$5,000,000
PREFERRED STOCK AGREEMENT
Dated as of October 15, 1998
between
MERRY LAND & INVESTMENT COMPANY, INC.
and
MERRY LAND PROPERTIES, INC.,
as the Company
TABLE OF CONTENTS
ARTICLE PAGE
I. DEFINITIONS................................................1
Section 1.1 Defined Terms..................................1
Section 1.2 Accounting Terms and Determinations...........18
II. ISSUANCE OF PREFERRED STOCK TO MLIC.......................19
Section 2.1 Issuance......................................19
Section 2.2 Certificates..................................19
III. REPRESENTATIONS AND WARRANTIES............................19
Section 3.1 Existence and Power...........................19
Section 3.2 Power and Authority...........................19
Section 3.3 No Violation..................................19
Section 3.4 Financial Information.........................20
Section 3.5 Litigation....................................20
Section 3.6 Compliance with ERISA.........................21
Section 3.7 Environmental Matters.........................21
Section 3.8 Taxes.........................................21
Section 3.9 Full Disclosure...............................21
Section 3.10 Solvency.....................................22
Section 3.11 Governmental Approvals.......................22
Section 3.12 Investment Company Act; Public Utility
Holding Company Act.........................22
Section 3.13 Principal Offices............................22
Section 3.14 Patents, Trademarks, etc.....................22
Section 3.16 No Default...................................22
Section 3.17 Licenses, etc................................22
Section 3.18 Compliance With Law..........................23
Section 3.19 No Burdensome Restrictions...................23
Section 3.20 Brokers' Fees................................23
Section 3.21 Labor Matters................................23
Section 3.22 Insurance....................................23
Section 3.23 Organizational Documents.....................23
Section 3.24 Qualifying Unencumbered Properties...........23
Section 3.25 Investment Affiliates........................24
IV. CONDITIONS PRECEDENT......................................24
V. AFFIRMATIVE AND NEGATIVE COVENANTS........................25
Section 5.1 Information...................................25
Section 5.2 Payment of Obligations........................28
Section 5.3 Maintenance of Property; Insurance; Leases....28
Section 5.4 Conduct of Business and Maintenance of
Existence.....................................29
Section 5.5 Compliance with Laws..........................29
Section 5.6 Inspection of Property, Books and Records.....29
Section 5.7 Existence.....................................29
Section 5.8 Financial Covenants...........................30
Section 5.9 Restriction on Fundamental Changes............30
Section 5.10 Changes in Business..........................31
Section 5.11 Loans........................................31
Section 5.12 Investment Affiliates........................31
Section 5.13 Transactions with Affiliates.................31
Section 5.14 Payments to an Affiliate.....................31
Section 5.15 Materials of Environmental Concern...........31
Section 5.16 Issuance of Preferred Stock..................32
VI. EVENTS OF DEFAULT.........................................32
Section 6.1 Events of Default.............................32
VII. MISCELLANEOUS.............................................34
Section 7.1 Termination of the Agreement..................34
Section 7.2 Securities Law Matters........................34
Section 7.3 Binding Effect................................36
Section 7.4 Notices.......................................36
Section 7.5 No Waivers....................................37
Section 7.6 Expenses; Indemnification.....................37
Section 7.7 Amendments and Waivers........................38
Section 7.8 Assignment....................................38
Section 7.9 Governing Law; Submission to Jurisdiction.....38
Section 7.10 Counterparts; Integration; Effectiveness.....39
Section 7.11 WAIVER OF JURY TRIAL.........................39
Section 7.12 Survival.....................................39
Section 7.13 Limitation of Liability......................39
Section 7.14 Recourse Obligation..........................39
Section 7.15 Confidentiality..............................39
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Terms, Preferences, Rights and Limitations of Preferred
Stock
Exhibit B - Certificate of Incorporation and Bylaws of the Company
Exhibit C - Opinion of the Company's Counsel
Exhibit D - Securities Information
SCHEDULES
Schedule 1.1A -Appraised Values
Schedule 1.1B- Participating Assets
Schedule 3.6 - ERISA Plans
Schedule 3.15 - Real Property
Schedule 3.24 - Qualifying Unencumbered Property
PREFERRED STOCK AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT dated as of October 15, 1998
(this "Agreement") is entered into between MERRY LAND INVESTMENT COMPANY,
INC., a Georgia corporation ("MLIC"), and MERRY LAND PROPERTIES, INC., a
Georgia corporation (the "Company").
Pursuant to the Asset Exchange Agreement of even date herewith between
MLIC and the Company, and in accordance with the terms and subject to the
conditions set forth in this Agreement, the Company has agreed to issue to
MLIC on the Closing Date five thousand (5,000) shares of Preferred Stock of
the Company.
ACCORDINGLY, the Company and MLIC agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.11827 DEFINED TERMS. As used in this Agreement, the
following terms shall have the meanings:
"ACCOMMODATION OBLIGATIONS" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of
which that Person is liable for any Indebtedness or other obligation
or liability of another Person, including without limitation and
without duplication (i) any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising
through any agreement to purchase, repurchase or otherwise acquire
such Indebtedness, obligation or liability or any security therefor,
or to provide funds for the payment or discharge thereof (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make payment other than for value received
and (ii) any obligation of such Person arising through such Person's
status as a general partner of a general or limited partnership with
respect to any Indebtedness, obligation or liability of such general
or limited partnership.
"ADJUSTED ASSET VALUE" means, with respect to any Person or
Property (exclusive of Participating Assets), (i) for any Property
(other than Unimproved Assets or Participating Assets) for which an
acquisition or disposition has not occurred in the Fiscal Quarter most
recently ended by the Company and its Consolidated Subsidiaries, the
product of four (4) and a fraction, the numerator of which is EBITDA
for such Fiscal Quarter attributable to any such Property owned by the
Company or any such Consolidated Subsidiary minus (aa) with respect to
any apartment units contained in such Property, an amount equal to the
product of the average number of apartment units in such Property
during such period and the Capital Apartment Reserve for such period,
and minus (bb) with respect to any commercial property other than
apartments units contained in such Property, an amount equal to the
product of the average number of square feet of leased space in such
commercial property other than apartments units contained in such
Property and the Capital Commercial Reserve for such period, and the
denominator of which is the FMV Cap Rate, plus (ii) for any Property
(other than Unimproved Assets or Participating Assets) which has been
acquired by the Company and its Consolidated Subsidiaries in the
Fiscal Quarter most recently ended, the Net Price of the Property paid
by the Company or the Consolidated Subsidiary, plus (iii) for any
Unimproved Assets owned by the Company or its Consolidated
Subsidiaries on the Effective Date, the lesser of (yy) the appraised
value on the Effective Date of such Unimproved Assets owned by the
Company or any Consolidated Subsidiary, or (zz) the amount set forth
on Schedule 1.1A attached hereto with respect to such Unimproved
Assets, provided, however, that if the Company has commenced the
construction of improvements on any such Unimproved Asset and a loan
facility for such construction is in place, the value thereof shall be
equal to the amount reflected on the Company's balance sheet for
"construction in progress" with respect to such Unimproved Asset, plus
(iv) for any Unimproved Assets acquired by the Company and its
Consolidated Subsidiaries after the Effective Date, the Net Price of
the Unimproved Assets paid by the Company or the Consolidated
Subsidiary, provided, however, that if the Company has commenced the
construction of improvements on any such Unimproved Asset and a loan
facility for such construction is in place, the value thereof shall be
equal to the amount reflected on the Company's balance sheet for
"construction in progress" with respect to such Unimproved Asset.
"AFFILIATE" shall mean with respect to any Person (i) each Person
that, directly or indirectly, owns or controls, whether beneficially,
or as a trustee, guardian or other fiduciary, 5% or more of the Stock
having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or
(iii) each of such Person's officers, directors, joint venturers and
partners. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Preferred Stock Agreement as the same
may from time to time hereafter be modified, supplemented or amended.
"APPLICABLE INTEREST RATE" shall mean (i) with respect to any
Fixed Rate Indebtedness, the fixed interest rate applicable to such
Fixed Rate Indebtedness at the time in question, and (ii) with respect
to any Floating Rate Indebtedness, either (x) the rate at which the
interest rate applicable to such Floating Rate Indebtedness is
actually capped (or fixed pursuant to an interest rate hedging
device), at the time of calculation, if the Company has entered into
an interest rate cap agreement or other interest rate hedging device
with respect thereto or (y) if the Company has not entered into an
interest rate cap agreement or other interest rate hedging device with
respect to such Floating Rate Indebtedness, the greater of (A) the
rate at which the interest rate applicable to such Floating Rate
Indebtedness could be fixed for the remaining term of such Floating
Rate Indebtedness, at the time of calculation, by the Company entering
into any unsecured interest rate hedging device either not requiring
an upfront payment or if requiring an upfront payment, such upfront
payment shall be amortized over the term of such device and included
in the calculation of the interest rate (or, if such rate is incapable
of being fixed by entering into an unsecured interest rate hedging
device at the time of calculation, a fixed rate equivalent reasonably
determined by MLIC) or (B) the floating rate applicable to such
Floating Rate Indebtedness at the time in question.
"APPROVED BANK" shall mean banks which have (i)(a) a minimum net
worth of $500,000,000 and/or (b) total assets of $10,000,000,000, and
(ii) a minimum long term debt rating of (a) BBB+ or higher by S&P, and
(b) Baa1 or higher by ▇▇▇▇▇'▇.
"ASSET EXCHANGE AGREEMENT" shall mean the Asset Exchange
Agreement, dated as of October 15, 1998, by and between MLIC and the
Company, including all amendments, modifications and supplements
thereto and any appendices, exhibits or schedules to any of the
foregoing, and shall refer to the Asset Exchange Agreement as the same
may be in effect at the time such reference becomes operative.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"BASE RATE" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 0.5%
plus the Federal Funds Rate for such day.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to
by any member of the ERISA Group.
