio of 84 apartment communities containing 23,305 units. The communities
are geographically diversified throughout the Southern United States, located in
twenty-five metropolitan areas, each with a population in excess of 250,000,
extending from the Washington, D.C. area to Texas and Florida. The Company also
owns two communities in Ohio. Substantially all of the Company's apartment
communities command rental rates in the upper range of their markets.
Building a Southern franchise. Merry Land believes that it is the largest
owner and operator of high-end apartment communities in the South. The Company's
strategy is to own and operate a significant number of communities in every
major market in the Southern United States, and to establish a reputation
recognized among apartment dwellers throughout this region for high quality
communities and first class service. The Company believes it has made
significant progress toward this goal and now enjoys advantages in attracting
residents, hiring high quality personnel, and achieving efficiencies in
marketing and operations. Merry Land believes that its combination of asset
quality and market coverage is unsurpassed in the South.
Growth Strategy. Merry Land's objective is to increase funds from
operations and distributions to shareholders by producing greater cash flows at
its existing apartment communities through effective management and also by
purchasing and developing additional apartment properties. The Company adds to
its holdings by buying existing apartment communities, by buying communities
under construction and in the initial lease-up stage (primarily from merchant
builders) and by developing communities from the ground up.
In recent years Merry Land has grown primarily through the acquisition of
apartment communities, increasing its investment in apartments in this manner
six fold over the last five years by acquiring 19,622 units in this period. Of
this total, 1,009 units with a cost of $60.5 million were acquired in the first
five months of 1996. The Company believes that current conditions are favorable
for it to continue to make acquisitions at attractive yields. Moreover, the
Company believes that recently increased levels of apartment construction will
provide it significant opportunities for expansion over the next several years
as large numbers of new apartment properties throughout the South are completed
and put on the market by merchant builders and others.
In December 1994, Merry Land commenced a program of apartment development.
At May 28, 1996, the Company had three communities with 1,174 units under
construction, seven communities with 1,983 units under development and another
community of 200 units planned, for a total development program of 3,357 units.
These communities will be completed throughout 1997 and 1998 at an expected
total cost of approximately $220 million. The communities under development
offer features typical of high-end properties, including nine foot ceilings,
high levels of trim and finish, garages and extensive amenities. In April 1996,
the first units of the Company's new development program were delivered and
leased.
Merry Land expects future growth to continue to come primarily from
acquisitions, rather than from development.
Dividends. The Company has increased its dividend from $.15 for the first
quarter of 1992 to $.37 for the first quarter of 1996. On April 15, 1996, the
Board of Directors declared a dividend of $.37 to be paid on June 28 to
shareholders of record on June 14. Purchasers of the Shares in this offering
will receive this dividend.
Merry Land is a Georgia corporation. It is headquartered at 624 Ellis
Street, Augusta, Georgia and its telephone number is (706) 722-6756.
S-3
<PAGE> 4
RECENT DEVELOPMENTS
Acquisitions. In 1996 through May 28, the Company acquired the following
communities (dollars in thousands):
<TABLE>
<CAPTION>
COMMUNITY LOCATION UNITS COST
- ---------------------------------------------------- ------------------------ ----- -------
<S> <C> <C> <C>
Crestview........................................... Austin, Texas 161 $10,100
Sedona Springs...................................... Austin, Texas 396 27,324
Mariner Club........................................ Ft. Lauderdale, Florida 304 18,000
Essex Park.......................................... Tampa, Florida 148 5,075
----- -------
1,009 $60,499
</TABLE>
In addition, the Company has agreed to acquire a proposed 380 unit
community to be built in Dallas. This community, to be called Creekside Homes at
Legacy, is expected to be completed in 1998.
Investment in Texas and Florida. In 1995, Merry Land bought its first
apartment communities in the state of Texas. With its 1996 acquisitions of
Crestview and Sedona Springs, the Company had acquired 1,830 units in Dallas and
947 units in Austin by May 15, 1996, and had established Regional Property
Managers in both cities. The Company expects Texas, the largest state in the
South, to become one of its major markets as it expands its holdings in Dallas
and Austin and enters other major markets in that state. Florida, the second
largest state in the South, currently contains Merry Land's largest number of
units and will remain a primary area of emphasis. Both these states have enjoyed
rapidly growing economies and populations in recent years.
Development Activity. During the first quarter of 1996, the Company bought
one tract of land in Atlanta for $3.5 million on which a 425 unit community to
be named Madison at Sweetwater Creek will be built. The Company also bought a
tract in Richmond for $1.9 million on which a 242 unit community to be named
Madison at Spring Oak will be built.
Issuance of Senior Unsecured Notes. In 1995, the Company sold senior
unsecured notes in three offerings, raising a total of $240.0 million. The funds
raised in these offerings have either been spent on acquisitions and development
or have been invested in marketable securities pending expenditure for
acquisitions or development. The Company held $50.5 million in cash and
securities at April 30, 1996. The following table summarizes these offerings
(dollars in thousands):
<TABLE>
<CAPTION>
ISSUE DATE AMOUNT RATE MATURITY
- ----------------------------------------------------------------- -------- ----- --------
<S> <C> <C> <C>
June............................................................. $120,000 7.250% 2005
August........................................................... 40,000 7.250 2002
November......................................................... 40,000 6.875 2003
November......................................................... $ 40,000 6.875% 2004
</TABLE>
Credit Line Increase. On June 30, 1995, the Company increased its existing
$100.0 million unsecured line of credit to $160.0 million. The Company's primary
bank provides the Company with the first $100.0 million of the line of credit,
which bears interest at 0.65% above the thirty day London Interbank Offered Rate
("LIBOR") and a group of five other banks provide the additional $60.0 million
of the line of credit at a rate of interest at 1.65% above LIBOR. The Company
maintains the credit line to finance apartment acquisitions and development and
for general corporate purposes. At March 31, 1996, certain of the Company's loan
covenants restricted the amount that could be drawn under the Company's line of
credit to $109.3 million.
Debt Rating Raised. Standard & Poor's raised its credit rating on the
Company's senior unsecured notes from BBB to BBB+ in connection with the 1995
debt offerings discussed above. Moody's Investors Service held its rating of the
Company's senior unsecured notes at Baa2.
S-4
<PAGE> 5
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares are estimated
at approximately $ million ($ million if the Underwriters'
over-allotment option is exercised in full). The Company intends to use the net
proceeds to acquire and develop additional apartment properties. Pending such
uses, the Company intends to invest temporarily the excess proceeds in interest
bearing and marketable securities.
MARKET PRICES OF COMMON STOCK AND DIVIDENDS TO SHAREHOLDERS
Merry Land's common stock ("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>
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.................................................... 21.63 19.00 .35
Second Quarter................................................... 21.50 18.88 .35
Third Quarter.................................................... 22.38 20.13 .35
Fourth Quarter................................................... 24.00 20.25 .35
1996
First Quarter.................................................... 23.75 21.63 .37
Second Quarter (through May 28, 1996)............................ $22.25 $20.13 $ .37
</TABLE>
On April 30, 1996, the Company had 3,582 shareholders of record. The
Company estimates that an additional 14,500 shareholders hold their shares in
"street name."
On April 15, 1996, the Board of Directors declared a dividend of $.37 per
share of Common Stock to be paid on June 28, 1996 to holders of record on June
14, 1996. Purchasers of the Shares in this offering will receive this dividend.
The current annual dividend rate is $1.48 per share. The $.37 quarterly dividend
represents a payout of 76% of funds from operations available for common shares
for the quarter ended March 31, 1996, a payout ratio which the Company believes
is conservative relative to its real estate investment trust ("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 (excluding capital gains) 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 1996 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.
S-5
<PAGE> 6
The federal income tax status of dividends paid to holders of Common Stock
was as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ----- -----
<S> <C> <C> <C>
Ordinary income......................................................... $.53 $1.24 $1.34
Capital gains........................................................... .37 .01 .06
Return of capital....................................................... -- -- --
---- ----- -----
Total dividends paid.......................................... $.90 $1.25 $1.40
==== ===== =====
</TABLE>
The loan agreements for the Company's 6.625% Senior Notes and its $160.0
million line of credit prohibit the payment of any dividends or other
distributions upon the occurrence of an event of default and otherwise limit
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.
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.
For the year ended December 31, 1995, the Company raised $11.2 million through
its Dividend Reinvestment and Stock Purchase Plan.
S-6
<PAGE> 7
CAPITALIZATION
The following table sets forth the capitalization of the Company on March
31, 1996 and after giving effect to the issuance of the Shares offered by this
Prospectus Supplement. This table should be read in conjunction with the
financial statements of the Company and related notes.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
(IN THOUSANDS)
Debt:
Unsecured bank line(1).......................................... $ -- $ --
6.625% Senior Notes, due 1999-2001.............................. 120,000 120,000
7.25% Senior Notes, due 2002.................................... 40,000 40,000
6.875% Senior Notes, due 2003................................... 40,000 40,000
6.875% Senior Notes, due 2004................................... 40,000 40,000
7.25% Senior Notes, due 2005.................................... 120,000 120,000
---------- -----------
Total debt.............................................. 360,000 360,000
Stockholders' Equity:
Preferred Stock, no par value, 20,000,000 shares
authorized;
$1.75 Series A Cumulative Convertible, 658,859 shares issued and
outstanding, $25.00 per share liquidation preference......... 16,471 16,471
$2.205 Series B Cumulative Convertible, 4,000,000 shares issued
and outstanding, $25.00 per share liquidation preference..... 100,000 100,000
$2.15 Series C Cumulative Convertible, 4,599,800 shares issued
and outstanding, $25.00 per share liquidation preference..... 114,995 114,995
Common Stock, no par value, $1.00 stated value, 100,000,000
shares authorized; 34,160,979 shares issued and outstanding,
shares issued and outstanding, as adjusted............ 34,161
Capital surplus................................................. 431,470
Cumulative undistributed net earnings........................... 8,785 8,785
Notes receivable from stockholders and ESOP..................... (18,014) (18,014)
Unrealized gain on securities................................... 8,023 8,023
---------- -----------
Total stockholders' equity................................. 695,891
---------- -----------
Total capitalization.................................. $1,055,891 $
========== ==========
</TABLE>
- ---------------
(1) Available under a $160.0 million line of credit which bears interest at
LIBOR plus 0.65% on the first $100.0 million and LIBOR plus 1.65% on the
next $60.0 million, and expected to be renewed annually, subject to the
bank's approval.
