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Exhibit 2
AGREEMENT AND PLAN OF MERGER
BETWEEN
EQUITY RESIDENTIAL PROPERTIES TRUST
AND
MERRY LAND & INVESTMENT COMPANY, INC.
DATED AS OF JULY 8, 1998
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TABLE OF CONTENTS
ARTICLE PAGE
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1 THE MERGER...............................................................................................2
1.1 The Merger......................................................................................2
1.2 Spinco Transactions.............................................................................2
1.3 Closing.........................................................................................3
1.4 Effective Time..................................................................................3
1.5 Effects of Merger on EQR's Declaration of Trust and Bylaws......................................3
1.6 Trustees........................................................................................3
1.7 Effect on Shares of Beneficial Interest and Options.............................................4
1.8 Exchange Ratio..................................................................................4
1.9 Alternative Structure of Merger.................................................................4
2 REPRESENTATIONS AND WARRANTIES OF MERRY LAND.............................................................5
2.1 Organization, Standing and Power of Merry Land..................................................5
2.2 Merry Land Subsidiaries.........................................................................5
2.3 Capital Structure...............................................................................6
2.4 Other Interests.................................................................................8
2.5 Authority; Noncontravention; Consents...........................................................8
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities...................................10
2.7 Absence of Certain Changes or Events...........................................................11
2.8 Litigation.....................................................................................11
2.9 Properties.....................................................................................12
2.10 Environmental Matters..........................................................................14
2.11 Related Party Transactions.....................................................................16
2.12 Employee Benefits..............................................................................16
2.13 Employee Matters...............................................................................18
2.14 Taxes..........................................................................................19
2.15 No Payments to Employees, Officers, Trustees or Directors......................................20
2.16 Brokers; Schedule of Fees and Expenses.........................................................20
2.17 Compliance with Laws...........................................................................20
2.18 Contracts; Debt Instruments....................................................................21
2.19 Opinion of Financial Advisor...................................................................23
2.20 State Takeover Statutes........................................................................23
2.21 Registration Statement.........................................................................23
2.22 Development Properties.........................................................................23
2.23 Investment Company Act of 1940.................................................................23
2.24 Trademarks, Patents and Copyrights.............................................................23
2.25 Insurance......................................................................................24
2.26 Definition of Knowledge of Merry Land..........................................................24
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ARTICLE PAGE
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2.27 Vote Required..................................................................................24
2.28 ESOP Accruals. ...............................................................................24
3 REPRESENTATIONS AND WARRANTIES OF EQR...................................................................24
3.1 Organization, Standing and Power of EQR........................................................25
3.2 Capital Structure..............................................................................25
3.3 Organization, Standing and Power of ERP Operating Partnership.................................26
3.4 Capital Structure of ERP Operating Partnership................................................27
3.5 Authority; Noncontravention; Consents..........................................................27
3.6 SEC Documents; Financial Statements; Undisclosed Liabilities...................................28
3.7 Absence of Certain Changes or Events...........................................................29
3.8 Litigation.....................................................................................29
3.9 Properties.....................................................................................30
3.10 Environmental Matters..........................................................................31
3.11 Taxes..........................................................................................31
3.12 Brokers; Schedule of Fees and Expenses.........................................................32
3.13 Compliance with Laws...........................................................................32
3.14 Contracts; Debt Instruments....................................................................32
3.15 Opinion of Financial Advisor...................................................................32
3.16 State Takeover Statutes........................................................................33
3.17 Registration Statement.........................................................................33
3.18 Investment Company Act of 1940.................................................................33
3.19 Definition of Knowledge of EQR.................................................................33
3.20 Vote Required..................................................................................33
3.21 Employee Policies..............................................................................33
4 COVENANTS...............................................................................................33
4.1 Acquisition Proposals..........................................................................33
4.2 Conduct of Merry Land's Business Pending Merger................................................35
4.3 Conduct of EQR's Business Pending Merger.......................................................38
4.4 Other Actions..................................................................................39
4.5 Filing of Certain Reports......................................................................39
4.6 Compliance with the Securities Act.............................................................39
5 ADDITIONAL COVENANTS....................................................................................40
5.1 Preparation of the Registration Statement and the Proxy Statement; Merry Land
Shareholders Meeting and EQR Shareholders Meeting..............................................40
5.2 Access to Information: Confidentiality.........................................................41
5.3 Best Efforts; Notification.....................................................................42
5.4 Costs of Transaction...........................................................................42
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ARTICLE PAGE
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5.5 Tax Treatment..................................................................................43
5.6 Public Announcements...........................................................................43
5.7 Listing........................................................................................43
5.8 Letters of Accountants.........................................................................43
5.9 Transfer and Gains Taxes.......................................................................43
5.10 Benefit Plans and Other Employee Arrangements..................................................44
5.11 Tax Indemnification............................................................................46
5.12 Indemnification................................................................................47
5.13 Asset Exchange and Purchase and Sale Agreements................................................48
5.14 Declaration of Dividends and Distributions.....................................................48
5.15 Transfer of Merry Land Assets After Effective Time.............................................48
5.16 Notices........................................................................................49
5.17 Resignations...................................................................................49
5.18 10b-17 Notice..................................................................................49
5.19 ESOP...........................................................................................49
5.20 Valuation of Distribution......................................................................49
5.21 Merger of Merry Land DownREIT..................................................................49
5.22 Transfer of Services Company Shares............................................................50
5.23 Certain Properties.............................................................................50
6 CONDITIONS..............................................................................................51
6.1 Conditions to Each Party's Obligation to Effect the Merger.....................................51
6.2 Conditions to Obligations of EQR...............................................................52
6.3 Conditions to Obligations of Merry Land........................................................54
7 TERMINATION, AMENDMENT AND WAIVER.......................................................................55
7.1 Termination....................................................................................55
7.2 Certain Fees and Expenses......................................................................57
7.3 Effect of Termination..........................................................................58
7.4 Amendment......................................................................................58
7.5 Extension; Waiver..............................................................................58
8 GENERAL PROVISIONS......................................................................................59
8.1 Nonsurvival of Representations and Warranties..................................................59
8.2 Notices........................................................................................59
8.3 Interpretation.................................................................................60
8.4 Counterparts...................................................................................60
8.5 Entire Agreement; No Third-Party Beneficiaries.................................................60
8.6 Governing Law..................................................................................60
8.7 Assignment.....................................................................................60
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8.8 Enforcement....................................................................................61
8.9 Severability...................................................................................61
8.10 Non-Recourse to Directors, Trustees and Officers...............................................61
EXHIBITS
Exhibit "A-1" - Articles of Merger
Exhibit "A-2" - Certificate of Merger
Exhibit "B" - Asset Exchange Agreement
Exhibit "C" - Preferred Stock Purchase Agreement
Exhibit "D" - Development Agreement
Exhibit "E" - Purchase and Sale Agreement
Exhibit "F" - Transaction Costs Agreement
Exhibit "G" - Retention and Severance Program
Exhibit "H" - Opinion of Hull, Xxxxxx, Xxxxxx & Xxxxxxx, P.C.
