Exhibit 99.3
PRINCIPAL SHAREHOLDER AGREEMENT
This PRINCIPAL SHAREHOLDER AGREEMENT (this "Agreement") dated as of
February 19, 2003, is made by and among Cornerstone Realty Income Trust, Inc., a
Virginia corporation ("Cornerstone"), and the undersigned shareholder (the
"Shareholder") of Merry Land Properties, Inc., a Georgia corporation (the
"Company").
RECITALS
A. Simultaneously herewith Cornerstone is entering into an Agreement and
Plan of Merger among Cornerstone, Cornerstone Merger Sub, Inc., a Georgia
corporation (the "Merger Sub"), and the Company dated as of February 19, 2003
(the "Merger Agreement").
B. The Merger Agreement provides for (i) the merger (the "Merger") of the
Company with and into Merger Sub. Pursuant to the Merger, the holders of the
outstanding capital stock of the Company will receive the applicable
consideration set forth in the Merger Agreement. Upon consummation of the
Merger, the Company will be merged into the Merger Sub and the Company will be a
wholly owned subsidiary of Cornerstone.
C. Shareholder owns of record and/or beneficially the number of shares of
common stock, without par value, of the Company (the "Company Shares") set forth
opposite Shareholder's name on Annex A hereto.
D. As a condition to its willingness to enter into the Merger Agreement,
Cornerstone has required that Shareholder agree, and Shareholder has agreed,
among other things, to execute and deliver this Agreement with respect to the
Company Shares now Beneficially Owned (as hereinafter defined) or in the future
acquired by Shareholder (all such shares, including those now owned and those
acquired in the future being referred to herein as the "Shares"), on the terms
and conditions provided for herein.
E. Capitalized terms used but not defined herein shall have the meanings
set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
Section 1. Agreement to Vote the Shares. Shareholder, in his or her
capacity as such, hereby agrees that during the period commencing on the date
hereof and continuing until the Termination Date (the "Voting Period"), at any
meeting (or any adjournment or postponement thereof) of the holders of any class
or classes of the capital stock of the Company, called with respect to any of
the following or in connection with the written consent of the holders of any
class or classes of the capital stock of the Company with respect to any of the
following, Shareholder shall vote (or cause to be voted) his or her Shares
Beneficially Owned by Shareholder, whether owned on the date hereof or hereafter
acquired, (x) in favor of the approval of the terms of the Merger Agreement and
each of the other transactions contemplated by the
Merger Agreement (and any actions required in furtherance thereof), (y) against
any action, proposal, transaction or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company or any of its subsidiaries under the
Merger Agreement or of Shareholder under this Agreement, and (z) except as
otherwise agreed to in writing in advance by Cornerstone, against the following
actions or proposals (other than the transactions contemplated by the Merger
Agreement or this Agreement): (i) any extraordinary corporate transaction, such
as a merger, consolidation or other business combination involving the Company
or any of its subsidiaries and any Acquisition Proposal; (ii) a sale, lease or
transfer of a significant part of the assets of the Company or any of its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or any of its subsidiaries (each of the actions in clauses (i) or
(ii), a "Business Combination"); and (iii) (A) any change in the persons who
constitute the board of directors of the Company that is not approved in advance
by at least a majority of the persons who were directors of the Company as of
the date of this Agreement (or their successors who were so approved); (B) any
change in the present capitalization of the Company or any amendment of the
Company's articles of incorporation or bylaws; (C) any other material change in
the Company's corporate structure or business; or (D) any other action or
proposal involving the Company or any of its subsidiaries that is intended, or
could reasonably be expected, to prevent, impede, or interfere with, delay,
postpone or adversely affect the transactions contemplated by the Merger
Agreement; provided that, nothing contained in this Agreement shall prevent
Shareholder from considering or negotiating, solely in his capacity as a
director of the Company, an Acquisition Proposal in accordance with Section 4.1
or Section 7.1(viii) of the Merger Agreement. Any such vote shall be cast or
consent shall be given in accordance with such procedures relating thereto as
shall ensure that it is duly counted for purposes of determining that a quorum
is present and for purposes of recording the results of such vote or consent.
Shareholder agrees not to enter into any agreement, letter of intent, agreement
in principle or understanding with any person that violates or conflicts with or
could reasonably be expected to violate or conflict with the provisions and
agreements contained in this Agreement or the Merger Agreement.
As used in this Agreement, the term "Beneficially Owns" or "Beneficial
Ownership" with respect to any securities means having "beneficial ownership" of
such securities as determined pursuant to Rule 13d-3 under the Exchange Act,
including pursuant to any agreement, arrangement or understanding, whether or
not in writing; provided, however, such terms shall not include Shares held of
record by Shareholder as Trustee for the Company's Employee Stock Ownership Plan
(the "ESOP") or unallocated Shares in the ESOP as to which Shareholder may
exercise voting power.