"CAPITAL LEASES" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"CAPITAL APARTMENT RESERVE" shall mean, for any period, $62.50
for each Fiscal Quarter to occur during such period.
"CAPITAL COMMERCIAL RESERVE" shall mean, for any period, $1.00
for each Fiscal Quarter to occur during such period.
"CAPITAL EXPENDITURES" as applied to any Person, means all
payments, including, without limitation, payments under Capital
Leases, for any fixed assets or improvements, or replacements,
substitutions or additions thereto, that have a useful life of more
than one year and which are required to be capitalized under GAAP.
"CASH AND CASH EQUIVALENTS" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without
limitation, treasury bills, notes and bonds, (iii) interest bearing or
discounted obligations of Federal agencies and Government sponsored
entities or pools of such instruments offered by Approved Banks and
dealers, including without limitation, Federal Home Loan Mortgage
Corporation participation sale certificates, Government National
Mortgage Association modified pass through certificates, Federal
National Mortgage Association bonds and notes, and Federal Farm Credit
System securities, (iv) time deposits, domestic and eurodollar
certificates of deposit, bankers acceptances, commercial paper rated
at least A-1 by S&P and P-1 by ▇▇▇▇▇'▇ and/or guaranteed by an Aa
rating by ▇▇▇▇▇'▇, a AA rating by S&P or better rated credit, floating
rate notes, other money market instruments and letters of credit each
issued by Approved Banks (provided that the same shall cease to be a
"Cash or Cash Equivalent" if at any time any such bank shall cease to
be an Approved Bank), (v) obligations of domestic corporations,
including, without limitation, commercial paper, bonds, debentures and
loan participations, each of which is rated at least AA by S&P and/or
Aa2 by ▇▇▇▇▇'▇ and/or guaranteed by an Aa rating by ▇▇▇▇▇'▇, a AA
rating by S&P or better rated credit, (vi) obligations issued by
states and local governments or their agencies, rated at least MIG-1
by ▇▇▇▇▇'▇ and/or SP-1 by S&P and/or guaranteed by an irrevocable
letter of credit of an Approved Bank (provided that the same shall
cease to be a "Cash or Cash Equivalent" if at any time any such bank
shall cease to be an Approved Bank), (vii) repurchase agreements with
major banks and primary government security dealers fully secured by
the U.S. Government or agency collateral equal to or exceeding the
principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA
rating given by S&P or Aa2 rating given by ▇▇▇▇▇'▇ or better rated
credit.
"CHANGE OF CONTROL" shall mean one or more of the following
events:
(a) less than a majority of the members of the Company's Board of
directors shall be persons who either (i) were serving as directors on
the Closing Date or (ii) were nominated as directors and approved by
the vote of the majority of the directors who are directors referred
to in clause (i) above or this clause (ii); or
(b) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the capital stock of the
Company as of the Closing Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing more than thirty percent (30%)
of the combined voting power of the outstanding voting securities for
the election of directors or shall have the right to elect a majority
of the Board of Directors of the Company.
"CLOSING DATE" means the date on or after the Effective Date on
which the conditions set forth in Article IV shall have been satisfied
to the satisfaction of MLIC.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
"COMPANY'S SHARE" means the Company's share of the liabilities or
assets, as the case may be, of a Consolidated Subsidiary based upon
the Company's percentage ownership of such Consolidated Subsidiary, as
the case may be.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity which is consolidated with the Company in accordance with
GAAP.
"CONTINGENT OBLIGATION" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to
be shown on such Person's balance sheet in accordance with GAAP, and
(ii) any obligation required to be disclosed in the footnotes to such
Person's financial statements, guaranteeing partially or in whole any
Non-Recourse Indebtedness, lease, dividend or other obligation,
exclusive of contractual indemnities (including, without limitation,
any indemnity or price-adjustment provision relating to the purchase
or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet
been called on or quantified, of such Person or of any other Person.
The amount of any Contingent Obligation described in clause (ii) shall
be deemed to be (a) with respect to a guaranty of interest or interest
and principal, or operating income guaranty, the Net Present Value of
the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to
the debt service for the note secured thereby), calculated at the
Applicable Interest Rate, through (i) in the case of an interest or
interest and principal guaranty, the stated date of maturity of the
obligation (and commencing on the date interest could first be payable
thereunder), or (ii) in the case of an operating income guaranty, the
date through which such guaranty will remain in effect, and (b) with
respect to all guarantees not covered by the preceding clause (a), an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made or, if not stated
or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder) as recorded on the balance sheet and on the footnotes to
the most recent financial statements of the Company required to be
delivered pursuant to Section 5.1 hereof. Notwithstanding anything
contained herein to the contrary, guarantees of completion shall not
be deemed to be Contingent Obligations unless and until a claim for
payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent
Obligation in an amount equal to any such claim. Subject to the
preceding sentence, (i) in the case of a joint and several guaranty
given by such Person and another Person (but only to the extent such
guaranty is recourse, directly or indirectly to the Company), the
amount of the guaranty shall be deemed to be 100% thereof unless and
only to the extent that such other Person has delivered Cash or Cash
Equivalents to secure all or any part of such Person's guaranteed
obligations and (ii) in the case of a guaranty (whether or not joint
and several) of an obligation otherwise constituting Indebtedness of
such Person, the amount of such guaranty shall be deemed to be only
that amount in excess of the amount of the obligation constituting
Indebtedness of such Person. Notwithstanding anything contained
herein to the contrary, "Contingent Obligations" shall be deemed not
to include guarantees of Unused Commitments or of construction loans
to the extent the same have not been drawn. All matters constituting
"Contingent Obligations" shall be calculated without duplication.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, lease, contract, undertaking, document or
instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is
subject (including without limitation any restrictive covenant
affecting such Person or any of its properties).
"CONVERTIBLE SECURITIES" means evidences of shares of stock,
limited or general partnership interests or other ownership interests,
warrants, options, or other rights or securities which are convertible
into or exchangeable for, with or without payment of additional
consideration, shares of common stock of the Company, either
immediately or upon the arrival of a specified date or the happening
of a specified event.
"DEBT RESTRUCTURING" means a restatement of, or material change
in, the amortization or other financial terms of any Indebtedness of
the Company or any Consolidated Subsidiary.
"DEBT SERVICE" means, for any period, Interest Expense for such
period PLUS scheduled principal amortization (excluding any individual
scheduled principal payment which exceeds 25% of the original
principal amount of an issuance of Indebtedness) for such period on
all Indebtedness of the Company, on a consolidated basis.
"DEFAULT" means any condition or event which with the giving of
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized
by law to close.
"EBITDA" means, for any period (i) Net Income for such period,
PLUS (ii) depreciation and amortization expense and other non-cash
items deducted in the calculation of Net Income for such period, PLUS
(iii) Interest Expense deducted in the calculation of Net Income for
such period, PLUS, (iv) Taxes deducted in the calculation of Net
Income for such period, MINUS (v) the gains (and PLUS the losses) from
extraordinary items or asset sales or write-ups or forgiveness of
indebtedness included in the calculation of Net Income, for such
period, MINUS (vi) earnings of Subsidiaries for such period
distributed to third parties, all of the foregoing without
duplication. In calculating EBITDA, the effect of the Participating
Assets and the Participating Loans shall be excluded.
"EFFECTIVE DATE" means the date this Agreement becomes effective
in accordance with Section 7.10.
"ENVIRONMENTAL AFFILIATE" means any partnership, joint venture,
trust or corporation in which an equity interest is owned by the
Company, either directly or indirectly, and, as a result of the
ownership of such equity interest, the Company may have recourse
liability for Environmental Claims against such partnership, joint
venture or corporation (or the property thereof).
"ENVIRONMENTAL APPROVALS" means any permit, license, approval,
ruling, variance, exemption or other authorization required under
applicable Environmental Laws.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by
any other Person alleging potential liability of such Person for
investigatory costs, cleanup costs, governmental response costs,
natural resources damage, property damages, personal injuries, fines
or penalties arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such
Person or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law, in each case (with
respect to both (i) and (ii) above) as to which there is a reasonable
possibility of an adverse determination with respect thereto and
which, if adversely determined, would have a Material Adverse Effect
on the Company.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on human
health or to emissions, discharges or releases of Materials of
Environmental Concern into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern or the clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA GROUP" means the Company, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together
with the Company or any Subsidiary, are treated as a single employer
under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Domestic Business Day next succeeding such
day, PROVIDED that (i) if such day is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business
Day, the Federal Funds Rate for such day shall be the average rate
quoted to MLIC on such day on such transactions as determined by MLIC.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"FISCAL QUARTER" means a fiscal quarter of a Fiscal Year.
"FISCAL YEAR" means the fiscal year of the Company which shall be
the twelve (12) month period ending on the last day of December in
each year.
"FIXED CHARGES" for any Fiscal Quarter period means the sum of
(i) Debt Service for such period, (ii) the product of the average
number of apartment units owned (directly or beneficially) by the
Company or any Subsidiary of the Company during such period and the
Capital Apartment Reserve for such Period, (iii) the product of the
average number of square feet of commercial property other than
apartment units owned (directly or beneficially) by the Company or any
Subsidiary of the Company during such period and the Capital
Commercial Reserve for such Period, and (iv) dividends on preferred
shares in the Company payable by the Company for such period.
"FIXED RATE INDEBTEDNESS" means all Indebtedness which accrues
interest at a fixed rate.
"FLOATING RATE INDEBTEDNESS" means all Indebtedness which is not
Fixed Rate Indebtedness and which is not a Contingent Obligation or an
Unused Commitment.
"FUNDS AVAILABLE FOR DISTRIBUTION" as applied to any Person (and
without duplication) means (i) Net Income, MINUS (ii) Capital
Expenditures, PLUS (iii) depreciation and amortization, but only to
the extent deducted in the calculation of Net Income.
"FMV CAP RATE" means 9.5%.