Exhibit "I" - Opinion of Xxxxxxx & Wolfe
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INDEX OF DEFINED TERMS
DEFINED TERM SECTION
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Acquisition Proposal 4.1(a)
Affiliate 2.11
Affiliates 4.6
Agreement Preamble
AICPA Statement 5.8(a)
Alternative Merger 1.9
Articles of Merger Recital B
Asset Exchange Agreement Recital C
Augusta Office Lease 1.2(d)
Base Amount 7.2
Break-Up Expenses 7.2
Break-Up Fee 7.2
Break-Up Fee Tax Opinion 7.2
Certificate of Merger Recital B
Change in Control Share Grants 2.3(b)
Closing 1.3
Closing Date 1.3
Code Recital D
Commitment 4.2(p)
Confidentiality Agreement 5.2
Controlled Group Member 2.12
Debt Documents 2.18(b)
Department 1.4
Determination 1.9
Development Agreement 1.2(c)
Distribution 1.2(e)
DownREIT Units 2.3(a)
Effective Time 1.4
Employee Plan 2.12
Employment Release 5.10(b)
Employee Share Award and Option Plan 3.2(a)
Encumbrances 2.9(a)
Environmental Laws 2.10
EQR Preamble
EQR Common Shares 1.8
EQR Disclosure Letter Article 3
EQR Distribution Reinvestment Plan 3.2(a)
EQR Employee Share Plan 3.2(a)
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DEFINED TERM SECTION
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EQR Financial Statement Date 3.7
EQR Material Adverse Change 3.7
EQR Material Adverse Effect 3.1
EQR Options 3.2(a)
EQR Preferred Shares 3.2(a)
EQR Properties 3.9
EQR SEC Documents 3.6
EQR Series A Shares 3.2(a)
EQR Series B Shares 3.2(a)
EQR Series C Shares 3.2(a)
EQR Series D Shares 3.2(a)
EQR Series E Shares 3.2(a)
EQR Series F Shares 3.2(a)
EQR Series G Shares 3.2(a)
EQR Shareholder Approvals 3.5(a)
EQR Shareholders Meeting 5.1(b)
EQR Subsidiaries 3.1
ERISA 2.12
ERP Operating Partnership 1.2(b)
ESOP 2.3(b)
Exchange Act 2.5(b)
Exchange Ratio 1.8(a)
Excise Tax 5.11
Excluded Subsidiaries 2.2(a)
GAAP 2.6
Gain Limitation 5.23(b)
GBCC 1.1
Governmental Entity 2.5(b)
Gross-Up Payment 5.11
Xxxx-Xxxxx Act 2.5(d)
Hazardous Substances 2.10
include, includes or including 8.3
Indebtedness 2.18(b)
Indemnified Parties 5.12
IRS 1.9
Laws 2.5(b)
Liens 2.2(b)
Merger Recital A
Merry Land Preamble
Merry Land Capital Budget 2.9(c)
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DEFINED TERM SECTION
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Merry Land Common Shares 1.8(a)
Merry Land Disclosure Letter Article 2
Merry Land DownREIT 1.2(e)
Merry Land Dividend Reinvestment Plan 2.3(a)
Merry Land Environmental Reports 2.10
Merry Land Financial Statement Date 2.7
Merry Land Material Adverse Change 2.7
Merry Land Material Adverse Effect 2.1
Merry Land Option 2.3(b)
Merry Land Preferred Shares 2.3(a)
Merry Land Properties 2.9(a)
Merry Land Schedule 5.10 Employees 5.10(b)
Merry Land SEC Documents 2.6
Merry Land Series A Shares 2.3(a)
Merry Land Series B Shares 2.3(a)
Merry Land Series C Shares 2.3(a)
Merry Land Series D Shares 2.3(a)
Merry Land Series E Shares 2.3(a)
Merry Land Shareholder Approvals 2.5(a)
Merry Land Shareholder Meeting 5.1(c)
Merry Land Shares 2.3(a)
Merry Land Subsidiaries 2.2(a)
Merry Land Title Insurance Policy 2.9(b)
Monthly ESOP Accrual 2.28
NYSE 2.5(b)
1940 Act 2.23
OP Units 3.2(a)
Outside Property Management Agreements 2.18(f)
Payments 5.11
Payor 7.2
Pension Plan 2.12
Person 2.2(a)
Plan 5.10(c)
Preferred Stock Purchase Agreement 1.2(b)
Property Restrictions 2.9(a)
Proxy Statement 2.5(b)
Purchase and Sale Agreement 1.2(f)
Qualifying Income 7.2
Recipient 7.2
Registration Statement 5.1(a)
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DEFINED TERM SECTION
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REIT 2.14(b)
REIT Requirements 7.2
Restricted Share Grants 2.3(b)
Retention and Severance Program 5.10(b)
Retention Payments 5.10(b)
SEC 2.5(b)
Section 4999 5.11
Securities Act 2.5(b)
Severance Payments 5.10(b)
Services Corp. 4.2(l)
Share Loan and Acquisition Agreements 2.3(b)
Shareholder Approvals 3.5(a)
Shareholder Meetings 5.1(c)
Short Period Merry Land E&P 5.23(b)
Spinco Recital C
Spinco Assets 5.23
Spinco Preferred Stock 1.2(a)
Spin-Off 1.2
Subsidiary 2.2(a)
Superior Acquisition Proposal 4.1
Surviving Trust 1.1
Takeover Statute 2.20
Taxes 2.14(a)
Third Party Management Agreements 2.18(e)
Third Party Provisions 8.5
Title 8 1.1
to the Knowledge of EQR 3.19
to the Knowledge of Merry Land 2.26
Transaction Costs Agreement 5.4
Transfer and Gains Taxes 5.9
Transferred Properties 1.2(f)
Welfare Plan 2.12
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July
8, 1998 by and between EQUITY RESIDENTIAL PROPERTIES TRUST, a Maryland real
estate investment trust ("EQR"), and MERRY LAND & INVESTMENT COMPANY, INC., a
Georgia corporation ("Merry Land").