Section 2. Grant of Irrevocable Proxy. Shareholder, in his capacity as
such, hereby irrevocably appoints Cornerstone or any designee of Cornerstone the
lawful agent, attorney and proxy of Shareholder, during the Voting Period (which
proxy shall be automatically revoked without any further action on the part of
Shareholder at the end of the Voting Period) at any meeting of the shareholders
of the Company, called with respect to any of the following or in connection
with any written consent of the shareholders of the Company with respect to any
of the following, to vote (or cause to be voted) the Shares held of record
(other than those held of record as trustee of the ESOP) or Beneficially Owned
by Shareholder on such matters and as indicated in Section 1, clauses (x), (y)
and (z) above (collectively, the "Specified Matters").
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Shareholder intends this proxy to be irrevocable and coupled with an interest
and will take such further action or execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any proxy
previously granted by Shareholder with respect to his or her Shares. Shareholder
shall not during the Voting Period purport to vote (or execute a consent with
respect to) his or her Shares in connection with any of the Specified Matters)
(other than through this irrevocable proxy) or grant any other proxy or power of
attorney with respect to any of his or her Shares in respect of the Specified
Matters, deposit any of his or her Shares into a voting trust or enter into any
agreement (other than this Agreement), arrangement or understanding with any
person, directly or indirectly, to vote, grant any proxy or give instructions
with respect to the voting of any of his or her Shares in connection with any of
the Specified Matters.
Section 3. Representations and Warranties of Cornerstone. Cornerstone
hereby represents and warrants to Shareholder as follows:
(a) Due Authorization; Binding Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Cornerstone, and
no other corporate proceedings on the part of Cornerstone are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Cornerstone
and constitutes a valid and binding agreement of Cornerstone enforceable against
Cornerstone in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii) is
subject to general principles of equity.
(b) No Conflicts. Except for (i) filings under the HSR Act, if applicable,
(ii) the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iii) the applicable requirements of state securities, takeover
or Blue Sky laws and (iv) such notifications, filings, authorizing actions,
orders and approvals as may be required under other laws, (A) no filing with,
and no permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of this
Agreement by Cornerstone and the consummation by each of the transactions
contemplated hereby and (B) neither the execution and delivery of this Agreement
by Cornerstone nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the provisions hereof shall (1) conflict
with or result in any breach of any provision of its amended and restated
articles of incorporation or by-laws (or similar documents), (2) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which it is a party or
by which Shareholder or any of his or her properties or assets may be bound or
(3) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to it or any of his or her properties or assets, except in the case
of (2) or (3) for violations, breaches or defaults which would not, individually
or in the aggregate, reasonably be expected to materially impair the ability of
Cornerstone to perform its obligations hereunder.
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(c) Good Standing. Cornerstone is a corporation duly organized, validly
existing and in good standing under the laws of Commonwealth of Virginia and has
all requisite corporate power and authority to execute and deliver this
Agreement.
Section 4. Representations and Warranties of the Shareholders. Shareholder
hereby severally and not jointly represents and warrants to Cornerstone as
follows:
(a) Ownership of Shares. On the date hereof, Shareholder is the Beneficial
Owner of the number of Shares set forth opposite his or her name on Annex A
hereto and has the power to vote and dispose of such Shares.
(b) Power; Binding Agreement. Shareholder has the legal capacity, power
and authority to enter into and perform all of his or her obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Shareholder will not violate any other agreement to which Shareholder is a party
including, without limitation, any voting agreement, stockholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered by
Shareholder and assuming the due authorization, execution and delivery by
Cornerstone, constitutes a valid and binding agreement of Shareholder
enforceable against Shareholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights generally
and (ii) is subject to general principles of equity.
(c) No Conflicts. Except for (i) filings under the HSR Act, if applicable,
(ii) the applicable requirements of the Exchange Act and the Securities Act,
(iii) the applicable requirements of state securities, takeover or Blue Sky
laws, (iv) such notifications, filings, authorizing actions, orders and
approvals as may be required under other laws, (A) no filing by Shareholder
with, and no permit, authorization, consent or approval of, any state, federal
or foreign public body or authority is necessary for the execution of this
Agreement by Shareholder and the consummation by Shareholder of the transactions
contemplated hereby and (B) neither the execution and delivery of this Agreement
by Shareholder nor the consummation by Shareholder of the transactions
contemplated hereby nor compliance by Shareholder with any of the provisions
hereof shall (1) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which Shareholder is a party or by which Shareholder or any of his or her
properties or assets may be bound or (2) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Shareholder or any of his or
her properties or assets, except for violations, breaches or defaults which
individually or in the aggregate would not reasonably be expected to materially
adversely affect the ability of Shareholder to perform his or her obligations
hereunder.