"GAAP" means generally accepted accounting principles recognized
as such in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
"GROSS ASSET VALUE" means, with respect to any Person or
Property, Adjusted Asset Value plus, in the case of any Person, the
value of any Cash or Cash Equivalent owned by such Person and not
subject to any Lien.
"INDEBTEDNESS" as applied to any Person (without duplication and
excluding, in any event, the principal amount of any currently
outstanding Participating Loans), means (a) all indebtedness,
obligations or other liabilities of such Person for borrowed money,
(b) all indebtedness, obligations or other liabilities of such Person
evidenced by Securities or other similar instruments, (c) all
Contingent Obligations of such Person, (d) all reimbursement
obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's
account or other similar instruments for which a contingent liability
exists, (e) all obligations of such Person to pay the deferred
purchase price of Property or services, (f) all obligations in respect
of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others
secured by a Lien on any asset of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by, or are a
personal liability of such Person, (h) all indebtedness, obligations
or other liabilities (other than interest expense liability) in
respect of Interest Rate Contracts and foreign currency exchange
agreements (other than Interest Rate Contracts purchased to hedge
Indebtedness), (i) ERISA obligations currently due and payable and
(j) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such
Person.
"INDEMNITEE" has the meaning set forth in Section 7.6(b).
"INTEREST EXPENSE" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized
(including the interest component of Capital Leases but excluding
interest expense covered by an interest reserve established under a
loan facility and any interest expense with respect to a currently
outstanding Participating Loan) of the Company, on a consolidated
basis, including without limitation all commissions, discounts and
other fees and charges owed with respect to drawn letters of credit,
amortized costs of Interest Rate Contracts incurred on or after the
Closing Date, calculated for all Fixed Rate Indebtedness, at the
actual interest rate in effect with respect to all Indebtedness
outstanding as of the last day of such Fiscal Quarter and in the case
of all Floating Rate Indebtedness, the greater of (i) (A) the Treasury
Rate plus 1.50% for taxable Indebtedness and (B) 6.0% for tax-exempt
Indebtedness, (ii) the actual rate of interest in effect with respect
to such Floating Rate Indebtedness outstanding for which no Interest
Rate Contract is in effect as of the last day of such quarter and
(iii) if an Interest Rate Contract is in effect with respect to such
Floating Rate Indebtedness, the strike rate payable under such
Interest Rate Contract, all determined on an annualized basis.
"INTEREST RATE CONTRACTS" means, collectively, interest rate
swap, collar, cap or similar agreements providing interest rate
protection.
"INVESTMENT AFFILIATE" means any Person in whom the Company holds
an equity interest, directly or indirectly, whose financial results
are not consolidated under GAAP with the financial results of the
Company on the consolidated financial statements of the Company.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any
other type of preferential arrangement, in each case that has the
effect of creating a security interest, in respect of such asset. For
the purposes of this Agreement, the Company or any Subsidiary of the
Company shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"MARGIN STOCK" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means an effect resulting from any
circumstance or event or series of circumstances or events, of
whatever nature (but excluding general economic conditions), which
does or could reasonably be expected to, materially and adversely
(i) affect the business, operations, properties, assets or financial
condition of the Company and its Consolidated Subsidiaries taken as a
whole, (ii) impair the ability of the Company and its Consolidated
Subsidiaries, taken as a whole, to perform their respective
obligations under this Agreement, or (iii) cause a Default under
Sections 5.8, 5.9 or 5.13. Circumstances or events with respect to
the Participating Assets and Participating Loans (other than
liabilities incurred with respect to the Participating Assets which in
the aggregate exceed the Adjusted Asset Value thereof and for which
the Company or any of its Subsidiaries would be legally responsible)
shall not be taken into consideration in the determination of a
Material Adverse Effect.
"MATERIAL PLAN" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $250,000.
"MATERIALS OF ENVIRONMENTAL CONCERN" means and includes
pollutants, contaminants, hazardous wastes, toxic and hazardous
substances, asbestos, lead, petroleum and petroleum by-products.
"MERGER AGREEMENT" shall mean that certain Agreement and Plan of
Merger by and between Equity Residential Properties Trust and Merry
Land & Investment Company, Inc., dated as of July 8, 1998, as amended
by First Amendment to Agreement and Plan of Merger dated as of
September 4, 1998.
"▇▇▇▇▇'▇" means ▇▇▇▇▇'▇ Investors Services, Inc. or any successor
thereto.
"MULTIEMPLOYER PLAN" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such five year
period.
"NET INCOME" means, for any period, the net earnings (or loss)
after Taxes of the Company, on a consolidated basis, for such period
calculated in conformity with GAAP, but excluding, in any event, the
effect of any Participating Assets or Participating Loans.
"NET OPERATING INCOME" means, for any period with respect to any
Property owned (directly or beneficially) by the Company or its
wholly-owned Subsidiaries, the net operating income of such Property
(attributed to such Property in a manner reasonably acceptable to
MLIC) for such period (i) determined in accordance with GAAP,
(ii) determined in a manner which is consistent with the past
practices of the Company, and (iii) inclusive of an allocation of
reasonable management fees and administrative costs to each Property
consistent with the past practices of the Company, except that, for
purposes of determining Net Operating Income, income shall not
(a) include security or other deposits or (b) be reduced by
depreciation or amortization.
"NET PRICE" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, PLUS (ii) the principal
amount of any note received or other deferred payment to be made in
connection with such purchase or sale (except as described in
clause (iv) below), PLUS (iii) the value of any other considerations
delivered in connection with such purchase or sale (including, without
limitation, shares of common stock or preferred stock in the Company)
(as reasonably determined by MLIC), MINUS (only in the case of a sale)
(iv) the value of any consideration deposited into escrow or subject
to disbursement or claim upon the occurrence of any event, MINUS (only
in the case of a sale) (v) the value of any consideration required to
be paid to any Person other than the Company and its Subsidiaries
owning a beneficial interest in such Property, MINUS (vi) reasonable
costs of sale and taxes paid or payable in connection with such
purchase or sale.
"NET PRESENT VALUE" shall mean, as to a specified or
ascertainable dollar amount, the present value, as of the date of
calculation of any such amount using a discount rate equal to the Base
Rate in effect as of the date of such calculation.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness with respect to
which recourse for payment is limited to (i) specific assets related
to a particular Property or group of Properties encumbered by a Lien
securing such Indebtedness or (ii) any Subsidiary (provided that if a
Subsidiary is a partnership, there is no recourse to the Company as a
general partner of such partnership); provided, however, that personal
recourse of the Company for any such Indebtedness for fraud,
misrepresentation, misapplication of cash, waste, environmental claims
and liabilities and other circumstances customarily excluded by
institutional lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financing of real
estate shall not, by itself, prevent such Indebtedness from being
characterized as Non-Recourse Indebtedness.
"OBLIGATIONS" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Company from time
to time owing to MLIC, under or in connection with the Senior
Subordinated Term Loan Agreement or any other Loan Document (as
therein defined).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PARTICIPATING ASSETS" means those assets more fully described on
Schedule 1.1B hereto, but only for so long as such assets are subject
to Participating Loans.
"PARTICIPATING LOANS" means certain Non-Recourse Indebtedness
held by MLIC which are currently in effect with respect to and are
secured by the Participating Assets.
"PERMITTED LIENS" means:
(a) Liens for Taxes, assessments or other governmental
charges not yet due and payable or which are being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with the terms hereof;
(b) statutory liens of carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not more
than sixty (60) days delinquent or which are being contested in
good faith in accordance with the terms hereof;
(c) deposits made in the ordinary course of business to
secure liabilities to insurance carriers;
(d) Liens for purchase money obligations for equipment;
PROVIDED that (i) the Indebtedness secured by any such Lien does
not exceed the purchase price of such equipment, (ii) any such
Lien encumbers only the asset so purchased and the proceeds upon
sale, disposition, loss or destruction thereof, and (iii) such
Lien, after giving effect to the Indebtedness secured thereby,
does not give rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions, other
similar charges or encumbrances and all other items listed on
Schedule B to the owner's title insurance policies, except in
connection with any Indebtedness, for any of the Real Property
Assets, so long as the foregoing do not interfere in any material
respect with the use or ordinary conduct of the business of the
owner and do not diminish in any material respect the value of
the Property to which it is attached or for which it is listed;
(f) Liens and judgments which have been or will be bonded or
released of record within thirty (30) days after the date such
Lien or judgment is entered or filed against the Company, or any
Subsidiary;
(g) Liens, including Liens on Participating Assets to secure
Participating Loans, on Property of the Company or its
Subsidiaries (other than Qualifying Unencumbered Property)
securing Indebtedness which may be incurred or remain outstanding
without resulting in an Event of Default hereunder; and
(h) Liens in favor of the Company against any asset of any
wholly-owned Subsidiary of the Company.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code
and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has
at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the
ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"PREFERRED STOCK" means the Redeemable Cumulative Preferred Stock
of the Company having the terms and preferences, rights and
limitations set forth in EXHIBIT A hereto.
"PREFERRED STOCK OBLIGATIONS" means, as of the date of
determination and without duplication, the liquidation value of the
outstanding Preferred Stock and all accumulated and unpaid dividends
thereon, together with any accrued and unpaid interest thereon.
"PRIME RATE" means the rate of interest publicly announced by the
▇▇▇▇▇▇ Guaranty Trust Company of New York in New York City from time
to time as its Prime Rate.
"PROPERTY" means, with respect to any Person, any real or
personal property, building, facility, structure, equipment or unit,
or other asset owned by such Person.
"QUALIFYING UNENCUMBERED PROPERTY" means any Real Property Asset
from time to time which (i) is wholly-owned (directly or beneficially)
by the Company, (ii) is not subject (nor are any equity interests in
such Property subject) to a Lien which secures Indebtedness of any
Person other than Permitted Liens, and (iii) is not subject (nor are
any equity interests in such Property subject) to any covenant,
condition, or other restriction which prohibits or limits the creation
or assumption of any Lien upon such Property (it being understood that
covenants similar to those set forth in Section 5.8 hereof shall not
be deemed to constitute any such prohibition or limitation). In
addition, in the case of any Property that is owned by a Subsidiary of
the Company, if such Subsidiary shall commence any proceeding under
any bankruptcy, insolvency or similar law, or any such involuntary
case shall be commenced against it and shall remain undismissed and
unstayed for a period of 60 days, then, simultaneously with the
occurrence of such conditions, such Property shall no longer
constitute a Qualifying Unencumbered Property.