R E C I T A L S:
A. The Board of Trustees of EQR and the Board of Directors of Merry
Land deem it advisable and in the best interests of their respective
shareholders, subject to the conditions and other provisions contained herein,
that EQR and Merry Land shall combine their businesses by the merger of Merry
Land with and into EQR; provided, however, that at the option of EQR, and
subject to the terms of this Agreement, such business combination shall be
effectuated by an alternative transaction structure not affecting any economic
aspects of such combination to the shareholders of Merry Land (the "Merger").
B. Upon the terms and conditions set forth herein, EQR and Merry Land
shall execute (i) Articles of Merger in substantially the form attached hereto
as Exhibit "A-1" (the "Articles of Merger") and shall file such articles in
accordance with Maryland law, and (ii) a Certificate of Merger in substantially
the form attached hereto as Exhibit "A-2" (the "Certificate of Merger") and
shall file such certificate in accordance with Georgia law, in each case to
effectuate the Merger.
C. Immediately prior to the Merger, it is contemplated that Merry Land
shall transfer certain of its assets to Spinco, a corporation or business trust
to be formed ("Spinco"), and that Spinco shall assume certain obligations of
Merry Land, all as provided in the Asset Exchange Agreement in substantially the
form attached hereto as Exhibit "B" (the "Asset Exchange Agreement").
D. Immediately prior to the Merger, it is contemplated that Merry Land
shall distribute to its common shareholders all the outstanding shares of Spinco
owned by it in a distribution subject to income tax under the Internal Revenue
Code of 1986, as amended (the "Code").
E. For federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Code.
F. EQR and Merry Land have each received a fairness opinion relating to
the Merger, as more fully described herein.
G. EQR and Merry Land desire to make certain representations,
warranties and agreements in connection with the Merger.
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NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with Title 8 of the Corporations and Associations
Article of the Annotated Code of Maryland, as amended ("Title 8"), and the
Georgia Business Corporation Code (the "GBCC"), Merry Land shall be merged with
and into EQR, with EQR as the surviving entity (the "Surviving Trust").
1.2 SPINCO TRANSACTIONS. Merry Land shall form Spinco. Prior to the
Effective Time (as defined herein):
(a) Merry Land shall, and shall cause Spinco to, execute and
deliver the Asset Exchange Agreement and each of Merry Land and Spinco
shall consummate the transactions contemplated thereby including,
without limitation, the transfer by Merry Land of certain properties
and the issuance by Spinco of preferred stock to Merry Land (the
"Spinco Preferred Stock");
(b) EQR shall cause ERP Operating Limited Partnership, an
Illinois limited partnership of which EQR is the sole general partner
("ERP Operating Partnership"), to execute, deliver, and consummate and
Merry Land shall execute, deliver and consummate, the Preferred Stock
Purchase Agreement in substantially the form attached hereto as Exhibit
"C" (the "Preferred Stock Purchase Agreement"), whereby ERP Operating
Partnership shall, subject to the terms and conditions set forth
therein, acquire the Spinco Preferred Stock from Merry Land;
(c) EQR shall cause ERP Operating Partnership to execute and
deliver, and Merry Land shall cause Spinco to execute and deliver, the
Development Agreement in substantially the form attached hereto as
Exhibit "D" (the "Development Agreement");
(d) EQR shall cause ERP Operating Partnership to execute and
deliver, and Merry Land shall cause Spinco to execute and deliver, an
Office Lease Agreement containing substantially the terms set forth on
the term sheet attached as Schedule 1.2 to the EQR Disclosure Letter
(as defined herein)(the "Augusta Office Lease"); provided, however,
that if such terms cannot be agreed to by the parties hereto prior to
the Closing (as defined herein) the parties hereto shall have no
obligations with respect to the Augusta Office Lease.
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(e) Merry Land shall distribute to its common shareholders, as
a distribution taxable under Code Section 301 (the "Distribution"), all
the outstanding common shares of Spinco owned by Merry Land as further
described in the Asset Exchange Agreement. Merry Land shall not
distribute any common shares of Spinco to the limited partners of Merry
Land DownREIT I LP, a Georgia limited partnership of which Merry Land
Apartment Communities, Inc., a Georgia corporation and a wholly-owned
subsidiary of Merry Land, is the sole general partner ("Merry Land
DownREIT"); and
(f) ERP Operating Partnership shall execute and deliver, and
Merry Land shall cause Spinco to execute and deliver, the Purchase and
Sale Agreement (the "Purchase and Sale Agreement") in substantially the
form attached hereto as Exhibit "E", pursuant to which certain
properties may be sold by ERP Operating Partnership to Spinco (together
with the properties transferred to Spinco pursuant to the Asset
Exchange Agreement, the "Transferred Properties").