S-7
<PAGE> 8
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company and
should be read in conjunction with the financial statements and notes thereto
incorporated by reference herein. The following amounts are in thousands, except
for information with respect to per share amounts and apartment units.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Income from property operations:
Rental and mineral royalty revenue......... $ 16,447 $ 23,479 $ 56,181 $103,169 $ 145,214 $ 32,990 $ 41,653
Rental expenses, property taxes and
insurance................................ 7,065 9,604 22,611 38,409 58,527 12,383 16,040
Depreciation of real estate owned.......... 3,022 4,156 9,066 17,877 26,265 5,892 7,802
-------- -------- -------- -------- ---------- -------- --------
6,360 9,719 24,504 46,883 60,422 14,715 17,811
Income from mortgage backed securities:
Interest income............................ 12,832 3,978 -- -- -- -- --
Interest expense........................... 8,543 1,558 -- -- -- -- --
-------- -------- -------- -------- ---------- -------- --------
4,289 2,420 -- -- -- -- --
Other income:
Other interest and dividend income......... 1,709 1,940 2,463 2,440 6,908 631 1,650
Other...................................... 297 249 10 (655) 4,476 140 1,223
-------- -------- -------- -------- ---------- -------- --------
2,006 2,189 2,473 1,785 11,384 771 2,873
Expenses:
Interest unrelated to mortgage backed
securities............................... 4,261 4,230 5,640 10,394 15,646 2,977 5,792
General and administrative................. 1,277 1,304 1,433 1,773 2,396 510 594
Depreciation - other and amortization...... 112 44 180 470 670 128 207
Other non-recurring costs.................. -- -- 1,308 200 1,370 -- --
-------- -------- -------- -------- ---------- -------- --------
5,650 5,578 8,561 12,837 20,082 3,615 6,593
Gains on sales of assets:
Gains on sales of investments.............. (698) 332 6,960 881 1,673 48 458
Gains on sales of land..................... 803 377 1,032 196 68 -- --
Gains on sales of depreciable real
estate................................... -- 83 9 77 72
Gains on mortgage backed securities........ 1,681 1,903 -- -- -- -- --
-------- -------- -------- -------- ---------- -------- --------
1,786 2,695 7,992 1,154 1,813 48 458
-------- -------- -------- -------- ---------- -------- --------
Net income................................... 8,791 11,445 26,408 36,985 53,537 11,919 14,549
Preferred dividends paid..................... -- -- 4,025 7,934 18,129 3,074 4,966
-------- -------- -------- -------- ---------- -------- --------
Net income available for common shares....... $ 8,791 $ 11,445 $ 22,383 $ 29,051 $ 35,408 $ 8,845 $ 9,583
========= ========= ========= ========= ========== ========= =========
Weighted average common shares............... 9,326 10,652 17,268 26,430 33,368 32,720 33,899
Weighted average fully diluted common
shares..................................... 9,449 10,753 20,381 32,562 43,112 39,627 44,759
Net income per common share.................. $ .94 $ 1.07 $ 1.30 $ 1.10 $ 1.06 $ .27 $ .28
Common dividends paid........................ 4,116 7,285 16,934 33,467 46,734 11,416 12,584
Common dividends paid per share.............. $ .44 $ .66 $ .90 $ 1.25 $ 1.40 $ .35 $ .37
BALANCE SHEET DATA (at end of period)
Properties, at cost.......................... $132,355 $220,615 $565,111 $815,306 $1,041,622 $771,995 $1,065,628
Mortgage backed securities................... 115,973 -- -- -- -- -- --
Total assets................................. 262,881 235,695 562,172 806,655 1,072,846 828,987 1,077,913
Debt related to mortgage backed securities... 112,854 -- -- -- -- -- --
Senior Notes................................. -- -- 120,000 120,000 360,000 120,000 360,000
Mortgage debt................................ 8,351 8,238 37,173 17,835 -- 17,819 --
Other debt................................... 62,588 109,358 -- 74,975 -- -- --
Total shareholders' equity................... $ 73,919 $106,831 $397,715 $584,851 $ 695,859 $683,129 $ 695,891
OTHER DATA
Funds from operations(1)..................... $ 10,027 $ 12,906 $ 28,790 $ 53,907 $ 79,360 $ 17,763 $ 21,892
Funds from operations available to common
shares..................................... $ 10,027 $ 12,906 $ 24,764 $ 45,973 $ 61,231 $ 14,689 $ 16,926
Apartment units acquired during the period... 986 2,845 7,452 4,872 3,444 -- 161
Total apartment units at end of the period... 3,711 6,529 13,981 18,852 22,296 18,852 22,457
</TABLE>
- ---------------
(1) 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 1991 and 1992 includes net income from mortgage backed
securities, which was $4,289,000 and $2,420,000, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
S-8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In recent years Merry Land has grown rapidly through the acquisition of
apartment communities. Its investment in apartments grew by 18% in 1995, 35% in
1994, 114% in 1993, 76% in 1992 and 36% in 1991, and revenue, expenses, net
income and funds from operations all reflect this growth. The Company believes
that its access to public and private debt and equity, its experience as an
apartment owner, 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. Merry Land considers its market area
to include the Southern United States, extending from the Washington, D.C. area
to Texas and Florida.
The Company believes that conditions in the real estate and financial
markets will allow it to continue to expand its apartment holdings through a
variety of sources, including acquisitions, the purchase of communities planned,
under construction or newly completed by merchant builders, and through
ground-up development. It should be noted, however, that as the Company's
absolute size increases, it is likely that its rate of growth will slow and that
increases in earnings and cash flow will become increasingly dependent on
improved results from its existing communities rather than from portfolio
growth. However, there can be no assurance that market conditions will allow any
rental increase.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996.
Rental Markets. The Company operates in 27 metropolitan areas, and has no
more than 14% of its portfolio by cost located within any one city. The Company
believes that this diversification of its apartment portfolio reduces the
volatility of its aggregate rental occupancy and rental income. The following
table summarizes the Company's holdings in its largest markets as of March 31,
1996 (dollars in thousands, except average rental rates):
<TABLE>
<CAPTION>
AVERAGE
AVERAGE RENTAL
OCCUPANCY(1) RATE(2)
% OF ------------- -------------
MARKET UNITS COST TOTAL COST 1995 1996 1995 1996
- ------------------------------- ------ ---------- ---------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta........................ 3,346 $ 138,609 14% 98% 96% $596 $631
Dallas......................... 1,830 117,701 12 -- 88 -- 829
Jacksonville................... 2,550 104,944 10 97 97 575 616
Orlando........................ 1,902 90,732 9 91 95 629 652
Tampa.......................... 1,301 64,151 6 96 95 627 661
Charlotte...................... 1,623 58,558 6 95 93 551 557
Ft. Myers...................... 1,268 58,491 6 99 95 650 658
Raleigh........................ 1,256 47,005 5 97 95 573 596
Austin......................... 551 33,854 3 -- 89 -- 815
Charleston..................... 880 33,170 3 95 88 510 539
Savannah....................... 865 32,743 3 98 97 572 609
All others..................... 5,085 242,581 23 94 91 615 656
------ ---------- ----- ---- ---- ---- ----
22,457.. $1,022,539 100% 95% 93% $596 $650
</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 March month end.
S-9
<PAGE> 10
Delivery of newly constructed apartments has increased in many of the
Company's markets and occupancy levels have moderated in some cities. The
Company expects its apartment portfolio to experience occupancy in 1996
approximately 1.5% to 2.0% below the 95% average occupancy experienced
throughout 1995.
Rental Operations -- Total Portfolio. The operating performance of the
Company's apartment portfolio is summarized in the following table (dollars in
thousands except average monthly rent):
<TABLE>
<CAPTION>
THREE MONTHS
-------------------
1995 1996 % CHANGE
------- ------- --------
<S> <C> <C> <C>
Rents.................................................. $32,760 $41,416 26%
Operating expenses..................................... 9,088 11,187 23
Taxes and insurance.................................... 3,145 4,515 44
Depreciation........................................... 5,854 7,771 33
------- ------- --------
Operating income....................................... $14,673 $17,943 22%
Average occupancy(1)................................... 95.4% 93.2% (2.2)%(2)
Average monthly rent(3)................................ $ 596 $ 650 9.1%
Expense ratio(4)....................................... 37.3% 37.9% 0.6%(2)
</TABLE>
- ---------------
(1) Represents the average physical occupancy at each month end for the period
held.
(2) Represents increase or decrease between periods.
(3) Represents weighted average monthly rent charged for occupied units and
rents asked for unoccupied units at March 31.
(4) Represents total of operating expenses, taxes and insurance divided by
rents.
With Merry Land's acquisition of new communities, the weighted average
number of apartments owned rose to 22,457 in the first three months of 1996 from
18,852 in the first three months of 1995, and rental revenues and expenses rose
accordingly. Company wide occupancy at March 31, 1996 totaled 93.2%, down from
95.4% at the same date in 1995. This decline was due in part to 89.1% occupancy
in Dallas and Austin where the Company acquired several communities still in
initial lease-up. Excluding the Texas communities, occupancy at March 31, 1996
was 93.7%.
The 9.1% increase in portfolio average rental rates in the first three
months of 1996 from the first three months of 1995 resulted from both higher
rents at the Company's continuing properties and higher rents charged at the
communities the Company acquired in 1995 and 1996, whose monthly rents averaged
$758 at March 31, 1996, versus the total portfolio average of $650.
Rental Operations -- Comparable Communities. The performance of the 18,411
units which the Company held for the first three months of both 1995 and 1996
("same store" results), is
S-10
<PAGE> 11
summarized in the following table (dollars in thousands, except average monthly
rent; see footnotes above):
<TABLE>
<CAPTION>
THREE MONTHS
------------------- CHANGE FROM PERCENT
1995 1996 1995 TO 1996 INCREASE
------- ------- ------------ --------
<S> <C> <C> <C> <C>
Rental income............................... $32,073 $33,098 $1,025 3.2%
Personnel................................... 3,201 3,463 262 8.2
Utilities................................... 1,991 2,042 51 2.6
Operating................................... 1,540 1,677 137 8.9
Maintenance & grounds....................... 2,145 2,112 (33) (1.5)
Taxes and insurance......................... 3,085 3,273 188 6.1
------- ------- ------------ --------
11,962 12,567 605 5.1
Depreciation................................ 5,755 5,936 181 3.1
------- ------- ------------ --------
Operating income............................ $14,356 $14,595 $ 239 1.7%
Average occupancy for period(1)............. 95.3% 93.9% (1.4)%(2)
Average monthly rent (3).................... $ 598 $ 628 5.0%
Expense ratio (4)........................... 37.3% 38.0% 0.7%(2)
</TABLE>
Same store results do not include Gwinnett Crossing, a 314 unit community,
or Cherry Creek, a 127 unit community. Both communities were owned for the first
three months of 1995 and 1996. The 260 unit Gwinnett Club community, acquired in
1995, is adjacent to Gwinnett Crossing. These communities were combined and are
now operated as a single community. The Cherry Creek community was acquired in
December 1994 and is currently being renovated. It has been combined with a
development community which will contain 280 additional units.