"REAL PROPERTY ASSETS" means as of any time, the real property
assets (including interests in participating mortgages in which the
Company's interest therein is characterized as equity according to
GAAP) owned directly or indirectly by the Company and its Consolidated
Subsidiaries.
"RELEASE" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape,
injection, deposit, discharge, dispersal, dumping, leaching or
migration of Materials of Environmental Concern in the indoor or
outdoor environment, including the movement of Materials of
Environmental Concern through or in the air, soil, surface water,
ground water or property.
"RECOURSE DEBT" shall mean Indebtedness that is not Non-Recourse
Indebtedness.
"REGULATION U" means Regulation U of the Federal Reserve Board,
as in effect from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
"SECURED DEBT" means Indebtedness of the Company, on a
consolidated basis, the payment of which is secured by a Lien on any
Property owned or leased by the Company, or any Subsidiary of the
Company, but excluding in any event, any Participating Loans.
"SECURITIES" means any stock, partnership interests (other than
Multifamily Residential Property Partnership Interests), shares,
shares of beneficial interest, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities," or any certificates of
interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the obligations.
"SENIOR INDEBTEDNESS" means (i) the principal amount of all
indebtedness arising under the Senior Term Loan Agreement, together
with any interest (including any interest accruing after the
commencement of any bankruptcy proceeding, and any interest which
would have accrued but for the commencement of such proceeding,
whether or not such interest is allowed as an enforceable claim in
such bankruptcy proceeding), premium, if any, and any other amount
(including any fee or expense) due in connection with such
indebtedness under the Senior Term Loan Documents, and (ii) any other
indebtedness for borrowed money of the Company or any of its
Subsidiaries which by the documents evidencing such indebtedness is
designated as "Senior Indebtedness" by specific reference to the
Senior Subordinated Term Loan Agreement and notice of which has been
given to, and acknowledged by, MLIC pursuant to Section 7.10 of the
Senior Subordinated Term Loan Agreement.
"SENIOR SUBORDINATED TERM LOAN AGREEMENT" means the Senior
Subordinated Term Loan Agreement, dated as of October 15, 1998, by and
between the Company and Merry Land & Investment Company, Inc.
"SENIOR TERM LOAN AGREEMENT" means the Senior Term Loan
Agreement, dated as of October 15, 1998, by and between the Company
and Merry Land & Investment Company, Inc.
"SENIOR TERM LOAN DOCUMENTS" means (i) the Senior Term Loan
Agreement, together with all exhibits thereto, all other documents,
agreements and instruments executed in connection therewith and all
amendments and supplements thereto, and (ii) the loan documents
evidencing any other Senior Indebtedness.
"SOLVENT" means, with respect to any Person, that the fair
saleable value of such Person's assets exceeds the Indebtedness of
such Person.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Company.
"TAXES" means all federal, state, local and foreign income and
gross receipts taxes, but excluding any of the foregoing which arise
as a result of the Participating Assets or Participating Loans.
"TERMINATION EVENT" shall mean (i) a "reportable event", as such
term is described in Section 4043 of ERISA (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC), or
an event described in Section 4062(e) of ERISA, (ii) the withdrawal by
any member of the ERISA Group from a Multiemployer Plan during a plan
year in which it is a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), or the incurrence of liability by any
member of the ERISA Group under Section 4064 of ERISA upon the
termination of a Multiemployer Plan, (iii) the filing of a notice of
intent to terminate any Plan under Section 4041 of ERISA, other than
in a standard termination within the meaning of Section 4041 of ERISA,
or the treatment of a Plan amendment as a distress termination under
Section 4041 of ERISA, (iv) the institution by the PBGC of proceedings
to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or cause a trustee to be
appointed to administer, any Plan or (v) any other event or condition
that might reasonably constitute grounds for the termination of, or
the appointment of a trustee to administer, any Plan or the imposition
of any liability or encumbrance or Lien on the Real Property Assets or
any member of the ERISA Group under ERISA.
"TOTAL LIABILITIES" means, as of the date of determination and
without duplication, all Indebtedness of the Company, on a
consolidated basis, PLUS accounts payable incurred in the ordinary
course of business.
"TRANSACTION COSTS AGREEMENT" has the meaning set forth in
Article IV.
"TRANSFER" shall have the meaning given such term in the Asset
Exchange Agreement.
"TREASURY RATE" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a
ten year maturity, as such yield is reported in Federal Reserve
Statistical Release H.15 -- Selected Interest Rates, published most
recently prior to the date the applicable Treasury Rate is being
determined. Such yield shall be determined by straight line linear
interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, MLIC
shall select, in its reasonable discretion, an alternate basis for the
determination of Treasury yield for U.S. Treasury Constant Maturity
Series with ten year maturities.
"UNENCUMBERED APARTMENT ASSET VALUE" means (i) a fraction, the
numerator of which is the product of four (4) and the aggregate
Unencumbered Net Operating Income for the most recently ended Fiscal
Quarter which is attributable (in a manner reasonably acceptable to
MLIC) to Qualifying Unencumbered Properties which are primarily multi-
family residential properties, wholly-owned (directly or beneficially)
by the Company for the entire Fiscal Quarter, and the denominator of
which is the FMV Cap Rate, PLUS (ii) for all Qualifying Unencumbered
Properties which are primarily multi-family residential properties,
wholly-owned (directly or beneficially) by the Company which have been
acquired (directly or indirectly) by the Company during the Fiscal
Quarter most recently ended, the aggregate Net Price paid by the
Company or its affiliates for such Qualifying Unencumbered Properties.
"UNENCUMBERED NET OPERATING INCOME" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by
the Company and/or any wholly-owned Subsidiary of the Company during
the applicable period, Net Operating Income from each such Qualifying
Unencumbered Property minus (i) with respect to any apartment units
contained in such Qualifying Unencumbered Property, an amount equal to
the product of the number of apartment units in such Qualifying
Unencumbered Property during such period and the Capital Apartment
Reserve for such period, and minus (ii) with respect to any commercial
property other than apartments units contained in such Qualifying
Unencumbered Property, an amount equal to the product of the number of
square feet of leased space in such commercial property other than
apartments units contained in such Qualifying Unencumbered Property
and the Capital Commercial Reserve for such period.
"UNIMPROVED ASSETS" means Real Property Assets upon which no
material improvements have been completed which completion is
evidenced by a certificate of occupancy or its equivalent.
"UNITED STATES" means the United States of America, including the
fifty states and the District of Columbia.
"UNSECURED DEBT" means Indebtedness of the Company and any
Subsidiary of the Company, which is not Secured Debt.
"UNSECURED INTEREST EXPENSE" means Interest Expense, other than
Interest Expense payable in respect of Secured Debt and other than
Interest Expense payable in respect of the Indebtedness of any Person
other than the Company or any Subsidiary of the Company.
"UNUSED COMMITMENTS" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction
loan) which any third party is obligated to advance to the Company or
another Person or otherwise pursuant to any loan document, written
instrument or otherwise.
Section 2.h ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants) with the most
recent audited consolidated financial statements of the Company and its
Consolidated Subsidiaries delivered to MLIC; PROVIDED that, if the Company
notifies MLIC that the Company wishes to amend any covenant in Article V to
eliminate the effect of any change in GAAP on the operation of such
covenant (or if MLIC notifies the Company that MLIC wishes to amend
Article V for such purpose), then the Company's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such
notice is withdrawn or such covenant is amended in a manner reasonably
satisfactory to the Company and MLIC.
ARTICLE II.
ISSUANCE OF PREFERRED STOCK TO MLIC
Section 1.h ISSUANCE. Subject to the terms and conditions set forth
in this Agreement, MLIC hereby agrees to acquire from the Company on the
Closing Date five thousand (5,000) shares of Preferred Stock. Said shares
shall be issued by the Company to MLIC as partial consideration for MLIC's
contribution of the Contributed Assets to the Company pursuant to the Asset
Exchange Agreement. MLIC shall not be required to furnish any other
consideration to the Company for the issuance of the Preferred Stock to
MLIC.
Section 2.h CERTIFICATES. The Company shall deliver to MLIC on the
Closing Date a certificate representing the five thousand (5,000) shares of
Preferred Stock being acquired by MLIC on the Closing Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to MLIC on the Closing Date and at
all times that MLIC or its successors own 20% or more of the shares of
Preferred Stock acquired by MLIC on the Closing Date:
Section 1.h EXISTENCE AND POWER. The Company is a corporation, duly
formed and validly existing and in good standing under the laws of the
State of [Delaware] and has all powers and all material governmental
licenses, authorizations, consents and approvals required to own its
property and assets and carry on its business as now conducted or as it
presently proposes to conduct and has been duly qualified and is in good
standing in every jurisdiction in which the failure to be so qualified
and/or in good standing is likely to have a Material Adverse Effect.
Section 2.h POWER AND AUTHORITY. The Company has the corporate power
and authority to execute, deliver and carry out the terms and provisions of
this Agreement and has taken all necessary corporate action, if any, to
authorize the execution and delivery on behalf of the Company and the
performance by the Company of this Agreement. The Company has duly
executed and delivered this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by
applicable insolvency, bankruptcy or other laws affecting creditors rights
generally, or general principles of equity, whether such enforceability is
considered in a proceeding in equity or at law.