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Section 5. Certain Covenants of the Shareholder. Shareholder hereby
covenants and agrees as follows:
(a) No Solicitation. During the term of this Agreement, Shareholder in
Shareholder's capacity as a shareholder of the Company will not, and will
instruct his or her employees, representatives or agents not to, directly or
indirectly, solicit, facilitate, participate in or initiate any inquiries or the
making of any proposal by any person or entity (other than Cornerstone and
Merger Sub or any designees of Cornerstone and Merger Sub) which constitutes, or
may reasonably be expected to lead to any sale of the Shares or any Acquisition
Proposal; provided that, nothing contained in this Agreement shall prevent
Shareholder from considering or negotiating, solely in his capacity as a
director of the Company, an Acquisition Proposal in accordance with Section 4.1
of the Merger Agreement. If Shareholder, or any employee, representative or
agent of Shareholder, receives an inquiry or proposal with respect to the sale
of Shares, then Shareholder shall promptly inform Cornerstone of the terms and
conditions, if any, of such inquiry or proposal and the identity of the person
making it unless notice thereof has previously been given by the Company as
contemplated by the Merger Agreement. Shareholder shall, and shall instruct his
or her respective employees, representatives and agents to, immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
(b) Restriction on Transfer, Proxies and Non-Interference. Shareholder
hereby agrees, from the date hereof through the termination of this Agreement
pursuant to Section 8(e) hereof, and except as contemplated hereby and except
for pledges in existence as of the date hereof, not to (i) sell, transfer,
pledge, encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale, transfer,
pledge, encumbrance, assignment or other disposition of, any of his or her
Shares or (ii) grant any proxies in connection with Specified Matters, deposit
his or her Shares into a voting trust or enter into a voting agreement with
respect to his or her Shares or (iii) take any action that would make any
representation or warranty of Shareholder contained herein untrue or incorrect
or have the effect of preventing, impeding, interfering with or adversely
affecting the performance by Shareholder of his or her obligations under this
Agreement.
Section 6. Legend. If requested by Cornerstone, Shareholder agrees that
the following legend shall be conspicuously noted on each certificate
representing his or her Shares:
"The shares represented by this certificate are
subject to a Principal Shareholder Agreement dated as of
February 19, 2003. The Principal Shareholder Agreement
restricts the transferability of the shares represented
by this certificate and includes a voting agreement and
an irrevocable proxy to vote the shares represented by
this certificate."
Section 7. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to effectuate the transactions contemplated by this
Agreement.
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Section 8. Miscellaneous.
(a) Entire Agreement; Assignment. This Agreement, together with the
Merger Agreement dated the date hereof, (i) constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (ii) shall not be assigned
by operation of law or otherwise, provided that Cornerstone may assign its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Cornerstone, but no such assignment shall relieve Cornerstone of
its obligations hereunder if such assignee does not perform such obligations.
(b) Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by Shareholder and Cornerstone.
(c) Publication. Each Shareholder hereby consents to disclosure in the
Proxy Statement (including all documents and schedules filed with the SEC) and
press releases with respect to the Merger in accordance with the Merger
Agreement, the identity of Shareholder and ownership of his or her Shares and
the nature of Shareholder's commitments, arrangements and understandings
pursuant to this Agreement. Cornerstone agrees to give Shareholder a reasonable
opportunity to review the disclosures referenced in the immediately preceding
sentence.
(c) Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
documented courier or delivery service, (ii) transmitted by facsimile during
normal business hours or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) to the following listed persons at the
addresses and facsimile numbers specified below, or to such other persons,
addresses or facsimile numbers as a party entitled to notice shall give, in the
manner hereinabove described, to the others entitled to notice:
If to any Shareholder, to the address listed opposite the name of
Shareholder on Annex A hereto.
If to Cornerstone, to:
Cornerstone Realty Income Trust, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Facsimile: 000-000-0000
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with a copy to:
McGuireWoods LLP
One Xxxxx Center
000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: 000-000-0000
If given personally or by documented courier or delivery service, or transmitted
by facsimile, a notice shall be deemed to have been given when it is received.
If given by mail, it shall be deemed to have been given on the third business
day following the day on which it was posted.
(d) Governing Law. Except to the extent that the GBCC applies with
respect to issues of corporate mechanics because the Company is a Georgia
corporation, this Agreement shall be governed in all respects by the laws of the
Commonwealth of Virginia without regard to any laws or regulations relating to
choice of laws (whether of the Commonwealth of Virginia or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the Commonwealth of Virginia.
(e) Termination. This Agreement shall terminate and no party shall have
any rights or obligations hereunder and this Agreement shall become null and
void and have no further effect (the "Termination Date") upon the earlier to
occur of (i) the Effective Time or (ii) the termination of the Merger Agreement
in accordance with its terms. The representations, warranties, covenants and
agreements contained herein shall terminate and shall not survive the
termination of this Agreement.
(f) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore, each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(g) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other right,
power or remedy by such party.
(h) Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
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(i) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, and
delivered by means of facsimile transmission or otherwise, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same agreement. If any party
hereto elects to execute and deliver a counterpart signature page by means of
facsimile transmission, it shall deliver an original of such counterpart to each
of the other parties hereto within ten days of the date hereof, but in no event
will the failure to do so affect in any way the validity of the facsimile
signature or its delivery.
(j) Headings. Headings of the Sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretative effect whatsoever.
(k) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
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IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of
each of the parties hereto, all as of the date first above written.
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
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Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Executive Vice President
SHAREHOLDER
/s/ X. Xxxxxxx Houston
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X. Xxxxxxx Houston
ANNEX A
Name of Shareholder Total Number of Shares Notice Information
------------------- ---------------------- ------------------
X. Xxxxxxx Houston 478,176