Rental income rose by $1.0 million or 3.2% for those properties held for
all of both periods, as a result of 1.4% lower occupancy during the year and
5.0% higher average rental rates. At March 31, 1996 same property occupancy was
93.7%, down from 95.2% at March 31, 1995, as newly completed apartment
construction reduced occupancy in some of the Company's markets.
Operating expenses increased $0.6 million or 5.1% in the first three months
of 1996 from the same period in 1995. An unusually severe winter caused higher
than expected operating expenses and also led to a number of out of service
units due to frozen pipes. Personnel costs accounted for $0.3 million of the
increase, resulting from higher life and health insurance premiums (because the
Company extended coverage to its employees' dependents) and higher levels of
staffing as formerly vacant positions were filled at communities acquired in
late 1994. Off-site property management expense, which is allocated to the
communities, rose $0.1 million as the Company established additional corporate
positions in training, marketing and maintenance. Accruals for property tax and
insurance rose $0.2 million.
Rental Operations -- Development Properties. During the first quarter of
1996 the Company had eleven communities under development with three under
construction at March 31, 1996. Construction is scheduled to begin on four more
communities in 1996. $10.1 million was expended in the first three months of
1996 for apartments under development, bringing the cumulative investment to
$31.1 million, including capitalized interest of $1.5 million. For the remainder
of 1996, the Company expects to spend about $70.0 million on development. No
units were placed in service in the first three months of 1996. The Company
expects to put approximately 500 units in service in 1996. Later this year as
units are delivered and put in service some dilution of earnings may occur to
the extent leasing lags behind the delivery of units.
Interest and Dividend Income. Interest and dividend income rose to $1.7
million in the first three months of 1996 from $0.6 million in the first three
months of 1995 due to the temporary investment of proceeds from the $80.0
million 6.875% senior unsecured notes offerings in November 1995. Average
investments rose to $79.8 million in the first three months of 1996 from
S-11
<PAGE> 12
$35.3 in the first three months of 1995, while the average annual return on
investments in 1996 averaged 7.3% as compared to 7.05% in 1995.
Other Income. Other income totaled $1.2 million in the first three months
of 1996 as compared to $0.1 million in the first three months of 1995. Other
income in 1996 included profits of $1.1 million from cash management activities
and $0.1 million of miscellaneous income, while the income in 1995 came from the
sale of timber. Cash management activities include the profits on sales of
liquid securities held for less than one year.
Interest Expense. Interest expense totaled $5.8 million in the first three
months of 1996, up from $3.0 million in the first three months of 1995. Average
debt outstanding rose to $360.0 million in the first three months of 1996 from
$200.8 million in the first three months of 1995, primarily as a result of the
issuance of the 6.875% and 7.25% senior unsecured notes in 1995. The weighted
average interest rate charged on all the Company's debt increased to 7.0% in the
first three months of 1996 from 6.7% for the first three months in 1995,
primarily as a result of the replacement of short-term financing with the 6.875%
and 7.25% senior unsecured notes. During the first three months of 1996, $0.5
million of interest related to the Company's development projects was
capitalized.
General and Administrative Expenses. General and administrative expenses
in the first three months of 1996 were $0.6 million, representing 1.4% of rental
revenues and 2.7% of funds from operations. For all of 1995, expenses averaged
1.7% of rental revenues and 3.0% of funds from operations. The significant
improvement this year reflects continuing efforts to control overhead costs and
more importantly the significant increase in the Company's revenues and funds
from operations.
Gains on Sales of Assets. Net gains recognized on the sale of assets
totaled $0.5 million in the first three months of 1996 and $0.01 million in the
first three months of 1995. Gains in both years came primarily from the sale of
securities held for more than one year. In the first three months of 1996,
35,000 shares of First Financial Holdings, Inc. were sold on the open market. At
March 31, 1996, the Company owned 165,000 shares of First Financial. 87,000
additional shares were sold after the end of the quarter, and the gain will be
reported in the second quarter.
Net Income. Net income totaled $14.5 million in the first three months of
1996 and $11.9 million for the first three months of 1995. Net income available
for common shareholders totaled $9.6 million in the first three months of 1996
and $8.8 million for the first three months of 1995. The increases in net income
and net income available for common shareholders for 1996 when compared to 1995
arose principally from substantially increased operating income from apartments
due to the growth of the Company's apartment holdings, as well as increases in
other income and net realized gains. Net income per common share in the first
three months of 1996 increased to $.28 from $.27 in the first three months of
1995.
Dividends to preferred shareholders. Dividends to preferred shareholders
totaled $5.0 million in the first three months of 1996 and $3.1 million in the
first three months of 1995. The increase in preferred dividends arose from an
increase in the amount of preferred stock outstanding during the period.
Preferred dividends are summarized in the following table (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
---------------
1995 1996
------ ------
<S> <C> <C>
Series A Preferred dividends............................................... $ 487 $ 289
Series B Preferred dividends............................................... 2,205 2,205
Series C Preferred dividends............................................... 382 2,472
------ ------
Total preferred dividends $3,074 $4,966
</TABLE>
Holders of the Company's Series A Preferred Stock have converted 3.9
million of the 4.6 million shares of Series A Preferred Stock originally issued
in June 1993 into 5.3 million shares of the Company's Common Stock as the common
dividend was raised above the equivalent preferred
S-12
<PAGE> 13
dividend. In March and April 1995 the Company issued 4.6 million shares of
Series C Convertible Preferred Stock.
Funds From Operations. Funds from operations rose 23% to $21.9 million in
the first three months of 1996 as compared to $17.8 million in the first three
months of 1995. Funds from operations available to common shares rose 15% to
$16.9 million in the first three months of 1996 compared to $14.7 million in the
first three months of 1995. These increases were principally due to increased
rental operating income resulting from the growth of the Company's apartment
holdings and increased other income from cash management activities. On a fully
diluted per share basis, funds from operations increased 9% to $.49 in 1996 from
$.45 in the same period in 1995.
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
-----------------
1995 1996
------- -------
<S> <C> <C>
Net income............................................................... $11,919 $14,548
Less preferred dividends paid............................................ 3,074 4,966
------- -------
Net income available for common shares................................... 8,845 9,582
Add depreciation of real estate owned.................................... 5,892 7,802
Less net realized gains.................................................. 48 458
------- -------
Funds from operations available to common shares......................... 14,689 16,926
Add preferred dividends.................................................. 3,074 4,966
------- -------
Funds from operations-fully diluted...................................... $17,763 $21,892
======== ========
Weighted average common shares outstanding
Primary................................................................ 32,720 33,899
Fully diluted.......................................................... 39,627 44,759
Funds from operations per share-
Primary................................................................ $ .45 $ .50
Fully diluted.......................................................... $ .45 $ .49
</TABLE>
The Company believes that funds from operations is an important measure of
its 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 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 depreciation. Revision of the definition
reduced the Company's funds from operations by $0.2 million and $0.1 million in
the first three months of 1996 and 1995, respectively.
S-13
<PAGE> 14
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995.
Rental Operations -- Total Portfolio. The Company expects its apartment
portfolio to experience occupancy in 1996 slightly below the 95% level of 1994
and 1995. The operating performance of the Company's apartment portfolio is
summarized in the following table (dollars in thousands except average monthly
rent):
<TABLE>
<CAPTION>
CHANGE FROM PERCENT
1993 1994 1995 1994 TO 1995 INCREASE
------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Rents................................. $54,565 $101,667 $144,283 $ 42,616 42%
Operating expenses.................... 16,572 27,578 40,726 13,148 48%
Taxes and insurance................... 5,420 10,058 15,465 5,407 54%
Depreciation.......................... 8,924 17,735 26,138 8,403 47%
------- -------- -------- ------------ ---
Operating income...................... $23,649 $ 46,296 $ 61,954 $ 15,658 34%
Average occupancy(1).................. 92.2% 95.2% 95.2% 0.0% 0.0%
Average monthly rent(2)............... $ 551 $ 591 $ 639 $ 48 8.1%
Expense ratio(3)...................... 39.2% 37.0% 38.9% 1.9% 5.1%
</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
rents.
With Merry Land's acquisition of new communities, the weighted average
number of apartments owned rose to 20,290 in 1995 from 15,278 in 1994, and
rental revenues and expenses rose accordingly. Rental revenues also increased
because most of the rental markets in which Merry Land operates experienced
strong job growth and household formation, and this was reflected in high
occupancy levels and rising rent rates. Company wide occupancy at December 31,
1995 totaled 94.0%, down from 96.0% at the same date in 1994. This decline was
due in large part to 86% occupancy in Dallas where the Company acquired several
communities still in the initial lease up period following completion of
construction.
The 8.1% increase in portfolio average rental rates in 1995 from 1994
resulted from higher rents at its continuing properties, and also reflects the
higher rents charged at the communities the Company acquired in 1995, whose
monthly rents averaged $751 at December 31, 1995 versus total portfolio average
of $639.
S-14
<PAGE> 15
Rental Operations -- Comparable Communities. The performance of the 13,666
units which the Company held for all of both 1994 and 1995, is summarized in the
following table (dollars in thousands, except average monthly rent; see
footnotes above):
<TABLE>
<CAPTION>
CHANGE FROM PERCENT
1994 1995 1994 TO 1995 INCREASE
------- ------- ------------ --------
<S> <C> <C> <C> <C>
Rental income.................................. $91,825 $96,103 $4,278 4.7%
Personnel...................................... 9,016 10,550 1,534 17.0%
Utilities...................................... 5,826 6,052 226 3.9%
Operating...................................... 5,008 5,490 482 9.6%
Maintenance & grounds.......................... 5,892 5,720 (172) (2.9)%
Taxes and insurance............................ 9,267 9,597 330 3.6%
------- ------- ------------ --------
35,009 37,409 2,400 6.9%
Depreciation................................... 16,269 17,131 862 5.3%
------- ------- ------------ --------
Operating income............................... $40,547 $41,563 $1,016 2.5%
Average occupancy for year(1).................. 95.2% 95.4% 0.2% 0.0%
Average monthly rent(2)........................ $ 580 $ 606 $ 26 4.5%
Expense ratio(3)............................... 38.1% 38.9% 0.8% 2.1%
</TABLE>
Reflecting generally strong rental markets, total income rose by $4.3
million or 4.7% for those properties held for all of both periods, as a result
of flat average occupancy during the year, 4.5% higher average rental rates and
a $0.7 million increase in other income. At December 31, 1995 same store
occupancy was 95.2%, down from 96.4% at December 31, 1994, as newly completed
apartment construction moderated strong occupancy in some of the Company's
markets.