All of such transactions are referred to collectively herein as the "Spin-Off".
Immediately after the Effective Time (as defined below), the transactions
contemplated by, the Development Agreement, the Augusta Office Lease and the
Purchase and Sale Agreement which are to occur on the Closing Date (as defined
below) shall be consummated.
1.3 CLOSING. The closing of the Merger ("Closing") will take place at
10:00 a.m. on the date to be specified by the parties, which (subject to
satisfaction or waiver of the other conditions set forth in Article 6) shall be
no later than the third business day after satisfaction or waiver of the
conditions set forth in Section 6.1(a) (the "Closing Date"), at the offices of
Xxxxxxx & Xxxxx, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, unless
another date or place is agreed to in writing by the parties hereto.
1.4 EFFECTIVE TIME. As soon as practicable following the satisfaction
or waiver of the conditions set forth in Article 6, EQR and Merry Land shall (i)
execute and file the Articles of Merger, executed in accordance with Title 8,
with the State Department of Assessments and Taxation of Maryland (the
"Department"), and shall make all other filings and recordings required under
Title 8, and (ii) file the Certificate of Merger in accordance with Section
14-2-1105 of the GBCC, with the Secretary of State of Georgia, and shall make
all other filings and recordings required under the GBCC. The Merger shall
become effective (the "Effective Time") at such time as shall be specified in
the Articles of Merger and Certificate of Merger. Unless otherwise agreed, the
parties shall cause the Effective Time to occur on the Closing Date.
1.5 EFFECTS OF MERGER ON EQR'S DECLARATION OF TRUST AND BYLAWS. The
Second Amended and Restated Declaration of Trust of EQR shall be amended at the
Effective Time as provided in the Articles of Merger. The Second Amended and
Restated Bylaws of EQR, as amended and in effect immediately prior to the
Effective Time, shall continue in full force and effect after the Merger until
further amended in accordance with applicable Maryland law.
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1.6 TRUSTEES. The trustees of the Surviving Trust shall be (i) the
trustees of EQR immediately prior to the Effective Time, who shall continue to
serve for the balance of their unexpired terms or their earlier death,
resignation or removal, and (ii) Xxxxx X. Xxxx and Xxxxxxx X. Xxxxxxxx, each of
whom shall serve for the terms specified in the Articles of Merger.
1.7 EFFECT ON SHARES OF BENEFICIAL INTEREST AND OPTIONS. The Merger
shall have no effect on the shares of beneficial interest, options to purchase
shares of beneficial interest and restricted share awards of EQR. The effect of
the Merger on the shares, options and restricted share awards of Merry Land
shall be solely as provided herein and in the Articles of Merger.
1.8 EXCHANGE RATIO.
(a) The exchange ratio to be set forth in the Articles of
Merger ("Exchange Ratio") shall be 0.53 of a common share of beneficial
interest of EQR, $0.01 par value per share ("EQR Common Shares"), for
each share of Merry Land common stock, without par value ("Merry Land
Common Shares") outstanding immediately prior to the Effective Time.
(b) If, from the date hereof until the Effective Time, EQR (i)
pays a dividend or makes a distribution on the EQR Common Shares in EQR
Common Shares, (ii) subdivides the outstanding EQR Common Shares into a
greater number of EQR Common Shares, or (iii) combines the outstanding
EQR Common Shares into a smaller number of EQR Common Shares, the
Exchange Ratio shall be adjusted to reflect the proportionate change in
the number of outstanding EQR Common Shares.
1.9 ALTERNATIVE STRUCTURE OF MERGER. While it is currently contemplated
that the Merger shall be effectuated through the merger of Merry Land with and
into EQR, upon a determination (a "Determination") that the tax-free nature of
the Merger would not be affected by altering the transaction structure of the
Merger, EQR shall have the option, with the consent of Merry Land, which consent
shall not be unreasonably withheld, to cause the Merger to be effectuated
through an alternative transaction structure (the "Alternative Merger"). The
parties acknowledge and agree that Merry Land may reasonably withhold consent to
any Alternative Merger that would likely cause a delay in the Effective Time and
further agree that the Effective Time shall not be delayed by reason of the
process of seeking a Determination. A Determination shall consist of the receipt
by EQR of a private letter ruling from the Internal Revenue Service ("IRS") or
the publication by the IRS of a revenue ruling or other published announcement
(including the promulgation of a Treasury regulation) to the effect that, and to
which counsel for the parties are reasonably willing to opine that, the
Alternative Merger will not adversely affect the tax-free nature of the Merger.
Upon the election of EQR, pursuant to this Section 1.9, to effectuate the Merger
through the Alternative Merger, the parties shall amend this Agreement, the
Articles of Merger, the Certificate of Merger, and all other agreements as may
be necessary or desirable, including without limitation, amendments providing
for additional parties to be added to such agreements, solely for the purposes
of such effectuation; provided, however, that such amendments shall not modify
the
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economic terms or effects of this Agreement to the shareholders, employees or
directors of Merry Land; and, further provided, that all alternative structures
of the Merger shall be submitted to and approved by the shareholders of EQR and
Merry Land in the manner required by applicable law. Subject to the second
sentence of this Section 1.9, any such amendments may be made before or after
the approval of the Merger by the respective shareholders of EQR and Merry Land.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MERRY LAND
Except as set forth in the letter of even date herewith signed by the
Chairman of the Board or President of Merry Land in his capacity as such and
delivered to EQR prior to the execution hereof (the "Merry Land Disclosure
Letter"), Merry Land represents and warrants to EQR as follows:
2.1 ORGANIZATION, STANDING AND POWER OF MERRY LAND. Merry Land is a
corporation duly organized and validly existing under the laws of Georgia and
has the requisite power and authority to carry on its business as now being
conducted. Merry Land is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of Merry Land and the Merry Land
Subsidiaries (as defined below) taken as a whole (a "Merry Land Material Adverse
Effect"). Schedule 2.1 to the Merry Land Disclosure Letter sets forth each
jurisdiction in which Merry Land is qualified or licensed to do business, as
well as all assumed names under which Merry Land conducts business in such
jurisdictions, excluding those jurisdictions in which the only properties held
by Merry Land are Transferred Properties. Merry Land has previously delivered to
EQR complete and correct copies of its Articles of Incorporation and Bylaws, in
each case, as amended to the date of this Agreement.