Section 3.h NO VIOLATION. Neither the execution, delivery or
performance by or on behalf of the Company of this Agreement, nor
compliance by the Company with the terms and provisions thereof nor the
consummation of the transactions contemplated by this Agreement, (i) will
materially contravene any applicable provision of any law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will materially conflict with or result in any breach
of, any of the terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets
of the Company or any of its Consolidated Subsidiaries pursuant to the
terms of any indenture, mortgage, deed of trust, or other agreement or
other instrument to which the Company (or of any partnership of which the
Company is a partner) or any of its Consolidated Subsidiaries is a party or
by which it or any of its property or assets is bound or to which it is
subject, or (iii) will cause a material default by the Company under any
organizational document of the Company or any Person in which the Company
has an interest, the consequences of which conflict, breach or default
would have a Material Adverse Effect, or result in or require the creation
or imposition of any Lien whatsoever upon any Property (except as
contemplated herein).
Section 4.h FINANCIAL INFORMATION.
(a) The historical combined consolidated balance sheet of the
Company's predecessor as of December 31, 1997, and the related
historical combined statements of the financial position of the
Company's predecessor as of December 31, 1997, reported on by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, a copy of which is in the Form 10 delivered to MLIC,
fairly present, in conformity with GAAP, the consolidated financial
position of the Company's predecessor as of such date and the
combined results of operations and cash flows for the fiscal year then
ended, except as may be otherwise stated therein. The historical
combined consolidated balance sheet of the Company's predecessor as
of June 30, 1998, and the related historical combined financial
statements of the Company's predecessor for the period from January 1,
1998 to June 30, 1998, reported on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, a copy of
which is in the Form 10 delivered to MLIC, fairly present, in
conformity with GAAP, the consolidated financial position of the
Company's predecessor as of such date and the combined results of
operations and cash flows for such period, except as may be otherwise
stated therein and subject in all cases to year end adjustments.
(b) Since June 30, 1998, (i) except as may have been disclosed in
writing to MLIC, nothing has occurred having a Material Adverse
Effect, and(ii) except as may have been disclosed in the Form 10 the
Company has not incurred any material indebtedness or guaranty on or
before the Closing Date.
Section 5.b LITIGATION. Except as previously disclosed by the Company
in writing to MLIC, there is no action, suit or proceeding pending against,
or to the knowledge of the Company threatened against or affecting, (i) the
Company or any of its Consolidated Subsidiaries, (ii) this Agreement or any
of the transactions contemplated by this Agreement or (iii) any of their
assets, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision
which could, individually, or in the aggregate have a Material Adverse
Effect or which in any manner draws into question the validity of this
Agreement or the other Loan Documents.
Section 6.b COMPLIANCE WITH ERISA.
(a) Except as set forth on SCHEDULE 3.6 attached hereto, the
Company is not a member of any Plan or Multiemployer Plan or, as of
the Closing Date, any other Benefit Arrangement. After the Closing
Date, the Company may establish or assume any Benefit Arrangement, so
long as any such event would not result in a Material Adverse Effect.
(b) The transactions contemplated by this Agreement will not
constitute a nonexempt prohibited transaction (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA) that could
subject MLIC to any tax or penalty or prohibited transactions imposed
under Section 4975 of the Code or Section 502(i) of ERISA.
Section 7.b ENVIRONMENTAL MATTERS. After the Closing Date, the
Company will conduct reviews of the effect of Environmental Laws on the
business, operations and properties of the Company and Consolidated
Subsidiaries of either or both when necessary in the course of which it
identifies and evaluates associated liabilities and costs (including,
without limitation, any capital or operating expenditures required for
clean-up or closure of properties presently owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities, and
any actual or potential liabilities to third parties, including employees,
and any related costs and expenses). On the basis of this review, the
Company will ascertain the likelihood of such associated liabilities and
costs, including the costs of compliance with Environmental Laws, having a
Material Adverse Effect on the Company and its Consolidated Subsidiaries.
Section 8.b TAXES. After the Closing Date, the Company and its
Consolidated Subsidiaries will file all United States Federal income tax
returns and all other material tax returns which are required to be filed
by them and will pay all taxes due pursuant to such returns or pursuant to
any assessment received by the Company or any Consolidated Subsidiary,
except such taxes, if any, as are reserved against in accordance with GAAP,
such taxes as may be contested in good faith by appropriate proceedings or
such taxes, the failure to make payment of which when due and payable will
not have, in the aggregate, a Material Adverse Effect.
Section 9.b FULL DISCLOSURE. All information heretofore furnished by
the Company to MLIC for purposes of or in connection with this Agreement or
any transaction contemplated hereby or thereby is true and accurate in all
material respects on the date as of which such information is stated or
certified. The Company has disclosed to MLIC, in writing any and all
facts which have or may have (to the extent the Company can now reasonably
foresee) a Material Adverse Effect.
Section 10.b SOLVENCY. On the Closing Date and after giving effect to
the transactions contemplated by this Agreement occurring on the Closing
Date, the Company will be Solvent.
Section 11.b GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of any of the transactions contemplated
thereby other than those that have already been duly made or obtained and
remain in full force and effect or those which, if not made or obtained,
would not have a Material Adverse Effect;
Section 12.b INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Company nor any Consolidated Subsidiary is (x) an
"INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY",
within the meaning of the Investment the Company Act of 1940, as amended,
(y) a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY" of a "HOLDING COMPANY" or
an "AFFILIATE" of either a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY"
within the meaning of the Public Utility Holding the Company Act of 1935,
as amended, or (z) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.
Section 13.b PRINCIPAL OFFICES. As of the Closing Date, the principal
office, chief executive office and principal place of business of the
Company is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
Section 14.b PATENTS, TRADEMARKS, ETC. The Company has obtained and
holds in full force and effect all patents, trademarks, servicemarks, trade
names, copyrights and other such rights, free from burdensome restrictions,
which are necessary for the operation of its business as presently
conducted, the impairment of which is likely to have a Material Adverse
Effect.
Section 15.b OWNERSHIP OF PROPERTY. Schedule 3.15 attached hereto and
made a part hereof sets forth all the real property owned or ground leased
by the Company and Persons in which the Company, directly or indirectly,
owns an interest as of the Closing Date.
Section 16.b NO DEFAULT. No Event of Default or, to the best of the
Company's knowledge, Default exists under or with respect to this Agreement
and the Company is not in default in any material respect beyond any
applicable grace period under or with respect to any other material
agreement, instrument or undertaking to which it is a party or by which it
or any of its property is bound in any respect, the existence of which
default is likely to result in a Material Adverse Effect.
Section 17.b LICENSES, ETC. The Company has obtained and does hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other consents and approvals which are necessary for the operation of its
businesses as presently conducted, the absence of which is likely to have a
Material Adverse Effect.
Section 18.b COMPLIANCE WITH LAW. To the Company's knowledge, the
Company and each of the Real Property Assets are in compliance with all
laws, rules, regulations, orders, judgments, writs and decrees, including,
without limitation, all building and zoning ordinances and codes, the
failure to comply with which is likely to have a Material Adverse Effect.
Section 19.b NO BURDENSOME RESTRICTIONS. Except as may have been
disclosed by the Company in writing to MLIC, the Company is not a party to
any agreement or instrument or subject to any other obligation or any
charter or corporate or partnership restriction, as the case may be, which,
individually or in the aggregate, is likely to have a Material Adverse
Effect.
Section 20.b BROKERS' FEES. The Company has not dealt with any
broker or finder with respect to the transactions contemplated by this
Agreement or otherwise in connection with this Agreement, and the Company
has not done any act, had any negotiations or conversation, or made any
agreements or promises which will in any way create or give rise to any
obligation or liability for the payment by the Company of any brokerage
fee, charge, commission or other compensation to any party with respect to
the transactions contemplated by this Agreement.
Section 21.b LABOR MATTERS. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Company and
the Company has not suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
Section 22.b INSURANCE. The Company currently maintains insurance at
100% replacement cost insurance coverage (subject to customary deductibles)
in respect of each of the Real Property Assets, as well as commercial
general liability insurance (including "builders' risk" where applicable)
against claims for personal, and bodily injury and/or death, to one or more
persons, or property damage, as well as workers' compensation insurance, in
each case with respect to liability and casualty insurance with insurers
having an A.M. Best policyholders' rating of not less than A-VII in amounts
that prudent owner of assets such as the Real Property Assets would
maintain.
Section 23.b ORGANIZATIONAL DOCUMENTS. The documents delivered
pursuant to Article IV constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifications
thereof) of the Company. The Company represents that it has delivered to
MLIC true, correct and complete copies of each of the documents set forth
in this Section 3.23.
Section 24.b QUALIFYING UNENCUMBERED PROPERTIES. As of the date
hereof, each Property listed on Schedule 3.24 as a Qualifying Unencumbered
Property (i) is a Real Estate Asset wholly-owned (directly or beneficially)
by the Company or a wholly-owned Subsidiary of the Company, (ii) is not
subject (nor are any equity interests in such Property subject) to a Lien
which secures Indebtedness of any Person, other than Permitted Liens, and
(iii) is not subject (nor are any equity interests in such Property
subject) to any covenant, condition, or other restriction which prohibits
or limits the creation or assumption of any Lien upon such Property. All
of the information set forth on Schedule 3.24 is true and correct in all
material respects.
Section 25.b INVESTMENT AFFILIATES. As of the date hereof, the
Company has no Investment Affiliates.
ARTICLE IV.
CONDITIONS PRECEDENT
The obligation of MLIC to acquire the Preferred Stock is subject to
the satisfaction of all of the following conditions, which the Company
agrees to cause to be satisfied on and as of the Closing Date:
(a) the Asset Exchange Agreement shall have been duly executed
and delivered by and to the respective parties, all conditions
precedent to the closing and/or effectiveness of said agreement shall
have been fully satisfied or waived, and the Transfer shall have been
fully consummated.