Operating expenses increased $2.4 million or 6.9% in 1995 as compared to
the same period in 1994. Personnel costs accounted for $1.5 million of this
increase as a result of $0.4 million higher performance bonuses, $0.3 million
higher ESOP contributions, $0.2 million higher workers compensation insurance
premiums and higher levels of staffing as formerly vacant positions were filled
at communities acquired in late 1993. Off site property management expense,
which is allocated to the communities, rose $0.4 million as the Company
established additional corporate level positions in marketing, training and
maintenance. Insurance costs rose $0.3 million due to increases in premiums for
communities located in Florida.
For those 6,528 apartments owned by the Company for both 1994 and 1993,
rental revenues increased $3.1 million or 8.2% in 1994 over 1993 as monthly
rental rates increased 3.9% to $530 per month from $510 per month, while
occupancy for those units rose to 95.7% for 1994 from 92.6% for all of 1993.
Operating expenses decreased $0.7 million in 1994 from 1993. Of this decrease,
$0.5 million came from a change in capitalization of certain expenditures which
had previously been expensed, including painting the exterior of apartment
communities, replacement of mini blinds and replacement of vinyl floor covering.
The remaining decrease in expenses came from lower personnel costs.
Rental Operations -- Development Properties. During 1995 the Company had
nine communities under active development with three under construction at year
end. Construction is scheduled to begin on four more communities in 1996. $12.8
million was expended in 1995 for apartments under development, bringing the
cumulative investment to $20.9 million, including capitalized interest of $1.1
million. No units were placed in service in 1995.
Mineral Royalty and Commercial Property Income. These amounts decreased to
$0.9 million in 1995 from $1.4 million in 1994 and $1.6 million in 1993, largely
as the result of the expiration in late 1994 of one of two contracts for the
sale of sand and also because of lower occupancies at the Company's
non-apartment properties.
S-15
<PAGE> 16
Interest and Dividend Income. Interest and dividend income rose to $6.9
million in 1995 from $2.4 million in 1994 and $2.5 million in 1993 due to the
temporary investment of proceeds from the $115.0 million Series C Preferred
Stock offering in March, the $160.0 million 7.25% senior unsecured notes
offerings in June and August and the $80.0 million 6.875% senior unsecured notes
offering in November. Average securities investments rose to $92.0 million in
1995 from $40.1 in 1994 and $13.2 million in 1993, while the average annual
return on investments in 1995 averaged 7.1%, up from 5.8% in 1994 and 5.2% in
1993.
Other Income. Other income totaled $4.5 million in 1995 as compared to a
loss of $0.7 million in 1994. Other income in 1995 included profits of $4.4
million from cash management activities and $0.1 million from the sale of
timber, while the loss in 1994 came from cash management activities. Cash
management activities include the purchase and sale of liquid securities and the
purchase and sale of options related to such securities. In 1995, income from
cash management activities included $2.4 million from the sale of options and
$1.9 million from the sale of securities, while the loss in 1994 came from the
sale of securities.
The profits and losses from cash management activities of the Company's
uncommitted cash and temporary investments are included in other income, but
were included in net realized gains prior to the third quarter of 1995. Gains
and losses from the sale of long-term investments continue to be included in net
realized gains and losses. The Company believes that this accounting for cash
management activities is consistent with the recent interpretations by the
National Association of Real Estate Investment Trusts of its definition of funds
from operations with respect to sales of undepreciated assets incidental to the
Company's operations.
Interest Expense. Interest expense totaled $15.6 million in 1995, up from
$10.4 million in 1994 and $5.6 million in 1993. Average debt outstanding rose to
$264.6 million in 1995 from $165.2 million in 1994 and $95.2 million in 1993,
primarily as a result of financing apartment purchases and development through
the issuance of the 7.25% and 6.875% senior unsecured notes discussed above. The
weighted average interest rate charged on all the Company's debt increased to
6.9% in 1995 from 6.4% in 1994 and 5.4% for 1993, primarily as a result of
rising short term rates and the replacement of short-term financing with the
7.25% and 6.875% senior unsecured notes.
Amortization-Financing Costs. Amortization of deferred loan costs
increased to $0.5 million in 1995 from $0.3 million in 1994 and $0.1 million in
1993 as a result of additional amortization relating to $2.0 million in deferred
loan costs incurred and capitalized upon the issuance of $240.0 million in
senior unsecured notes issued during 1995. Partially offsetting this increase
for 1995 and future years is a decrease in amortization of deferred loan costs
relating to the Claire Point loan. These loan costs were written off in their
entirety on November 30, 1995 when this loan was defeased.
General and Administrative Expenses. General and administrative expenses
in 1995 were $2.4 million, only 1.7% of rental revenues and 3.0% of funds from
operations. For 1994 these expenses averaged 1.7% of rental revenues and 3.2% of
funds from operations and for 1993 averaged 2.6% of revenues and 5.0% of funds
from operations. The significant improvements since 1993 reflect continuing
efforts to control overhead costs and the significant increase in the Company's
revenues.
Non Recurring Costs. In 1995, the Company recorded a $1.6 million loss on
the retirement of $17.4 million of mortgage debt. Of this amount, $1.1 million
was unamortized deferred loan cost and the remainder was a prepayment penalty.
Partially offsetting this loss, the Company reversed a $0.2 million charge
reserved in 1994 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. In 1993 the Company sold $120.0 million of 6.625%
unsecured senior notes and used the $119.0 million 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.
S-16
<PAGE> 17
Gains on Sales of Assets. Net gains recognized on the sale of assets
totaled $1.8 million in 1995, $1.2 million for 1994 and $8.0 million for 1993.
Gains in 1995 came primarily from the sale of 281,400 shares of First Financial
Holdings, Inc. and included losses on the sale of Treasury securities and the
unwinding of an interest rate lock. At December 31, 1995, the Company owned
200,000 shares of First Financial with an unrealized gain of $2.6 million. Gains
in 1994 came from the sale of securities and real estate. Gains in 1993 came
primarily from the sale of thrift stocks.
Net Income. Net income totaled $53.5 million for 1995, $37.0 million for
1994 and $26.4 million for 1993. Net income available for common shareholders
totaled $35.4 million for 1995, $29.1 million for 1994 and $22.4 million for
1993. The increases in net income and net income available for common
shareholders for 1995 when compared to 1994 arose principally from substantially
increased operating income from apartments due to the growth of the Company's
apartment holdings. Net income per common share in 1995 decreased to $1.06 from
$1.10 in 1994 and $1.30 in 1993.
Dividends to preferred shareholders. Dividends to preferred shareholders
totaled $18.1 million for 1995 and $7.9 million for 1994 and $4.0 million for
1993. The increase in preferred dividends arose from an increase in the amount
of preferred stock outstanding during the period. In 1995 the Company sold 4.6
million shares of Series C Cumulative Convertible Preferred Stock in a public
offering. In November 1994, the Company completed a private placement of 4.0
million shares of its Series B Cumulative Convertible Preferred Stock. In June
1993, the Company sold 4.6 million shares of Series A Cumulative Convertible
Preferred Stock in a public offering.
Preferred dividends are summarized in the following table (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Series A Preferred dividends...................................... $4,025 $6,454 $ 1,425
Series B Preferred dividends...................................... -- 1,480 8,820
Series C Preferred dividends...................................... -- -- 7,884
------ ------ -------
Total preferred dividends............................... $4,025 $7,934 $18,129
</TABLE>
Holders of the Company's Series A Preferred Stock have converted 3.9
million of the 4.6 million shares of Series A Preferred Stock originally issued
in June 1993 into 5.3 million shares of the Company's Common Stock. Conversions
have occurred because the common dividend was raised above the equivalent
preferred dividend.
Funds From Operations. Funds from operations rose 47% to $79.4 million in
1995 as compared to $53.9 million in 1994 and $28.8 million in 1993. Funds from
operations available to common shares rose 33% to $61.2 million in 1995 compared
to $46.0 million in 1994 and $24.8 million in 1993. These increases were
principally due to increased rental operating income resulting from the growth
of the Company's apartment holdings and increased other income. On a fully
diluted per share basis, funds from operations increased to $1.84 in 1995 from
$1.66 per share in 1994, or 11%. In 1993, funds from operations was $1.41 per
share.
S-17
<PAGE> 18
The following is a reconciliation of net income to funds from operations
(data in thousands, except per share data):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net income...................................................... $26,408 $36,985 $53,537
Less preferred dividends paid................................... 4,025 7,934 18,129
------- ------- -------
Net income available for common shares.......................... 22,383 29,051 35,408
Add depreciation of real estate owned........................... 9,066 17,877 26,265
Add non-recurring costs......................................... 1,308 200 1,370
Less net realized gains......................................... 7,992 1,153 1,812
------- ------- -------
Funds from operations available to common shares................ 24,765 45,973 61,231
Add preferred dividends......................................... 4,025 7,934 18,129
------- ------- -------
Funds from operations-fully diluted............................. $28,790 $53,907 $79,360
======== ======== ========
Weighted average common shares outstanding--
primary....................................................... 17,268 26,430 33,368
fully diluted................................................. 20,381 32,562 43,112
Funds from operations per share--
primary....................................................... $1.43 $1.74 $1.84
fully diluted................................................. $1.41 $1.66 $1.84
</TABLE>
Application of the revised definition of funds from operations which
eliminates any amortization of debt costs and any non-real estate depreciation
reduced the Company's funds from operations by $0.2 million, $0.5 million and
$0.7 million for 1993, 1994 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Financial Structure. At March 31, 1996, total debt equaled 34% of total
capitalization at cost, and 27% of total capitalization with equity valued at
market. At that date, the Company's financial structure was as follows (dollars
in thousands):
<TABLE>
<CAPTION>
EQUITY AT
% OF MARKET % OF
COST TOTAL VALUE TOTAL
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Advances under line of credit.................. $ -- $ --
Mortgage loans................................. -- --
6.625% senior unsecured notes, 1999............ 40,000 40,000
6.625% senior unsecured notes, 2000............ 40,000 40,000
6.625% senior unsecured notes, 2001............ 40,000 40,000
7.25% senior unsecured notes, 2002............. 40,000 40,000
6.875% senior unsecured notes, 2003............ 40,000 40,000
6.875% senior unsecured notes, 2004............ 40,000 40,000
7.25% senior unsecured notes, 2005............. 120,000 120,000
---------- ----------
Total debt........................... 360,000 34 % 360,000 27 %
Common and preferred stock(1).................. 695,891 66 % 979,212 73 %
---------- ---- ---------- ----
Total capitalization................. $1,055,891 100 % $1,339,212 100 %
========== ==== ========== ====
</TABLE>
- ---------------
(1) Assumes conversion of all outstanding Preferred Stock into Common Stock.