2.2 MERRY LAND SUBSIDIARIES.
(a) Schedule 2.2 to the Merry Land Disclosure Letter sets
forth (i) each Subsidiary of Merry Land (excluding those entities designated as
"Excluded Subsidiaries" on such Schedule 2.2, the "Merry Land Subsidiaries"),
(ii) the legal form of each Merry Land Subsidiary, including the state or
country of formation, (iii) the ownership interest therein of Merry Land, if not
wholly-owned by Merry Land, and if not wholly-owned, the identity and ownership
interest of other owners of such Merry Land Subsidiary, and (iv) each apartment
community and/or other real estate properties owned or under contract to be
purchased by each Merry Land Subsidiary, and separately setting forth each
apartment community currently under development, (v) each jurisdiction in which
each Merry Land Subsidiary is qualified or licensed to do business and (vi) each
assumed name
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under which each Merry Land Subsidiary conducts business in any jurisdiction. As
used in this Agreement, "Subsidiary" of any Person means any corporation,
partnership, limited liability company, joint venture or other legal entity
(other than an Excluded Subsidiary) of which such Person (either directly or
through or together with another Subsidiary of such Person) owns any of the
capital stock or other equity interests of such corporation, partnership,
limited liability company, joint venture or other legal entity. As used herein,
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or any
other legal entity.
(b) Except as set forth in Schedule 2.2 to the Merry Land
Disclosure Letter, (i) all the outstanding shares of capital stock of each Merry
Land Subsidiary that is a corporation have been validly issued and are (A) fully
paid and nonassessable, (B) owned by Merry Land or by another Merry Land
Subsidiary, and (C) owned free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), and (ii) all equity interests in each Merry Land
Subsidiary that is a partnership, joint venture, limited liability company or
trust which are owned by Merry Land, by another Merry Land Subsidiary or by
Merry Land and another Merry Land Subsidiary are owned free and clear of all
Liens. Each Merry Land Subsidiary that is a corporation is duly incorporated and
validly existing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted, and each Merry Land Subsidiary that is a partnership, limited
liability company or trust is duly organized and validly existing under the laws
of its jurisdiction of organization and has the requisite power and authority to
carry on its business as now being conducted. Each Merry Land Subsidiary is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a Merry Land Material Adverse
Effect. True and correct copies of the Articles of Incorporation, Bylaws,
partnership agreements, joint venture and operating agreements or similar
organizational documents of each Merry Land Subsidiary, as amended to the date
of this Agreement, have been previously delivered to EQR.
2.3 CAPITAL STRUCTURE.
(a) As of July 2, 1998, the authorized shares of stock of
Merry Land consists of 100,000,000 Merry Land Common Shares, of which 42,976,843
were issued and outstanding, and 20,000,000 shares of preferred stock, without
par value (the "Merry Land Preferred Shares", and, collectively with the Merry
Land Common Shares, the "Merry Land Shares"), including 180,901 shares of $1.75
Series A Cumulative Convertible Preferred Stock ("Merry Land Series A Shares"),
(ii) 4,000,000 shares of $2.205 Series B Cumulative Convertible Preferred Stock
("Merry Land Series B Shares"), (iii) 4,599,400 shares of $2.15 Series C
Cumulative Convertible Preferred Stock ("Merry Land Series C Shares"), (iv)
1,000,000 shares of $4.145 Series D Cumulative Redeemable Preferred Stock
("Merry Land Series D"), and (v) 4,000,000 shares of 7.625% Series E Cumulative
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Redeemable Preferred Stock ("Merry Land Series E Shares"). As of the date
hereof, (i) 180,901 Merry Land Series A Shares, 4,000,000 Merry Land Series B
Shares, 4,599,400 Merry Land Series C, 1,000,000 Merry Land Series D Shares and
4,000,000 Merry Land Series E Shares were issued and outstanding, (ii) Merry
Land Common Shares were reserved for issuance under the Merry Land Dividend
Reinvestment and Stock Purchase Plan (the "Merry Land Dividend Reinvestment
Plan"), (iii) Merry Land Common Shares were reserved for issuance under the
Merry Land Stock Option and Incentive Plan, (iv) Merry Land Common Shares were
reserved for issuance subject to the exchange of 1,316,915.9476 issued and
outstanding Class I Preferred Return DownREIT partnership units ("DownREIT
Units") and 242,082.92 DownREIT Units required to be issued in exchange for
partnership units in the Vinings at Lenox Place, and (v) Merry Land Common
Shares were reserved for issuance upon the conversion of those Merry Land
Preferred Shares which are convertible into Merry Land Common Shares. On the
date hereof, except as set forth in this Section 2.3 or Schedule 2.3 of the
Merry Land Disclosure Letter, no Merry Land Shares or other voting securities of
Merry Land were issued, reserved for issuance or outstanding.