(b) the Company and MLIC shall have executed and delivered to the
Company and MLIC a duly executed original of this Agreement;
(c) MLIC shall have received an opinion of counsel for the
Company, acceptable to MLIC and its counsel from a law firm acceptable
to MLIC and its counsel;
(d) MLIC shall have received all documents MLIC may reasonably
request relating to the existence of the Company, the authority for
and the validity of this Agreement, the authority and incumbency of
the officers executing this Agreement and any other matters relevant
hereto, all in form and substance satisfactory to MLIC. Such
documentation shall include, without limitation, the certificate of
incorporation of the Company, as amended, modified or supplemented to
the Closing Date, certified to be true, correct and complete by the
Secretary of State of Delaware as of a date not more than ten (10)
days prior to the Closing Date, together with a certificate of good
standing as to the Company from the Secretaries of State of Delaware
and Georgia, to be dated not more than ten (10) days prior to the
Closing Date, as well as the by-laws of the Company, as amended,
modified or supplemented to the Closing Date, certified to be true,
correct and complete by a senior officer of the Company as of a date
not more than ten (10) days prior to the Closing Date;
(e) MLIC shall have received all certificates, agreements and
other documents and papers referred to in this Article IV;
(f) the Company shall have taken all actions required to
authorize the execution and delivery of this Agreement and the
performance thereof by the Company;
(g) MLIC shall be satisfied that neither the Company nor any
Consolidated Subsidiary is subject to any present or contingent
environmental liability which could have a Material Adverse Effect;
(h) MLIC shall have received the fees and expenses accrued
through the Closing Date as more fully provided in the Transaction
Costs Agreement of even date (the "Transaction Costs Agreement") among
Equity Residential Properties Trust, MLIC and the Company;
(i) MLIC shall have received copies of all consents, licenses and
approvals, if any, required in connection with the execution, delivery
and performance by the Company and the applicable Consolidated
Subsidiaries, and the validity and enforceability, of this Agreement,
or in connection with any of the transactions contemplated thereby,
and such consents, licenses and approvals shall be in full force and
effect;
(j) MLIC shall have received a certificate based upon the pro-
forma financial information contained in Borrower's Form 10 (including
the assumptions with respect to such pro forma financial information
contained therein) showing compliance with the requirements of
Section 5.8 as of the Closing Date; and
(k) no Default or Event of Default shall have occurred.
ARTICLE V.
AFFIRMATIVE AND NEGATIVE COVENANTS
The Company covenants and agrees with MLIC that so long as MLIC or
its successors own 20% or more of the shares of Preferred Stock acquired by
MLIC on the Closing Date:
Section 1.k INFORMATION. The Company will deliver to MLIC:
(a) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 125
days after the end of each fiscal year of the Company) a consolidated
balance sheet of the Company and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
the Company's operations and consolidated statements of the Company's
cash flow for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission on the Company's Form 10K and reported on by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, LLP or other independent public accountants of nationally
recognized standing;
(b) as soon as available and in any event within five (5)
Domestic Business Days after the same is required to be filed with the
Securities and Exchange Commission (but in no event later than 80 days
after the end of each of the first three quarters of each fiscal year
of the Company), (i) a consolidated balance sheet of the Company and
its Consolidated Subsidiaries as of the end of such quarter and the
related consolidated statements of the Company's operations and
consolidated statements of the Company's cash flow for such quarter
and for the portion of the Company's fiscal year ended at the end of
such quarter, all reported on in the form provided to the Securities
and Exchange Commission on the Company's Form 10Q, and (ii) and such
other information reasonably requested by MLIC;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Company (i) setting forth in reasonable detail the calculations
required to establish whether the Company was in compliance with the
requirements of Section 5.8 on the date of such financial statements;
(ii) certifying (x) that such financial statements fairly present the
financial condition and the results of operations of the Company on
the dates and for the periods indicated, on the basis of GAAP, with
respect to the Company subject, in the case of interim financial
statements, to normally recurring year-end adjustments, and (y) that
such officer has reviewed the terms of this Agreement and has made, or
caused to be made under his or her supervision, a review in reasonable
detail of the business and condition of the Company during the period
beginning on the date through which the last such review was made
pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant to this Section 5.1(c), the Closing Date) and
ending on a date not more than ten (10) Domestic Business Days prior
to the date of such delivery and that (1) on the basis of such
financial statements and such review of this Agreement, no Event of
Default existed under Section 6.1(b) with respect to Sections 5.8 and
5.9 at or as of the date of said financial statements, and (2) on the
basis of such review of this Agreement and the business and condition
of the Company, to the best knowledge of such officer, as of the last
day of the period covered by such certificate no Default or Event of
Default under any other provision of Section 6.1 occurred and is
continuing or, if any such Default or Event of Default has occurred
and is continuing, specifying the nature and extent thereof and, the
action the Company proposes to take in respect thereof. Such
certificate shall set forth the calculations required to establish the
matters described in clauses (1) and (2) above;
(d) (i) within five (5) Domestic Business Days after any officer
of the Company obtains knowledge of any Default, if such Default is
then continuing, a certificate of the chief financial officer, the
chief accounting officer, controller, or other executive officer of
the Company setting forth the details thereof and the action which the
Company is taking or proposes to take with respect thereto; and
(ii) promptly and in any event within five (5) Domestic Business Days
after the Company obtains knowledge thereof, notice of (y) any
litigation or governmental proceeding pending or threatened against
the Company or the Real Property Assets as to which there is a
reasonable possibility of an adverse determination and which, if
adversely determined, is likely to individually or in the aggregate,
result in a Material Adverse Effect, and (z) any other event, act or
condition which is likely to result in a Material Adverse Effect;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) (other than the exhibits thereto,
which exhibits will be provided upon request therefor by MLIC) which
the Company shall have filed with the Securities and Exchange
Commission;
(g) promptly and in any event within thirty (30) days, if and
when any member of the ERISA Group (i) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Code, a copy
of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes
any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or
other security, and in the case of clauses (i) through (vii) above,
which event could result in a Material Adverse Effect, a certificate
of the chief financial officer or the chief accounting officer of the
Company setting forth details as to such occurrence and action, if
any, which the Company or applicable member of the ERISA Group is
required or proposes to take;
(h) promptly and in any event within ten (10) days after the
Company obtains actual knowledge of any of the following events, a
certificate of the Company, executed by an officer of the Company,
specifying the nature of such condition, and the Company's or, if the
Company has actual knowledge thereof, the Environmental Affiliate's
proposed initial response thereto: (i) the receipt by the Company,
or, if the Company has actual knowledge thereof, any of the
Environmental Affiliates of any communication (written or oral),
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that the Company, or, if the Company has
actual knowledge thereof, any of the Environmental Affiliates, is not
in compliance with applicable Environmental Laws, and such
noncompliance is likely to have a Material Adverse Effect, (ii) the
Company shall obtain actual knowledge that there exists any
Environmental Claim pending against the Company or any Environmental
Affiliate and such Environmental Claim is likely to have a Material
Adverse Effect or (iii) the Company obtains actual knowledge of any
release, emission, discharge or disposal of any Material of
Environmental Concern that is likely to form the basis of any
Environmental Claim against the Company or any Environmental Affiliate
which in any such event is likely to have a Material Adverse Effect;
(i) promptly and in any event within five (5) Domestic Business
Days after receipt of any material notices or correspondence from any
company or agent for any company providing insurance coverage to the
Company relating to any loss which is likely to result in a Material
Adverse Effect, copies of such notices and correspondence; and
(j) from time to time such additional information regarding the
financial position or business of the Company and its Subsidiaries as
MLIC may reasonably request in writing.
Section 2.j PAYMENT OF OBLIGATIONS. The Company and each Subsidiary
will pay and discharge, at or before maturity, all its respective material
obligations and liabilities including, without limitation, any obligation
pursuant to any agreement by which it or any of its properties is bound, in
each case where the failure to so pay or discharge such obligations or
liabilities is likely to result in a Material Adverse Effect, and will
maintain in accordance with GAAP, appropriate reserves for the accrual of
any of the same.
Section 3.j MAINTENANCE OF PROPERTY; INSURANCE; LEASES.
(a) The Company will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business, including
without limitation the Real Property Assets (for so long as it
constitutes Real Property Assets), in good repair, working order and
condition, ordinary wear and tear excepted, in each case where the
failure to so maintain and repair will have a Material Adverse Effect.
(b) The Company shall maintain, or cause to be maintained,
insurance comparable to that described in Section 3.23 hereof with
insurers meeting the qualifications described therein, which insurance
shall in any event not provide for less coverage than insurance
customarily carried by owners of properties similar to, and in the
same locations as, the Real Property Assets. The Company will
deliver to MLIC upon the reasonable request of MLIC from time to time
(i) full information as to the insurance carried, (ii) within five (5)
days of receipt of notice from any insurer a copy of any notice of
cancellation or material change in coverage from that existing on the
date of this Agreement and (iii) forthwith, notice of any cancellation
or nonrenewal of coverage by the Company.
Section 4.b CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Company will continue to engage in business of the same general type as now
conducted by the Company, and each will preserve, renew and keep in full
force and effect, its partnership and trust existence and its respective
rights, privileges and franchises necessary for the normal conduct of
business unless the failure to maintain such rights and franchises does not
have a Material Adverse Effect.
Section 5.b COMPLIANCE WITH LAWS. The Company will and will cause
its Subsidiaries to comply in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, and all
zoning and building codes with respect to the Real Property Assets and
ERISA and the rules and regulations thereunder and all federal securities
laws) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings or where the failure to do so will
not have a Material Adverse Effect or expose MLIC to any material liability
therefor.
Section 6.b INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
each will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation
to its business and activities in conformity with GAAP, modified as
required by this Agreement and applicable law; and will permit
representatives of MLIC at such MLIC's expense to visit and inspect any of
its properties, including without limitation the Real Property Assets, to
examine and make abstracts from any of its books and records and to discuss
its affairs, finances and accounts with its officers and independent public
accountants, all at such reasonable times during normal business hours,
upon reasonable prior notice and as often as may reasonably be desired.
Section 7.b EXISTENCE. The Company shall do or cause to be done, all
things necessary to preserve and keep in full force and effect its, and its
Subsidiaries', existence and its patents, trademarks, servicemarks,
tradenames, copyrights, franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals the nonexistence of which is likely to
have a Material Adverse Effect.