At March 31, 1996, the Company had no borrowings outstanding under its
$160.0 million line of credit. The line matures on June 29, 1996, and subject to
the bank's approval, is expected to be renewed annually.
It generally is not the practice of the Company to finance its acquisitions
using mortgage debt, though at times the Company finds it advantageous to assume
such debt in order to successfully negotiate and close property acquisitions. At
May 28, 1996, the Company had no mortgage loans
S-18
<PAGE> 19
outstanding other than a $9.6 million mortgage loan assumed in connection with
the acquisition of the Mariner Club apartments.
The Company's preferred stock and its senior unsecured notes are rated
investment grade by Standard & Poor's Corporation and Moody's Investors
Services, Inc.
Liquidity. Merry Land expects to meet its short-term liquidity
requirements with cash provided by operating activities, by liquidating short
term investments and by borrowing under its line of credit. The Company's
primary short-term liquidity needs are operating expenses, apartment
acquisitions and development and capital improvements.
The Company's development costs totaled $31.1 million at March 31, 1996.
Over the next three years, the Company expects to spend approximately $190.0
million to complete its communities under development. With the exception of the
monthly amortization required on the Company's one mortgage loan, the Company
has no principal payments due on its debt during this period.
Capital resources available to the Company at March 31, 1996 included cash
and marketable securities of $79.8 million and the Company's $160.0 million line
of credit. At March 31, 1996, no amount was outstanding under the line of
credit, but the Company is limited in the amount of debt it may incur under the
terms of its existing loan agreements. At March 31, 1996, certain of the
Company's loan covenants restricted the amount that could be drawn under the
Company's line of credit to $109.3 million.
The Company expects to meet its long-term liquidity requirements, including
scheduled debt maturities and permanent financing for property acquisitions and
development, from a variety of sources, including operating cash flow,
additional borrowings and the issuance and sale of debt and equity securities in
the public and private markets.
Cash Flows. Operating cash flow has grown with the expansion of the
Company's apartment holdings to $82.2 million in 1995 from $56.1 million in 1994
and $30.9 million in 1993. Operating cash flow grew to $26.0 million in the
first quarter of 1996 from $16.6 million in the first quarter of 1995. 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
acquisitions and improvements. Dividends paid in 1994, 1995 and 1996 increased
from levels in prior years due to an increase in the average amount of stock
outstanding, and in the case of the Company's Common Stock, increases in the
quarterly dividend per share from $.20 for the first quarter of 1993 to $.37 for
S-19
<PAGE> 20
the first quarter of 1996. The following table summarizes cash flows for the
periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating activities................ $ 30,911 $ 56,099 $ 82,224 $ 16,611 $ 26,049
Sales of Merry Land Common and
Preferred Stock................... 283,560 187,939 116,845 98,460 3,708
Other............................... 17,660 3,977 11,778 72 --
-------- -------- --------- --------- ---------
Total sources of cash..... 333,560 303,652 359,091 115,143 29,757
Acquisitions of and improvements to
properties........................ (307,048) (242,134) (213,521) (3,173) (13,888)
Development of properties........... -- (8,129) (12,813) (1,324) (9,643)
Dividends paid...................... (20,959) (41,041) (64,868) (14,112) (17,550)
Net repayment of borrowings......... -- -- -- (74,991) --
Net purchase of marketable
securities........................ -- -- -- (1,404) --
Other............................... (23) -- (4,021) (1,181) (1,274)
-------- -------- --------- --------- ---------
Total uses of cash........ (328,030) (291,664) (295,223) (96,185) (42,355)
-------- -------- --------- --------- ---------
Increase (decrease) in cash,
securities and temporary
investments....................... $ 5,530 $ 11,998 $ 63,868 $ 18,958 $ (12,598)
</TABLE>
Capital Expenditures. The Company capitalizes the direct and indirect cost
of expenditures for the acquisition or development of apartments and for
replacements and improvements. Replacements are non-revenue producing capital
expenditures which recur on a regular basis, but which have estimated useful
lives of more than one year, such as carpet, vinyl flooring and exterior
repainting. Improvements are expenditures which significantly increase the
revenue producing capability or which significantly reduce the cost of operating
assets. At newly acquired communities, the Company often finds it necessary to
upgrade the physical appearance of the 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,
and some of these expenditures which would be considered replacements at
stabilized communities (as defined below) are classified as improvements at
newly acquired properties. Interest, real estate taxes and other carrying costs
incurred during the development period of apartments under construction are
capitalized and, upon completion of the project, depreciated over the lives of
the project.
S-20
<PAGE> 21
The following table summarizes the capital expenditures for the first three
months of 1995 and 1996 (dollars in thousands, except per unit data):
<TABLE>
<CAPTION>
THREE MONTHS
----------------
1995 1996
------ -------
<S> <C> <C>
Apartment communities:
Acquisitions............................................................ $ -- $10,151
Development projects:
Development costs.................................................... 1,068 9,643
Capitalized interest................................................. 255 473
Replacements for stabilized communities(1).............................. 727 1,178
Improvements(2)......................................................... 2,276 2,153
Commercial properties..................................................... 126 239
Corporate level expenditures.............................................. 45 167
------ -------
$4,497 $24,004
====== ========
Per Unit:
Replacements for stabilized communities(1).............................. $ 52 $ 64
Improvements(2)......................................................... $ 121 $ 96
</TABLE>
- ---------------
(1) Stabilized communities are those properties which have been owned for at
least one full calendar year. In the first three months of 1996, 18,411
units were stabilized as compared to 13,979 units in the first three months
of 1995.
(2) Improvements include expenditures for all properties owned during the
period, including replacements at newly acquired communities.
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-21
<PAGE> 22
BUSINESS
Organization. Merry Land maintains a centralized corporate structure,
managing all its communities and conducting all its corporate level activities,
including accounting, general property management and acquisitions and
development, from its offices in Augusta. The Company provides no services of
any kind to third parties and has no partners in any of its investments or other
activities.
The Company has 752 employees. Of this number, 689 work at its apartment
communities, 28 are employed in accounting, administration and general
management, 27 in corporate level property management and 8 in acquisitions and
development.
Property Management. The Company manages its properties under the trade
name "Merry Land Apartment Communities." Each community functions as an
individual business unit according to well developed policies and procedures and
is operated by an on-site Property Manager and staff who are extensively trained
by the Company in sales, management, accounting, maintenance and other
disciplines. Property Managers report to twelve Regional Property Managers who
report to the Company's three Vice Presidents of Property Management. Regional
Property Managers are located at communities in Raleigh, Charlotte, Augusta,
Atlanta(2), Charleston, Jacksonville, Orlando, Tampa, Ft. Lauderdale, Dallas and
Austin.
Merry Land believes that property management is of critical importance to
long term success in the apartment business. The emphasis of the property
management staff is on what the Company calls "First Class Service," a customer
focused, marketing oriented form of management. The Company's objective is to
produce consistently high levels of customer service and high levels of
financial performance at every Merry Land location. This is achieved through an
extensive program of recruiting and training, and a continual emphasis on
professional development, and performance based compensation programs.
Acquisitions and Development. Merry Land's acquisition and development
activities are conducted from the Company's Augusta headquarters. Over the past
fifteen years the Company has established relationships with brokers,
developers, merchant builders, financial institutions and other sellers of
apartment communities which provide Merry Land with a steady flow of acquisition
opportunities. Since the Company's objective is to own a significant number of
communities in every major Southern city, the acquisition group considers for
purchase any high quality community made available for sale at a reasonable
price in its market area.
The Company believes its development program allows it the flexibility to
develop communities in a number of markets and to expand, reduce or terminate
such activities as conditions warrant. The Company has engaged experienced
apartment developers to provide development and construction management services
to the Company on a project by project basis. The developers' fees are computed
as a share of the value of the completed projects, based on agreed upon
formulas, less actual costs. Merry Land's employees supervise development
activities with the assistance of architects and engineers as required. The
Company owns all land and improvements, directly contracts for construction and
bears essentially all risks of project development. While the Company has added
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. Merry Land will manage these new communities during and after
construction. The Company's present intention is to limit the total cost of
development underway at any given time to no more than 10% of its total assets.
Market Conditions. The Company believes that a generally favorable
relationship between aggregate supply and demand exists for apartment rentals in
its markets. The eight states which the Company considers its market area 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
indicate that from 1985 to 1995 total households in these states increased 17.5%
versus an
S-22
<PAGE> 23
increase of 9.2% nationally. In the most recent year, households in these states
increased 1.5% versus 0.7% nationally.
Apartment construction in the eight state area has fluctuated in recent
years, totalling 245,000 starts in 1985, declining to a low of 41,000 in 1992
and rising to 99,000 in 1994 and 112,000 in 1995. In 1996, increased supply has
led to somewhat softer markets in some cities. The Company's overall occupancy
at communities it held for all of 1995 and 1996 averaged 93.9% for the first
quarter of 1996 versus 95.3% for the first quarter of 1995. Despite lower
occupancy, rental revenues rose 3.2% over this period as a result of higher rent
rates and increased other income.
Based on currently available information, the Company expects generally
strong markets to prevail throughout the South for the foreseeable future. Same
store occupancy should average 1.5% to 2.0% below the high 96% occupancy levels
of 1994 and 1995. The Company believes that these projected levels of occupancy
are historically indicative of healthy markets. The Company further believes
that its lower 1996 occupancy rates resulted in part from its reluctance to
match discounting by competitors and its continued focus on raising rents.