(b) Set forth in Schedule 2.3 of the Merry Land Disclosure
Letter is a true and complete list of the following: (i) each outstanding
qualified or nonqualified option to purchase Merry Land Common Shares granted
under the Merry Land Stock Option and Incentive Plan or otherwise (a "Merry Land
Option") and a total thereof; (ii) each grant of Merry Land Shares to employees
which are subject to any risk of forfeiture ("Restricted Share Grants") and a
total thereof; (iii) any obligation of Merry Land to issue Merry Land Shares as
a result of the transactions contemplated hereby ("Change in Control Share
Grants") and a total thereof; and (iv) each loan made by Merry Land with respect
to the purchase of Merry Land Shares, including, without limitation, loans made
pursuant to Merry Land's Stock Loan Program, and indicating those loans which
will be forgiven, in whole or in part, as a result of the transactions
contemplated by this Agreement (the "Share Loan and Acquisition Agreements") and
totals thereof, and (v) all Merry Land Common Shares held by the trust
established pursuant to Merry Land's Employee Stock Ownership Plan (the "ESOP").
The Restricted Share Grants are included in the number of outstanding Merry Land
Shares set forth in Section 2.3(a). For each Merry Land Option held by the
executive officers of Merry Land, Schedule 2.3 of the Merry Land Disclosure
Letter sets forth the name of the grantee, the date of the grant, status of the
option as qualified or nonqualified under Section 422 of the Code, the number of
Merry Land Shares subject to such option, the number of shares subject to
options that are currently exercisable, the exercise price per share, those
options granting reload options, and the number of such shares subject to share
appreciation rights. For each Merry Land Option held by employees of Merry Land
or any of the Merry Land Subsidiaries who are not executive officers of Merry
Land, Schedule 2.3 to the Merry Land Disclosure Letter sets forth the name of
the grantee, the date of the grant, the number of Merry Land Shares subject to
such option and the exercise price per share. For each Restricted Share Grant,
Schedule 2.3 of the Merry Land Disclosure Letter sets forth the name of the
grantee, the date of the grant and the number of Merry Land Shares granted. For
each Change in Control Share Grant, Schedule 2.3 to the Merry Land Disclosure
Letter sets forth the aggregate number of Merry Land Shares to be issued
immediately prior to the Spin-Off and the Merger. For each Share Loan and
Acquisition Agreement, Schedule 2.3 of the Merry Land
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Disclosure Letter sets forth the name of the borrower, the date of the loan, the
aggregate principal amount of the loan, the number of shares originally pledged
as security for each loan, the number of shares that have been released from
such pledge and the outstanding loan balance as of the date of the Merry Land
Disclosure Letter. On the date of this Agreement, except as set forth in this
Section 2.3 or Schedule 2.3 of the Merry Land Disclosure Letter, no Merry Land
Shares or other voting securities of Merry Land were issued, reserved for
issuance, or outstanding.
(c) All outstanding Merry Land Shares are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no bonds, debentures, notes or other indebtedness of Merry
Land, or assets of any other entities exchangeable into Merry Land Shares having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which shareholders of Merry Land may vote.
(d) Except as set forth in this Section 2.3 or in Schedule 2.3
of the Merry Land Disclosure Letter, as of the date of this Agreement there are
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Merry Land or any
Merry Land Subsidiary is a party or by which such entity is bound, obligating
Merry Land or any Merry Land Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of Merry Land or any Merry Land
Subsidiary or obligating Merry Land or any Merry Land Subsidiary to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking.
(e) All dividends or distributions on Merry Land Shares which
have been authorized or declared prior to the date of this Agreement have been
paid in full.
(f) Since their original dates of issuance, there have been no
adjustments or changes to the conversion prices of the Merry Land Series A, B or
C Shares.
2.4 OTHER INTERESTS. Except as set forth in Schedule 2.2 or 2.4 of the
Merry Land Disclosure Letter, neither Merry Land nor any Merry Land Subsidiary
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, limited liability company, joint venture,
business trust or entity (other than investments in short-term investment
securities). With respect to such interests, Merry Land and each such Merry Land
Subsidiary is a partner, member or stockholder in good standing, and owns such
interests free and clear of all liens, pledges, security interests, claims,
options or other encumbrances. Neither Merry Land nor any of the Merry Land
Subsidiaries is in breach in any material respect of any provision of any
agreement, document or contract governing its rights in or to the interests
owned or held by it, all of which agreements, documents and contracts are (a)
set forth on the Merry Land Disclosure Letter, (b) unmodified except as
described therein and (c) in full force and effect. To the Knowledge of Merry
Land (as defined in Section 2.26), the other parties to such agreements,
documents or
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contracts are not in any material breach of any of their respective obligations
under such agreements, documents or contracts, nor has Merry Land received any
notice of any such material breach.
2.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Merry Land has the requisite power and authority to enter
into this Agreement and, subject to the affirmative vote of at least a majority
of the outstanding Merry Land Common Shares entitled to vote thereon to approve
the Merger (the "Merry Land Shareholder Approvals"), to consummate the
transactions contemplated by this Agreement to which Merry Land or any Merry
Land Subsidiary is a party. The execution and delivery of this Agreement by
Merry Land or any Merry Land Subsidiary and the consummation by Merry Land of
the transactions contemplated by this Agreement to which Merry Land or any Merry
Land Subsidiary is a party have been duly authorized by all necessary action on
the part of Merry Land or such Merry Land Subsidiary, subject to the Merry Land
Shareholder Approvals. This Agreement has been duly executed and delivered by
Merry Land and constitutes a valid and binding obligation of Merry Land,
enforceable against Merry Land in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(b) Except as set forth in Schedule 2.5 to the Merry Land
Disclosure Letter, the execution and delivery of this Agreement by Merry Land do
not, and the consummation of the transactions contemplated by this Agreement to
which Merry Land or any Merry Land Subsidiary is a party and compliance by Merry
Land with the provisions of this Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of Merry Land or any
Merry Land Subsidiary under, (i) the Articles of Incorporation or the Bylaws of
Merry Land or the comparable charter or organizational documents or partnership
or similar agreement (as the case may be) of any Merry Land Subsidiary, in each
case as amended or supplemented to the date of this Agreement, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Merry Land or any Merry Land Subsidiary or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to Merry Land or any Merry Land Subsidiary, or their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such
conflicts, violations, defaults, rights, loss or Liens that individually or in
the aggregate would not (x) have a Merry Land Material Adverse Effect or (y)
prevent the consummation of the transactions contemplated by this Agreement.