Section 8.b FINANCIAL COVENANTS.
(a) TOTAL LIABILITIES TO GROSS ASSET VALUE. The Company shall
not permit the ratio of (x) the sum of Total Liabilities plus the
Preferred Stock Obligations, to (y) Gross Asset Value, each determined
on a consolidated basis for the Company and its Consolidated
Subsidiaries, to exceed 0.80:1 at any time.
(b) UNENCUMBERED POOL. The Company shall not permit the ratio of
(x) the remainder of Unencumbered Apartment Asset Value minus
outstanding Senior Indebtedness to (y) the sum of the outstanding
Obligations plus the Preferred Stock Obligations, each determined on a
consolidated basis for the Company and its Consolidated Subsidiaries,
to be 0.30:1 or less at any time.
(c) EBITDA TO FIXED CHARGES RATIO. the Company shall not permit
the ratio of EBITDA for then most recently completed Fiscal Quarter to
Fixed Charges for the then most recently completed Fiscal Quarter,
each determined on a consolidated basis for the Company and its
Consolidated Subsidiaries, to be less than 1.15:1.
(d) DIVIDENDS. The Company shall not, as determined on an
aggregate annual basis, pay any dividends in excess of 90% of the
Company's Funds Available for Distribution for such Fiscal Year.
Section 9.d RESTRICTION ON FUNDAMENTAL CHANGES.
(a) The Company shall not enter into any merger or
consolidation, unless (i) the Company is the surviving entity,
(ii) the entity which is merged into the Company is predominantly in
the commercial real estate business, (iii) the creditworthiness of the
surviving entity's long term unsecured debt or implied senior debt, as
applicable, is not lower than the Company's creditworthiness two
months immediately preceding such merger as determined by MLIC in its
reasonable discretion , and (iv) in the case of any merger where the
then fair market value of the assets of the entity which is merged
into the Company is twenty-five percent (25%) or more of the Company's
then Gross Asset Value following such merger, MLIC consents thereto in
writing, which consent shall not be unreasonably withheld, conditioned
or delayed. The Company shall not liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution), discontinue its business or
convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of its
business or property, whether now or hereafter acquired. Nothing in
this Section shall be deemed to prohibit the sale or leasing of
portions of the Real Property Assets in the ordinary course of
business.
(b) The Company shall not amend organizational documents in any
manner that would have a Material Adverse Effect without MLIC's
consent, which shall not be unreasonably withheld.
(c) The Company shall deliver to MLIC copies of all amendments
to its organizational documents no less than ten (10) days after the
effective date of any such amendment.
Section 10.c CHANGES IN BUSINESS. The Company shall not enter into
any business which is substantially different from that conducted by the
Company on the Closing Date after giving effect to the transactions
contemplated by this Agreement. The Company shall carry on its business
operations through the Company and its Subsidiaries.
Section 11.c LOANS. The Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, make any loans or advances
to any Person.
Section 12.c INVESTMENT AFFILIATES. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, acquire or
create any Investment Affiliate.
Section 13.c TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not and shall not permit any Subsidiary of
the Company to enter into or be a party to any transaction with any
Affiliate of the Company or such Subsidiary, except as otherwise
provided herein or in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms that are fully disclosed to MLIC
and are no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's length transaction with a Person not an
Affiliate of the Company or such Subsidiary.
(b) The Company shall not and shall not permit any Subsidiary of
the Company to enter into any agreement or transaction to pay to any
Person any management or similar fee based on or related to the
Company's or any of its Subsidiaries' operating performance or income
or any percentage thereof, nor pay any management or similar fee to an
Affiliate.
Section 14.b PAYMENTS TO AN AFFILIATE. The Company shall not make, or
permit any Subsidiary to make any payment to any Affiliate if a Default or
Event of Default has occurred and is continuing or if a Default or Event of
Default would occur as a result of such payment.
Section 15.b MATERIALS OF ENVIRONMENTAL CONCERN. The Company shall
not and shall not permit any Subsidiary to cause or permit a Release of any
Material of Environmental Concern on, at, in, under, above, to, from or
about any of the Real Estate Assets where such Release would (a) violate in
any respect, or form the basis for any Environmental Claim under, any
Environmental Laws or (b) otherwise adversely impact the value or
marketability of any of the Real Estate Assets, other than such violations
or Environmental Claims which could not reasonably be expected to have a
Material Adverse Effect.
Section 16.b ISSUANCE OF PREFERRED STOCK. The Company shall issue the
Preferred Stock solely to MLIC pursuant to this Agreement and not to any
other Person.
ARTICLE VI.
EVENTS OF DEFAULT
Section 1.b EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the dividends on the Preferred Stock remain unpaid for two or
more Dividend Periods, which need not be consecutive, or a redemption
payment in connection with a required redemption under the terms of
the Preferred Stock has not been paid;
(b) the Company shall fail to observe or perform any covenant
contained in Section 5.8, Section 5.9(a) or (b), or Section 5.10;
(c) the Company shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by
clause (a), (b), (e), (f), (g), (h), (i), (m) or (n) of this
Section 6.1) for 30 days after written notice thereof has been given
to the Company by MLIC, or if such default is of such a nature that it
cannot with reasonable effort be completely remedied within said
period of thirty (30) days such additional period of time as may be
reasonably necessary to cure same, provided the Company commences such
cure within said thirty (30) day period and diligently prosecutes same
until completion, but in no event shall such extended period exceed
ninety (90) days;
(d) any representation, warranty, certification or statement made
by the Company in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or
deemed made) and the defect causing such representation or warranty to
be incorrect when made (or deemed made) is not removed within thirty
(30) days after written notice thereof from MLIC to the Company;
(e) the Company, or any Subsidiary shall default in the payment
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of
any Recourse Debt which the aggregate outstanding principal amount
exceeds $250,000 and such default shall continue beyond the giving of
any required notice and the expiration of any applicable grace period
and such default has not been waived, in writing, by the holder of any
such Debt; or the Company, or any Subsidiary shall default in the
performance or observance of any obligation or condition with respect
to any such Recourse Debt or any other event shall occur or condition
exist beyond the giving of any required notice and the expiration of
any applicable grace period, if the effect of such default, event or
condition is to accelerate the maturity of any such indebtedness or to
permit (without any further requirement of notice or lapse of time)
the holder or holders thereof, or any trustee or agent for such
holders, to accelerate the maturity of any such indebtedness. Under
no circumstances will defaults with respect to Participating Loans
constitute an Event of Default under this subsection (e);
(f) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any action to authorize any of the
foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days; or an order for relief shall be
entered against the Company under the federal bankruptcy laws as now
or hereafter in effect;
(h) one or more final, non-appealable judgments or decrees in an
aggregate amount of $250,000 or more shall be entered by a court or
courts of competent jurisdiction against the Company or its
Consolidated Subsidiaries (other than any judgment as to which, and
only to the extent, a reputable insurance company has acknowledged
coverage of such claim in writing) and (i) any such judgments or
decrees shall not be stayed, discharged, paid, bonded or vacated
within thirty (30) days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgments or decrees;
(i) a Change of Control;
(j) the Company shall cease at any time to qualify to be a
publicly traded, registered reporting company under the Securities
Exchange Act of 1934;
(k) if any Termination Event with respect to a Plan shall occur
as a result of which Termination Event or Events any member of the
ERISA Group has incurred or may incur any liability to the PBGC or any
other Person and the sum (determined as of the date of occurrence of
such Termination Event) of the insufficiency of such Plan and the
insufficiency of any and all other Plans with respect to which such a
Termination Event shall occur and be continuing (or, in the case of a
Multiple Employer Plan with respect to which a Termination Event
described in clause (ii) of the definition of Termination Event shall
occur and be continuing, the liability of the Company) is equal to or
greater than $250,000 and which MLIC reasonably determines will have a
Material Adverse Effect;
(l) if, any member of the ERISA Group shall commit a failure
described in Section 402(f)(1) of ERISA or Section 412(n)(1) of the
Code and the amount of the lien determined under Section 402(f)(3) of
ERISA or Section 412(n)(3) of the Code that could reasonably be
expected to be imposed on any member of the ERISA Group or their
assets in respect of such failure shall be equal to or greater than
$250,000 and which MLIC reasonably determines will have a Material
Adverse Effect;
(m) at any time, for any reason the Company seeks to repudiate
its obligations under this Agreement;
(n) An event of default shall occur pursuant to the terms of the
Senior Term Loan Agreement, or the Senior Subordinated Term Loan
Agreement, each dated October 15, 1998, and between the Company and
Merry Land & Investment Company, Inc.
ARTICLE VII.
MISCELLANEOUS
Section 1.n TERMINATION OF THE AGREEMENT. Unless otherwise agreed by
each of the parties to this Agreement, if the Merger Agreement shall have
been terminated, all obligations of MLIC under this Agreement shall
automatically terminate at such time without notice to the Company.
Section 2.n SECURITIES LAW MATTERS. MLIC acknowledges and understands
that:
(a) MLIC has been furnished with and has carefully reviewed the
documents and information set forth on EXHIBIT D attached hereto (the
"Information").
(b) MLIC has been afforded full and complete access to all
information and other materials relating to the Company and its
affiliates, and the properties and financial condition of the
foregoing, and any other matters relating to the Preferred Stock of
the Company which MLIC has requested, or deems necessary in evaluating
the merits and risks of acquiring the Preferred Stock, and has been
afforded the opportunity to obtain any additional information
necessary to verify the accuracy of any representations or information
set forth in the Information.
(c) MLIC has had the opportunity to have answered any questions
concerning the financial condition or business or other information
with respect to the Company and its affiliates and the business,
properties and financial condition of the foregoing or with respect to
the merits and risks of an acquisition of the Preferred Stock, and
MLIC has received complete and satisfactory answers to all such
questions.