Apartments. The Company owns high quality 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 48% one bedroom units, 46% two bedroom units and 6% three bedroom units. The
units average 904 square feet in area, eight years of age and are well equipped
with modern appliances and other conveniences. The communities are generally
heavily landscaped and offer extensive amenities. Most include swimming pools,
tennis courts, club rooms, exercise facilities and hot tubs. Some of the
Company's communities also offer racquetball courts, saunas, alarm systems and
other features, including 1,326 enclosed garages.
Residents at the Company's apartments typically earn middle and upper
middle levels of income. They include young professionals, white collar workers,
medical personnel, 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. The Company believes that demand for its
apartments is primarily dependent on the general economic strength of each
market's economy and its level of job creation and household formation, and is
less sensitive to prevailing interest rate levels for home mortgage loans. There
is steady turnover of leases at the Company's communities, allowing rents to be
adjusted upward as demand allows. Leases are generally for terms of from six to
twelve months. About two-thirds of the Company's units turn over each year, a
rate the Company believes is typical for higher end apartment communities.
The Company believes that the diversification of its portfolio reduces the
volatility of its aggregate rental occupancy and rental income. The Company owns
all its communities, directly or through its wholly owned subsidiaries, in fee
simple, with only two subject to encumbrances. One mortgage loan has been
defeased by the Company through transfer of government securities to a trust
account held by First Union National Bank of Georgia. This encumbrance will be
removed upon repayment of the mortgage debt by the trust in July of 1996. The
remaining mortgage of $9.6 million maturing in 2002 was assumed in connection
with the acquisition of the Mariner Club apartments in April 1996. The following
table describes the Company's apartment communities at March 31, 1996, except
for those three properties acquired in the second quarter of 1996 for which data
is provided as of the date of acquisition:
<TABLE>
<CAPTION>
AVERAGE MARCH
RENT(2)
--------------------
PER
SQ.
AVERAGE PER MONTH FT.
DATE DATE COST(1) COST UNIT SIZE ------------- -----
NAME LOCATION BUILT ACQUIRED UNITS (IN THOUSANDS) PER UNIT(1) (SQ. FT.) 1995 1996 1995
- ---------------------- ---------------- ------- -------- ------ --------------- ----------- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLORIDA
Indigo Lakes.......... Daytona 1989 1994 304 $ 11,490 $37,796 882 $544 $556 $0.62
Waterford Village..... Delray Beach 1989 1994 236 13,542 57,381 910 738 771 0.81
<CAPTION>
AVERAGE
OCCUPANCY
(3)
-------------
NAME 1996 1995 1996
- ---------------------- ----- ---- ----
<S> <C> <C> <C>
FLORIDA
Indigo Lakes.......... $0.63 94 % 96 %
Waterford Village..... 0.85 99 94
</TABLE>
S-23
<PAGE> 24
<TABLE>
<CAPTION>
AVERAGE MARCH
RENT(2)
--------------------
PER
SQ.
AVERAGE PER MONTH FT.
DATE DATE COST(1) COST UNIT SIZE ------------- -----
NAME LOCATION BUILT ACQUIRED UNITS (IN THOUSANDS) PER UNIT(1) (SQ. FT.) 1995 1996 1995
- ---------------------- ---------------- ------- -------- ------ --------------- ----------- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Laurel Gardens........ Ft. Lauderdale 1989 1995 384 $ 26,107 $67,987 1,192 $ (4) $865 $ (4)
Mariner Club(5)....... Ft. Lauderdale 1988 1996 304 18,000 59,211 931 (4) 889 (4)
Welleby Lake Club..... Ft. Lauderdale 1991 1993 304 18,228 59,961 1,061 788 790 0.74
------ --------------- ----------- --------- ---- ---- -----
992 62,335 62,838 1,072 788 849 0.74
Beach Club............ Ft. Myers 1990 1995 320 12,189 38,091 872 (4) 593 (4)
Colony Place.......... Ft. Myers 1991 1993 300 18,313 61,043 1,136 715 743 0.63
Polos................. Ft. Myers 1991 1993 328 15,230 46,433 955 620 657 0.65
Viridian Lake......... Ft. Myers 1991 1992 320 12,759 39,872 863 620 644 0.72
------ --------------- ----------- --------- ---- ---- -----
1,268 58,491 46,129 953 650 658 0.67
Bermuda Cove.......... Jacksonville 1989 1994 350 15,456 44,160 912 619 666 0.68
Claire Point.......... Jacksonville 1986 1993 256 13,614 53,180 1,010 641 678 0.63
Deerbrook............. Jacksonville 1983 1993 144 7,062 49,042 1,293 664 746 0.51
Princeton Square...... Jacksonville 1984 1992 288 8,148 28,292 738 479 510 0.65
Royal Oaks............ Jacksonville 1991 1993 284 12,322 43,387 816 593 621 0.73
Spicewood Springs..... Jacksonville 1986 1992 512 16,370 31,973 759 490 526 0.65
Timberwalk............ Jacksonville 1987 1993 284 12,758 44,923 851 562 592 0.66
Waterford............. Jacksonville 1988 1993 432 19,212 44,472 1,066 629 683 0.59
------ --------------- ----------- --------- ---- ---- -----
2,550 104,942 41,154 902 574 616 0.64
Cypress Cove.......... Melbourne 1990 1993 326 15,802 48,472 1,027 632 670 0.62
Lakeridge at Moors.... Miami 1991 1993 175 11,937 68,211 970 860 876 0.89
Auvers Village........ Orlando 1991 1993 480 22,489 46,852 1,021 634 658 0.62
Bishop Park........... Orlando 1991 1993 324 16,867 52,059 903 603 624 0.67
Conway Station........ Orlando 1987 1993 242 11,234 46,421 787 562 580 0.71
Copper Terrace........ Orlando 1989 1992 300 11,778 39,260 902 649 669 0.72
Lexington Park........ Orlando 1988 1993 252 11,179 44,361 799 571 593 0.71
Mission Bay........... Orlando 1991 1993 304 17,184 56,526 1,087 733 765 0.67
------ --------------- ----------- --------- ---- ---- -----
1,902 90,731 47,703 933 629 652 0.68
Augustine Club........ Tallahassee 1988 1993 222 8,344 37,586 900 600 661 0.67
Audubon Village....... Tampa 1990 1993 447 20,128 45,029 849 593 651 0.70
Essex Place(5)........ Tampa 1989 1996 148 5,075 34,291 834 (4) 639 (4)
Falls................. Tampa 1985 1993 240 8,374 34,892 655 500 517 0.76
Lofton Place.......... Tampa 1988 1993 280 14,755 52,696 953 635 672 0.67
Promenade............. Tampa 1994 1994 334 20,895 62,560 978 757 768 0.77
------ --------------- ----------- --------- ---- ---- -----
1,449 69,227 47,776 865 627 659 0.72
GEORGIA
Belmont Crossing...... Atlanta 1988 1993 316 13,305 42,104 1,023 590 625 0.58
Belmont Landing....... Atlanta 1988 1993 424 16,112 38,000 911 562 590 0.62
Champion's Park....... Atlanta 1987 1994 252 11,527 45,742 806 617 629 0.77
Gwinnett Crossing(6).. Atlanta 1990/89 1992/95 574 20,302 35,369 874 (4) 599 (4)
Harvest Grove......... Atlanta 1986 1992 376 11,011 29,285 927 545 580 0.59
Lexington Glen........ Atlanta 1990 1993 480 31,175 64,948 1,095 750 823 0.69
Shadowlake............ Atlanta 1989 1994 228 9,804 43,000 1,018 584 624 0.57
Sweetwater Glen....... Atlanta 1986 1992 200 5,985 29,925 802 538 565 0.67
Willow Trail.......... Atlanta 1985 1993 224 7,717 34,451 860 540 571 0.63
Windridge............. Atlanta 1982 1994 272 11,671 42,908 845 586 611 0.69
------ --------------- ----------- --------- ---- ---- -----
3,346 138,609 41,425 928 601 631 0.64
Downtown.............. Augusta (7) (7) 76 3,416 45,547 974 440 446 0.45
South Augusta......... Augusta 1950 1984 114 1,759 15,430 682 295 306 0.43
Woodcrest............. Augusta 1982 1982 248 8,400 33,871 875 497 503 0.57
Woodknoll............. Augusta 1975 1982 52 1,490 28,654 900 441 454 0.49
Other................. Augusta 1984 1984 1 72 72,000 1,300 675 675 0.52
------ --------------- ----------- --------- ---- ---- -----
491 15,137 30,892 849 402 436 0.52
Greentree............. Savannah 1983 1986 194 7,101 36,603 852 533 565 0.63
Huntington............ Savannah 1986 1992 147 5,194 35,333 812 574 625 0.71
Magnolia Villa........ Savannah 1986 1986 144 5,482 38,069 1,119 553 603 0.49
Marsh Cove............ Savannah 1983 1986 188 7,903 42,037 1,053 592 623 0.56
West Wind Landing..... Savannah 1985 1993 192 7,062 36,781 1,124 603 629 0.54
------ --------------- ----------- --------- ---- ---- -----
865 32,742 37,852 994 572 609 0.58
MARYLAND
Clary's Crossing...... Baltimore 1984 1994 198 11,997 60,591 938 780 782 0.83
<CAPTION>
AVERAGE
OCCUPANCY
(3)
-------------
NAME 1996 1995 1996
- ---------------------- ----- ---- ----
<S> <C> <C> <C>
Laurel Gardens........ $0.73 (4 )% 91 %
Mariner Club(5)....... 0.95 (4 ) 93
Welleby Lake Club..... 0.74 94 91 %
----- ---- ----
0.80 94 91
Beach Club............ 0.68 (4 ) 94
Colony Place.......... 0.65 99 98
Polos................. 0.69 98 96
Viridian Lake......... 0.75 99 96
----- ---- ----
0.69 99 95
Bermuda Cove.......... 0.73 99 97
Claire Point.......... 0.67 97 98
Deerbrook............. 0.58 94 96
Princeton Square...... 0.69 95 95
Royal Oaks............ 0.76 98 96
Spicewood Springs..... 0.69 99 96
Timberwalk............ 0.70 96 99
Waterford............. 0.64 97 96
----- ---- ----
0.69 97 97
Cypress Cove.......... 0.65 94 94
Lakeridge at Moors.... 0.90 95 89
Auvers Village........ 0.64 87 99
Bishop Park........... 0.69 91 93
Conway Station........ 0.74 91 97
Copper Terrace........ 0.74 91 94
Lexington Park........ 0.74 93 91
Mission Bay........... 0.70 94 91
----- ---- ----
0.70 91 95
Augustine Club........ 0.73 97 95
Audubon Village....... 0.77 96 95
Essex Place(5)........ 0.77 (4 ) 100
Falls................. 0.79 93 96
Lofton Place.......... 0.71 98 93
Promenade............. 0.78 95 96
----- ---- ----
0.76 95 95
GEORGIA
Belmont Crossing...... 0.61 96 99
Belmont Landing....... 0.65 97 98
Champion's Park....... 0.78 97 97
Gwinnett Crossing(6).. 0.69 99 98
Harvest Grove......... 0.63 98 96
Lexington Glen........ 0.75 99 91
Shadowlake............ 0.61 99 98
Sweetwater Glen....... 0.70 99 98
Willow Trail.......... 0.66 98 96
Windridge............. 0.72 97 96
----- ---- ----
0.68 98 96
Downtown.............. 0.46 83 95
South Augusta......... 0.45 81 64
Woodcrest............. 0.57 88 76
Woodknoll............. 0.50 100 96
Other................. 0.52 100 100
----- ---- ----
0.51 87 78
Greentree............. 0.66 96 95
Huntington............ 0.77 100 97
Magnolia Villa........ 0.54 99 95
Marsh Cove............ 0.59 98 97
West Wind Landing..... 0.56 98 100
----- ---- ----
0.62 98 97
MARYLAND
Clary's Crossing...... 0.83 97 95
</TABLE>
S-24
<PAGE> 25
<TABLE>
<CAPTION>
AVERAGE MARCH
RENT(2)
--------------------
PER
SQ.