Except as set forth on Schedule 2.5 to the Merry Land Disclosure Letter, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
Merry Land or any Merry Land Subsidiary in connection with the execution and
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delivery of this Agreement by Merry Land or the consummation by Merry Land of
the transactions contemplated by this Agreement, except for (i) the filing with
the Securities and Exchange Commission (the "SEC") of (x) a joint proxy
statement relating to the approval by Merry Land's shareholders and EQR's
shareholders of the transactions contemplated by this Agreement (as amended or
supplemented from time to time, the "Proxy Statement"), (y) registration
statements on appropriate forms under the Securities Act of 1933, as amended
(the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and (z) such reports under Section 13(a) of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (ii) the filing of listing applications with the
New York Stock Exchange Inc. ("NYSE") with respect to the shares of beneficial
interest of the Surviving Trust to be issued in the Merger, (iii) the filing of
the Articles of Merger with the Department, (iv) the filing of the Certificate
of Merger with the Secretary of State, and (v) such other consents, approvals,
orders, authorizations, registrations, declarations and filings (A) as are set
forth in Schedule 2.5 to the Merry Land Disclosure Letter, (B) as may be
required under (y) federal, state or local environmental laws, or (z) the "blue
sky" laws of various states, to the extent applicable, or (C) which, if not
obtained or made, would not prevent or delay in any material respect the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent Merry Land or any Merry Land Subsidiary from performing its
obligations under this Agreement in any material respect or have, individually
or in the aggregate, a Merry Land Material Adverse Effect.
(c) Merry Land is making no representation or warranty in this
Section 2.5 with respect to any matters or approvals required for any
Alternative Merger.
(d) For purposes of determining compliance with the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"Xxxx-Xxxxx Act"), Merry Land confirms that, with the exception of the
Transferred Properties, the only real property owned by Merry Land consists of
office and residential properties and unproductive real property, as such terms
are used in the Xxxx-Xxxxx Act.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Merry
Land has filed all required reports, schedules, forms, statements and other
documents with the SEC since January 1, 1992 through the date hereof (the "Merry
Land SEC Documents"). Schedule 2.6 of the Merry Land Disclosure Letter contains
a complete list of all Merry Land SEC Documents filed by Merry Land with the SEC
since January 1, 1992 and on or prior to the date of this Agreement. All of the
Merry Land SEC Documents (other than preliminary material), as of their
respective filing dates, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and, in each case, the
rules and regulations promulgated thereunder applicable to such Merry Land SEC
Documents. None of the Merry Land SEC Documents at the time of filing contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent such statements have been
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modified or superseded by later Merry Land SEC Documents filed and publicly
available prior to the date of this Agreement. The consolidated financial
statements of Merry Land included in the Merry Land SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of Merry Land and the Merry Land Subsidiaries, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Merry Land has no Merry Land Subsidiaries which are not
consolidated for accounting purposes. Except for liabilities and obligations set
forth in the Merry Land SEC Documents or in Schedule 2.6 to the Merry Land
Disclosure Letter, neither Merry Land nor any of the Merry Land Subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Merry Land or in the notes thereto and which, individually or
in the aggregate, would have a Merry Land Material Adverse Effect. On the date
of this Agreement, Spinco has no material assets or liabilities.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Merry Land SEC Documents or Schedule 2.7 to the Merry Land Disclosure Letter,
since the date of the most recent audited financial statements included in the
Merry Land SEC Documents (the "Merry Land Financial Statement Date") Merry Land
and the Merry Land Subsidiaries have conducted their business only in the
ordinary course (taking into account prior practices, including the acquisition
of properties and issuance of securities) and there has not been (a) any
material adverse change in the business, financial condition or results of
operations of Merry Land and the Merry Land Subsidiaries taken as a whole (a
"Merry Land Material Adverse Change"), nor has there been any occurrence or
circumstance that with the passage of time would reasonably be expected to
result in a Merry Land Material Adverse Change, (b) except for regular quarterly
distributions (in the case of Merry Land) not in excess of $0.41 per Merry Land
Common Share and per Class I Preferred Return Unit of Merry Land DownREIT
$0.4375 per share of Merry Land Series A, $0.5513 per share of Merry Land Series
B, $0.5375 per share of Merry Land Series C, $1.0363 per share of Merry Land
Series D and $0.4765 per share of Merry Land Series E in each case with
customary record and payment dates, any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any Merry Land Shares, (c) any split, combination or reclassification
of any of Merry Land Shares or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for, or
giving the right to acquire by exchange or exercise, shares of its beneficial
interest or any issuance of an ownership interest in, any Merry Land Subsidiary
except as contemplated by this Agreement, (d) any damage, destruction or loss,
whether or not covered by insurance, that has or would have a Merry Land
Material Adverse Effect, or (e) any change made prior to the date of this
Agreement in accounting
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methods, principles or practices by Merry Land or any Merry Land Subsidiary
materially affecting its assets, liabilities or business, except insofar as may
have been disclosed in Merry Land SEC Documents or required by a change in GAAP
or (f) any amendment of any employment, consulting, severance, retention or any
other agreement between Merry Land and any officer or trustee of Merry Land.
There are no distributions in arrears which have been scheduled for payment or
unpaid distributions with respect to the Merry Land Preferred Shares.