(d) MLIC has not relied upon any information or representation
not contained in the Information. Neither the Company nor any of its
agents nor anyone purporting to act on their behalf have made any
representation to the undersigned with respect to any tax or economic
benefits to be derived from an investment in the Preferred Stock. MLIC
is relying solely upon its own knowledge and upon the advice of its
advisors with respect to the tax, economic and other aspects of an
investment in the Preferred Stock.
(e) MLIC has carefully reviewed and understands the risks of, and
other considerations relating to, the acquisition of the Preferred
Stock and an investment in the Company.
(f) An owner of Preferred Stock must bear the economic risk of
ownership thereof for an indefinite period of time since purchase of
Preferred Stock involves the purchase of securities that have not been
registered under the Securities Act of 1933, as amended, and therefore
cannot be transferred (as defined below) except as provided below.
(g) No federal or state agency has passed upon the Preferred
Stock or made any finding or determination as to the fairness of an
investment in the Preferred Stock.
(h) MLIC hereby covenants and agrees that the Preferred Stock may
not be pledged, encumbered, sold, transferred or otherwise disposed of
(each a "transfer") except (a) pursuant to an effective registration
statement under the Securities Act of 1993, as amended (the "Act") or
(b) pursuant to an exemption from such registration pursuant to the
Act and in compliance with state securities and blue sky laws and an
opinion of counsel provided to the Company to the effect of this
subparagraph (b), which opinion shall be in form and substance
reasonably satisfactory to the Company. MLIC agrees that any transfer
of the Preferred Stock in violation of this Agreement will be null and
void and the certificates representing the Preferred Stock will bear
an appropriate restrictive legend.
(i) MLIC represents and warrants to the Company that:
(i) It is able to bear the economic risk of the acquisition
of the Preferred Stock.
(ii) It is an "accredited investor" as defined in Regulation
D promulgated under the Act.
(iii) The representatives of MLIC have been furnished with
and have carefully reviewed the Information. Such representatives
have such knowledge and experience in financial, business,
securities and real estate matters that they are capable of
evaluating the merits and risks of the acquisition of the
Preferred Stock and of making an informed investment decision.
(iv) MLIC hereby advises the Company that MLIC has entered
into a Preferred Stock Purchase Agreement, of even date with the
Merger Agreement, with ERP Operating Limited Partnership, an
Illinois limited partnership, pursuant to which MLIC has agreed
to sell the Preferred Stock to ERP Operating Limited Partnership.
In connection therewith, MLIC has obtained from ERP Operating
Limited Partnership representations and warranties similar to
those set forth in clauses (i), (ii) and (iii) above, a
representation that ERP Operating Limited Partnership will be
acquiring the Preferred Stock for its own account, as principal,
and not with a view to a transfer thereof, and a covenant similar
to that set forth in subparagraph (h) above.
(j) MLIC acknowledges and agrees that certain of the key
executives of MLIC were, immediately prior to the consummation of the
Transfer, key executives of MLIC, that it is fair and reasonable in
the circumstances to impute to MLIC as of the execution and delivery
of this Agreement and as of the consummation of the Transfer, all
knowledge, if any, of MLIC with respect to the Transferred Properties
and the Assumed Liabilities (as such terms are defined in the Asset
Exchange Agreement), and that all such knowledge shall so be (and
hereby is) imputed to MLIC. MLIC's acknowledgments and agreements set
forth in this clause (j) shall survive the Transfer indefinitely.
Section 3.j BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Company and MLIC.
Section 4.j NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission followed by telephonic confirmation or similar
writing) and shall be given to such party: (x) in the case of the Company,
or MLIC, at its address, telex number or facsimile number set forth on the
signature pages hereof with a duplicate copy thereof, in the case of MLIC,
to MLIC, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (y) in the case of the
Company, to ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or (z) in the case of
any party, such other address, telex number or facsimile number as such
party may hereafter specify for the purpose by notice to the other party.
Each such notice, request or other communication shall be effective (i) if
given by telex or facsimile transmission, when such telex or facsimile is
transmitted to the telex number or facsimile number specified in this
Section and the appropriate answerback or facsimile confirmation is
received, (ii) if given by certified registered mail, return receipt
requested, with first class postage prepaid, addressed as aforesaid, upon
receipt or refusal to accept delivery, (iii) if given by a nationally
recognized overnight carrier, 24 hours after such communication is
deposited with such carrier with postage prepaid for next day delivery, or
(iv) if given by any other means, when delivered at the address specified
in this Section 7.4.
Section 5.j NO WAIVERS. No failure or delay by MLIC in exercising any
right, power or privilege hereunder or under the Note shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 6.j EXPENSES; INDEMNIFICATION.
(a) Subject to the terms of the Transaction Costs Agreement, the
Company shall pay within thirty (30) days after written notice from
MLIC, (i) all reasonable out-of-pocket costs and expenses of MLIC
(including reasonable fees and disbursements of its counsel) in
connection with the preparation of this Agreement, this Agreement and
the documents and instruments referred to therein, and any waiver or
consent hereunder or any amendment hereof or any Default or alleged
Default hereunder, (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by MLIC, including fees and
disbursements of counsel for MLIC, in connection with the enforcement
of this Agreement and the instruments referred to therein and such
Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom;
(b) The Company agrees to indemnify MLIC, their respective
affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which
may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding that may at any
time (including, without limitation, at any time following the payment
of the Obligations) be asserted against any Indemnitee, as a result
of, or arising out of, or in any way related to or by reason of,
(i) any of the transactions contemplated by this Agreement or the
execution, delivery or performance of this Agreement, (ii) any
violation by the Company or the Environmental Affiliates of any
applicable Environmental Law, (iii) any Environmental Claim arising
out of the management, use, control, ownership or operation of
property or assets by the Company or any of the Environmental
Affiliates, including, without limitation, all on-site and off-site
activities of the Company or any Environmental Affiliate involving
Materials of Environmental Concern, (iv) the breach of any
environmental representation or warranty set forth herein, but
excluding those liabilities, losses, damages, costs and expenses
(a) for which such Indemnitee has been compensated pursuant to the
terms of this Agreement, (b) incurred solely by reason of the gross
negligence, willful misconduct bad faith or fraud of any Indemnitee as
finally determined by a court of competent jurisdiction,
(c) violations of Environmental Laws relating to a Property which are
caused by the act or omission of such Indemnitee after such Indemnitee
takes possession of such Property or (d) any liability of such
Indemnitee to any third party based upon contractual obligations of
such Indemnitee owing to such third party which are not expressly set
forth in this Agreement. In addition, the indemnification set forth
in this Section 7.6(b) in favor of any director, officer, agent or
employee of MLIC shall be solely in their respective capacities as
such director, officer, agent or employee. The Company's obligations
under this Section shall survive the termination of this Agreement.
Section 7.b AMENDMENTS AND WAIVERS. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Company and MLIC.
Section 8.b ASSIGNMENT. Neither the Company nor MLIC shall have the
right to assign its rights hereunder or any interest herein; PROVIDED,
HOWEVER, the foregoing provision shall not limit the right of MLIC, or
MLIC's successors or assigns, to sell, transfer or assign any shares of
Preferred Stock owned by it subject to the provisions of applicable
securities laws, and in connection with any such sale, transfer or
assignment, to assign its rights hereunder, whereupon the representations,
warranties and covenants contained herein shall run in favor of, and inure
to the benefit of, the purchaser, transferee or assignee of such shares of
Preferred Stock.
Section 9.b GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this Agreement
and any action for enforcement of any judgment in respect thereof may
be brought in the courts of the State of Illinois or of the United
States of America for the Northern District of Illinois, and, by
execution and delivery of this Agreement, the Company hereby accepts
for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid
courts and appellate courts from any thereof. The Company
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the hand
delivery, or mailing of copies thereof by registered or certified
mail, postage prepaid, to the Company at its address set forth below.
The Company hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the
right of MLIC to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction.
Section 10.b COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof. This Agreement shall become effective upon receipt by MLIC
and the Company of counterparts hereof signed by each of the parties
hereto.
Section 11.b WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND MLIC
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 12.b SURVIVAL. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the issuance of the
Preferred Stock.
Section 13.b LIMITATION OF LIABILITY. No claim may be made by the
Company or any other Person acting by or through the Company against MLIC
or the affiliates, directors, officers, employees, attorneys, agent,
successors or assigns of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions contemplated by
this Agreement, or any act, omission or event occurring in connection
therewith; and the Company hereby waives, releases and agrees not to ▇▇▇
upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
Section 14.b RECOURSE OBLIGATION. This Agreement and the obligations
hereunder are fully recourse to the Company. Notwithstanding the foregoing,
no recourse under or upon any obligation, covenant, or agreement contained
in this Agreement shall be had against any officer, director, shareholder
or employee of the Company, except in the event of fraud or
misappropriation of funds on the part of such officer, director,
shareholder or employee.
Section 15.b CONFIDENTIALITY. MLIC shall use reasonable efforts to
assure that information about the Company and its Subsidiaries and
Investment Affiliates, and the Properties thereof and their operations,
affairs and financial condition, not generally disclosed to the public,
which is furnished to MLIC pursuant to the provisions hereof is used only
for the purposes of this Agreement and shall not be divulged to any Person
other than MLIC, and their affiliates and respective officers, directors,
employees and agents who are actively and directly participating in the
evaluation , except: (a) to their attorneys and accountants, (b) in
connection with the enforcement of the rights and exercise of any remedies
of MLIC hereunder, (c) in connection with any transfer of the Preferred
Stock to a Person who has agreed in writing to be bound by a
confidentiality agreement substantially equivalent to the terms of this
Section 7.15, and (d) as may otherwise be required or requested by any
regulatory authority having jurisdiction over MLIC or by any applicable
law, rule, regulation or judicial process.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company and MLIC have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
MERRY LAND & INVESTMENT COMPANY, INC.
By:
Name:
Title:
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Address:624 ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
MERRY LAND PROPERTIES, INC.
By:
Name:
Title:
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Address:624 ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