AVERAGE PER MONTH FT.
DATE DATE COST(1) COST UNIT SIZE ------------- -----
NAME LOCATION BUILT ACQUIRED UNITS (IN THOUSANDS) PER UNIT(1) (SQ. FT.) 1995 1996 1995
- ---------------------- ---------------- ------- -------- ------ --------------- ----------- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA
Timber Hollow......... Chapel Hill 1986 1991 198 $ 6,467 $32,662 735 $584 $626 $0.79
Berkshire Place....... Charlotte 1982 1990 240 8,810 36,708 882 555 603 0.63
English Hills......... Charlotte 1984 1994 280 10,371 37,039 688 518 541 0.75
Hunt Club............. Charlotte 1990 1992 300 10,694 35,647 891 626 659 0.70
Kimmerly Glen......... Charlotte 1986 1995 260 9,305 35,788 750 (4) 539 (4)
Lake Point............ Charlotte 1984 1989 296 10,258 34,655 918 522 457 0.57
Steeplechase.......... Charlotte 1986 1994 247 9,120 36,923 724 530 675 0.73
------ --------------- ----------- --------- ---- ---- -----
1,623 58,558 36,080 811 551 557 0.68
Adams Farm............ Greensboro 1987 1994 300 14,813 49,377 1,005 639 670 0.64
Chatham Wood.......... High Point 1986 1990 208 7,145 34,351 811 488 511 0.60
Duraleigh Woods....... Raleigh 1987 1994 362 18,210 50,304 784 633 641 0.81
Misty Woods........... Raleigh 1984 1991 360 10,611 29,475 766 541 560 0.71
Sailboat Bay.......... Raleigh 1986 1993 192 6,299 32,807 641 500 532 0.78
Sommerset Place....... Raleigh 1983 1990 144 5,418 37,625 780 582 616 0.75
------ --------------- ----------- --------- ---- ---- -----
1,058 40,538 38,316 751 571 596 0.76
OHIO
Hunters Chase......... Cleveland 1987 1994 244 14,064 57,639 890 711 716 0.80
Saw Mill.............. Columbus 1987 1994 340 19,913 58,568 1,161 744 738 0.64
SOUTH CAROLINA
Quarterdeck........... Charleston 1986 1989 230 9,501 41,309 810 535 564 0.66
Summit Place.......... Charleston 1985 1985 226 8,096 35,823 892 457 465 0.51
Waters Edge........... Charleston 1985 1988 200 7,708 38,540 911 535 565 0.59
Windsor Place......... Charleston 1984 1989 224 7,865 35,112 953 517 564 0.54
------ --------------- ----------- --------- ---- ---- -----
880 33,170 37,693 892 510 539 0.58
Hollows............... Columbia 1987 1991 212 6,440 30,377 762 488 501 0.64
Haywood Pointe........ Greenville 1985 1991 216 6,848 34,351 848 516 541 0.61
TENNESSEE
Cherry Creek.......... Nashville 1986 1994 127 3,580 28,189 676 380 508 (4)
The Landings.......... Memphis 1986 1994 292 11,656 39,918 786 551 572 0.70
TEXAS
Crestview of Austin
Hills................ Austin 1993 1996 161 10,173 63,186 937 (4) 849 (4)
Sedona Springs(5)..... Austin 1995 1996 396 27,324 69,000 978 (4) 929 (4)
Madison at Stone
Creek................ Austin 1995 1995 390 23,681 60,721 862 (4) 807 (4)
------ --------------- ----------- --------- ---- ---- -----
947 61,178 64,602 923 (4) 865 (4)
Madison at Cedar
Springs.............. Dallas 1995 1995 380 24,422 64,268 898 (4) 844 (4)
Madison at Chase
Oaks................. Dallas 1995 1995 470 29,327 62,398 895 (4) 815 (4)
Madison at Melrose.... Dallas 1995 1995 200 14,014 70,070 947 (4) 906 (4)
Madison at Parkway.... Dallas 1995 1995 376 24,836 66,053 904 (4) 830 (4)
Madison at Round
Grove................ Dallas 1995 1995 404 25,102 62,134 933 (4) 792 (4)
------ --------------- ----------- --------- ---- ---- -----
1,830 117,701 64,317 912 (4) 829 (4)
VIRGINIA
Champion's Club....... Richmond 1988 1994 212 10,337 48,759 776 606 646 0.78
Hickory Creek......... Richmond 1984 1994 294 15,202 51,707 851 622 667 0.73
------ --------------- ----------- --------- ---- ---- -----
506 25,539 50,472 820 615 658 0.75
------ --------------- ----------- --------- ---- ---- -----
Totals 23,305 $ 1,072,938 $46,041 904 $596 $658 0.66
<CAPTION>
AVERAGE
OCCUPANCY
(3)
-------------
NAME 1996 1995 1996
- ---------------------- ----- ---- ----
<S> <C> <C> <C>
NORTH CAROLINA
Timber Hollow......... $0.85 99% 99 %
Berkshire Place....... 0.68 95 91
English Hills......... 0.79 94 91
Hunt Club............. 0.74 97 97
Kimmerly Glen......... 0.72 (4 ) 92
Lake Point............ 0.50 97 93
Steeplechase.......... 0.93 87 94
----- ---- ----
0.72 94 93
Adams Farm............ 0.67 99 92
Chatham Wood.......... 0.63 97 99
Duraleigh Woods....... 0.82 95 93
Misty Woods........... 0.73 95 98
Sailboat Bay.......... 0.83 98 93
Sommerset Place....... 0.79 100 91
----- ---- ----
0.79 97 95
OHIO
Hunters Chase......... 0.80 96 98
Saw Mill.............. 0.64 88 81
SOUTH CAROLINA
Quarterdeck........... 0.70 100 100
Summit Place.......... 0.52 91 81
Waters Edge........... 0.62 98 94
Windsor Place......... 0.59 89 79
----- ---- ----
0.61 95 88
Hollows............... 0.66 95 96
Haywood Pointe........ 0.64 98 98
TENNESSEE
Cherry Creek.......... 0.75 99 95
The Landings.......... 0.73 89 89
TEXAS
Crestview of Austin
Hills................ 0.91 (4 ) 97
Sedona Springs(5)..... 0.95 (4 ) 82
Madison at Stone
Creek................ 0.94 (4 ) 85
----- ---- ----
0.94 (4 ) 86
Madison at Cedar
Springs.............. 0.94 (4 ) 94
Madison at Chase
Oaks................. 0.91 (4 ) 87
Madison at Melrose.... 0.96 (4 ) 75
Madison at Parkway.... 0.92 (4 ) 84
Madison at Round
Grove................ 0.85 (4 ) 89
----- ---- ----
0.91 (4 ) 88
VIRGINIA
Champion's Club....... 0.83 92 86
Hickory Creek......... 0.78 91 95
----- ---- ----
0.80 91 91
----- ---- ----
Totals 0.73 95% 93 %
</TABLE>
- ---------------
(1) Represents the total acquisition cost of the property plus the capitalized
cost of the improvements made subsequent to acquisition.
(2) Represents the weighted average of rent charged for occupied units and rent
asked for unoccupied units at March 31 or as of the date of acquisition for
properties acquired after March 31, 1996.
(3) Represents average physical occupancy at each month end for the period held
or as of the date of acquisition for properties acquired after March 31,
1996.
(4) Properties not owned during period indicated.
(5) These properties were acquired after March 31, 1996 and data is as of the
date of acquisition.
(6) Includes 260 units acquired on April 28, 1995.
(7) These units consist of three locations, built and acquired at various times.
S-25
<PAGE> 26
Development in Progress. Merry Land conducts a program of apartment
development to provide an additional means of expanding its apartment holdings.
The communities under development offer features typical of high-end properties,
including nine foot ceilings, high levels of trim and finish, garages and
extensive amenities.
The following table summarizes the Company's development communities at
March 31, 1996 (dollars in thousands, except cost per unit):
<TABLE>
<CAPTION>
BUDGETED RENTALS
BUDGETED COST PER COST TO EXPECTED ESTIMATED
COMMUNITY LOCATION UNITS COST UNIT DATE TO BEGIN COMPLETION
- ------------------------ ------------------------ ----- -------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Under Construction
River Sound............. Atlanta, Georgia 586 $ 37,800 $64,505 $ 6,776 3Q 1996 4Q 1997
Cherry Creek............ Nashville, Tennessee 280 17,946 64,093 8,453 2Q 1996 4Q 1996
Long Point.............. Savannah, Georgia 308 20,000 64,935 1,882 4Q 1996 2Q 1997
----- -------- -------- -------
1,174 $ 75,746 $64,520 $17,111
Under Development
Sweetwater Creek........ Atlanta, Georgia 425 $ 29,712 $69,911 $ 2,996 1997 1998
Adams Farm II(1)........ Greensboro, North 200 11,049 54,245 994 1996 1997
Carolina
Wendover................ Greensboro, North 300 17,902 59,673 1,788 1996 1997
Carolina
Cherry Creek II......... Nashville, Tennessee 200 12,000 60,000 2,512 1997 1998
Wyndham................. Richmond, Virginia 264 21,000 79,545 2,089 1996 1997
Spring Oak.............. Richmond, Virginia 242 17,602 72,736 1,866 1996 1998
Long Point II........... Savannah, Georgia 352 20,400 57,955 553 1997 1998
----- -------- -------- -------
1,983 $129,665 $65,388 $12,798
Future Development
Wendover II............. Greensboro, North 200 $ 12,000 $60,000 $ 1,150
Carolina
----- -------- -------- -------
3,357 $217,411 $64,763 $31,059
</TABLE>
- ---------------
(1) Adjoins the Company's Adams Farm community.
S-26
<PAGE> 27
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............. 60 Chairman of the Board
W. Tennent Houston............ 45 President of the Company; Director
W. Hale Barrett............... 67 Secretary; Director; Member of law firm Hull,
Towill, Norman & Barrett, counsel to the Company
Pierce Merry, Jr.............. 71 Director; Former Chairman of Boral Bricks, Inc.
(formerly Merry Companies, Inc.)
Hugh Calvin Long II........... 44 Director; Capital Area President, First Union
National Banks of Virginia, Maryland &
Washington D.C.
Michael N. Thompson........... 47 Vice President -- Acquisitions and Development
Joseph P. Bailey, III......... 37 Vice President -- Property Management
Ralph J. Simons............... 31 Vice President -- Property Management
Ronald J. Benton.............. 38 Vice President -- Accounting
Dorrie E. Green............... 37 Vice President -- Administration
</TABLE>
As of April 30, 1996, Mr. Knox beneficially owned 2,746,618 or 8.0% of the
Company's Common Stock. At that date all directors and executive officers as a
group, including Mr. Knox, beneficially owned 3,763,174 or 11.0% of the
outstanding shares of Common Stock.
TAXATION
This section is a general summary of the material federal income tax
considerations that may be relevant to prospective purchasers of the Shares
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 Common 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, their own
tax advisor regarding the specific tax consequences to them of the purchase,
ownership, and sale of the Shares 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 1995, subject to the qualification that,
S-27
<PAGE> 28
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, 1995 the amount of the
dividend and interest thereon (net of related tax refunds) would be
approximately $800,000. The Company also has received an opinion from Hull,
Towill, Norman & Barrett, P.C. 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 1996. 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 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 believes
that it provides only customary services.
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.
S-28
<PAGE> 29
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 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 preferred stock and 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 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.
S-29
<PAGE> 30
TAXATION OF THE SHAREHOLDERS OF THE COMPANY
Distributions to Holders. Distributions made by the Company with respect
to the Shares 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 preferred stock will generally be taxed to the holders of the
Shares as ordinary income. Distributions with respect to the Shares 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 Shares as capital
assets).
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 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 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 Shares 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 Section 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 Shares. Upon the sale or exchange of Shares, the holder will
recognize gain or loss equal to the difference between the amount realized on
such sale and the tax basis of such Shares. Assuming the Shares are held as
capital assets, such gain or loss will be a long-term capital gain or loss if
the Shares have been held for more than one year. However, any loss recognized
by a holder on the sale of Shares 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.
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 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 Shares 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
S-30
<PAGE> 31
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 Shares 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 Shares 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-31
<PAGE> 32
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Alex.
Brown & Sons Incorporated, Goldman, Sachs & Co., PaineWebber Incorporated and
Interstate/Johnson Lane Corporation (the "Underwriters"), have severally agreed
to purchase from the Company the following respective number of Shares 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............................................................................ 2,500,000
=========
</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 offered hereby if any such
Shares are purchased.
The Company has been advised that the Underwriters propose to offer the
Shares 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 Underwriters.
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 375,000 additional Shares 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 to be purchased by it shown in the
table above bears to 2,500,000, 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 offered hereby. If purchased, the Underwriters will offer
such additional Shares on the same terms as those on which the 2,500,000 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 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 their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in giving said reports.
S-32
<PAGE> 33
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 L.L.P., 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 27,338
shares of Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the documents incorporated by reference pursuant to the
accompanying Prospectus dated January 22, 1996, 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, 1996; the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1996 and the
Company's annual report on Form 10-K for the year ended December 31, 1995. For
additional information with respect to documents incorporated by reference
herein, see "Incorporation Of Certain Documents By Reference" in the
accompanying Prospectus.
S-33
<PAGE> 34
PROSPECTUS
$500,000,000
[MERRY LAND & INVESTMENT COMPANY INC. LOGO]
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 $500,000,000 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 Debt Securities") or subordinated
Debt Securities ("Subordinated Debt Securities"). The Senior Debt Securities
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company. The Subordinated Debt 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 January 22, 1996.
<PAGE> 35
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (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, 1994;
ii. the Company's quarterly reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995;
iii. the Company's current reports on Form 8-K filed on, February 14,
1995, March 13, 1995, June 8, 1995, June 19, 1995, June 23, 1995, July 14,
1995, September 1, 1995, September 14, 1995, and November 8, 1995;
iv. the Company's current reports on Form 8-K/A filed on January 24,
1995 amending the Company's report on Form 8-K filed on November 3, 1994,
February 7, 1995 amending the Company's report on Form 8-K filed on August
15, 1994, June 21, 1995 amending the Company's report on Form 8-K filed on
June 19, 1995, September 18, 1995 amending the Company's report on Form 8-K
filed on June 8, 1995, and December 1, 1995 amending the Company's report
on Form 8-K filed on September 14, 1995;
v. the description of the Company's Common Stock, $1.75 Series A
Cumulative Convertible Preferred Stock and $2.15 Series C 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 27, 1995
relating to the annual meeting of shareholders held on April 17, 1995.
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 Prospectus to the extent
2
<PAGE> 36
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> 37
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. The Company is a self-administered and self-managed real
estate investment trust ("REIT") headquartered in Augusta, Georgia. At December
15, 1995, the Company owned 78 apartment communities containing 21,705 units and
having an aggregate cost of $969.8 million. At September 30, 1995, the
communities had an average occupancy of 95.2% and an average monthly rental rate
of $624. The Company's apartment communities are located in Florida, Georgia,
Maryland, North Carolina, Ohio, South Carolina, Tennessee, Texas 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.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Debt Securities are to be issued under an indenture dated as of
February 1, 1995, as supplemented by a supplemental indenture dated as of June
1, 1995 and as may be further 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 Debt 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 Senior Indenture and the
form of 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 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 Debt Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by the Subordinated Debt 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 supplemental indentures 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 Debt Securities or Subordinated Debt Securities;
2. the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
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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. 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
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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 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 Debt 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 Debt 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 applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at
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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 or transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration or 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).
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
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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, 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.
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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 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
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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 amendment 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, 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;
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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; 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;
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 Debt 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 Debt Securities will
not otherwise be affected (Section 1608 of the Subordinated Indenture). No
payment of principal or interest may be made on the Subordinated Debt 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 Debt Securities when the default is cured or waived, or 120 days
pass after the notice is 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
Debt 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 Debt 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
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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 Debt
Securities or ranks pari passu with the Subordinated Debt 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 Debt Securities are subordinated, and (3) the Subordinated Debt
Securities (Section 101 of the Subordinated Indenture). At December 15, 1995,
Senior Debt aggregated approximately $360.0 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, 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)
("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 failure 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
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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 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, 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
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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 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.
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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.
TRUSTEES
First Union National Bank of Georgia, 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 Amended and Restated
Articles of Incorporation (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 100,000,000 shares of Common Stock authorized and
33,827,757 shares were outstanding at November 30, 1995. 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
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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 677,470 shares of Series A Preferred Stock,
4,000,000 shares of Series B Preferred Stock and 4,599,800 shares of Series C
Preferred Stock were issued and outstanding at November 30, 1995. All
outstanding shares of the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock are fully paid and nonassessable.
The transfer agent and registrar for the Series A Preferred Stock, the
Series B Preferred Stock and the Series C 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 November 30, 1995 the
Company had 9,277,270 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.
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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 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
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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.
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 and Series C
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
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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 and the Series C
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
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
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 B Preferred Stock have no voting rights.
Series C Preferred Stock. The Series C Preferred Stock ranks senior to the
Common Stock, and pari passu with the Series A Preferred Stock and the Series B
Preferred Stock, with respect to payment of dividends and amounts upon
liquidation, dissolution or winding-up. Holders of Series C 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 $2.15 per share of Series C Preferred Stock. Dividends
on the Series C Preferred Stock are payable quarterly in arrears on the last
calendar day of March, June, September and December of each year.
Shares of Series C Preferred Stock are not redeemable by the Company prior
to March 31, 2000, and at no time are the shares of Series C Preferred Stock
redeemable for cash. On and after March 31, 2000, the shares of Series C
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 C 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 C 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 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, and no more. Except under certain circumstances or
except as otherwise from time to time required by applicable law, the holders of
Series C Preferred Stock have no voting rights.
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<PAGE> 54
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.
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. The form of
Deposit Agreement is filed as an exhibit to the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such exhibit.
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)
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<PAGE> 55
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 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
22
<PAGE> 56
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 to the holders of the Preferred
Stock 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 such holders. (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, 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
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<PAGE> 57
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 L.L.P.,
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 26,141 shares of the Company's Common Stock.
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<PAGE> 58
(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> 59
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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>
The Company............................. S-3
Use of Proceeds......................... S-5
Market Prices of Common Stock and
Dividends to Shareholders............. S-5
Capitalization.......................... S-7
Selected Financial Data................. S-8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ S-9
Business................................ S-22
Management.............................. S-27
Taxation................................ S-27
Underwriting............................ S-32
Experts................................. S-32
Legal Opinions.......................... S-33
Incorporation of Certain Documents by
Reference............................. S-33
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.......... 5
Description of Common Stock............. 16
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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2,500,000 SHARES
[MERRY LAND & INVESTMENT COMPANY INC. LOGO]
COMMON STOCK
---------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------
ALEX. BROWN & SONS
INCORPORATED
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
INTERSTATE/JOHNSON LANE
CORPORATION
June , 1996
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