2.8 LITIGATION. Except as disclosed in the Merry Land SEC Documents,
Schedule 2.8 or Schedule 2.9 to the Merry Land Disclosure Letter, and other than
personal injury and other routine tort litigation arising from the ordinary
course of operations of Merry Land and the Merry Land Subsidiaries (a) which are
covered by adequate insurance or (b) for which all material costs and
liabilities arising therefrom are reimbursable pursuant to common area
maintenance or similar agreements, there is no suit, action or proceeding
pending or, to the Knowledge of Merry Land, threatened against or affecting
Merry Land or any Merry Land Subsidiary that, individually or in the aggregate,
could reasonably be expected to (i) have a Merry Land Material Adverse Effect or
(ii) prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Merry Land or any Merry
Land Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Notwithstanding the foregoing, (y) Schedule
2.8 to the Merry Land Disclosure Letter sets forth each and every (i) uninsured
claim involving a potential dollar cost to Merry Land in excess of $250,000,
(ii) equal employment opportunity claim and (iii) claim relating to sexual
harassment and/or discrimination pending or, to the Knowledge of Merry Land,
threatened as of the date hereof, in each case with a brief summary of such
claim or threatened claim and (z) no claim is pending or has been made within
the last five (5) years under any directors' or officers' liability insurance
policy maintained at any time by Merry Land or any of the Merry Land
Subsidiaries.
2.9 PROPERTIES.
(a) Schedule 2.9 to the Merry Land Disclosure Letter
identifies all real property owned or leased by Merry Land and the Merry Land
Subsidiaries (the "Merry Land Properties"). Except as provided in Schedule 2.9
of the Merry Land Disclosure Letter, Merry Land or the Merry Land Subsidiary set
forth on Schedule 2.2 of the Merry Land Disclosure Letter owns fee simple title
to each of the Merry Land Properties, which are all of the real estate
properties owned by them (other than Transferred Properties). All such
properties are owned in each case free and clear of liens, mortgages or deeds of
trust, claims against title, charges which are liens, security interests or
other encumbrances on title ("Encumbrances") (except as provided below). Except
as set forth in Schedule 2.2, Schedule 2.18 or Schedule 2.9 of the Merry Land
Disclosure Letter, no other Person has any ownership interest in any of the
Merry Land Properties, and any such ownership interest so scheduled does not
materially detract from the value of, or materially interfere with the present
use of, any of the Merry Land Properties subject thereto or affected thereby.
The Merry Land Properties are not subject to any rights of way, written
agreements, laws, ordinances and regulations affecting
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building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") or other Encumbrances, except for (i)
Encumbrances and Property Restrictions set forth in the Merry Land Disclosure
Letter, (ii) Property Restrictions imposed or promulgated by law or any
governmental body or authority with respect to real property, including zoning
regulations, provided they do not materially adversely affect the current use of
any Merry Land Property, (iii) Encumbrances and Property Restrictions disclosed
on existing title reports or existing surveys (in either case copies of which
title reports and surveys have been delivered or made available to EQR and
listed in the Merry Land Disclosure Letter), which Encumbrances and Property
Restrictions, in any event, do not materially detract from the value of, or
materially interfere with the present use of, any of the Merry Land Properties
subject thereto or affected thereby (provided that Merry Land specifically
represents and warrants that any Encumbrances identified on any existing title
report as securing any Indebtedness, other than the Indebtedness identified on
Schedule 2.18 of the Merry Land Disclosure Letter, has been released of record
since the date of the title report in question) and (iv) mechanics', carriers',
workmen's, repairmen's liens, other Encumbrances and Property Restrictions, if
any, which, individually or in the aggregate, do not materially detract from the
value of or materially interfere with the present use of any of the Merry Land
Properties subject thereto or affected thereby, and do not otherwise materially
impair business operations conducted by Merry Land and the Merry Land
Subsidiaries. Except as provided in Schedule 2.9 of the Merry Land Disclosure
Letter, no portion of any of the Merry Land Properties is located in a flood
zone area "V". Schedule 2.9 lists each of the Merry Land Properties which are
under development as of the date of this Agreement and describes the status of
such development as of the date hereof.
(b) Except as provided in Schedule 2.9 to the Merry Land
Disclosure Letter, valid policies of title insurance (each a "Merry Land Title
Insurance Policy") have been issued insuring Merry Land's or the applicable
Merry Land Subsidiary's fee simple title to the Merry Land Properties in amounts
at least equal to the purchase price thereof paid by Merry Land therefor,
subject only to the matters disclosed above and on the Merry Land Disclosure
Letter, and such policies are, at the date hereof, in full force and effect and
no claim has been made against any such policy. A true and correct copy of each
Merry Land Title Insurance Policy has been previously delivered to EQR.
(c) Except as provided in Schedule 2.9 to the Merry Land
Disclosure Letter or in Merry Land's capital budget attached to the Merry Land
Disclosure Letter (the "Merry Land Capital Budget"), Merry Land has no Knowledge
(as defined in Section 2.26) (i) that, any certificate, permit or license from
any governmental authority having jurisdiction over any of the Merry Land
Properties or any agreement, easement or other right which is necessary to
permit the lawful use and operation of the buildings and improvements on any of
the Merry Land Properties or which is necessary to permit the lawful use and
operation of all driveways, roads and other means of egress and ingress to and
from any of the Merry Land Properties has not been obtained and is not in full
force and effect, or of any pending threat of modification or cancellation of
any of same; (ii) of any written notice of any violation of any federal, state
or municipal law, ordinance, order, regulation or requirement materially and
adversely affecting any of the Merry Land Properties issued by any governmental
authority; (iii) of any material structural defects relating to any Merry Land
Property
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which costs more than $100,000 to repair; (iv) of any Merry Land Property whose
building systems are not in working order in any material respect and costs more
than $100,000 to repair; (v) of any physical damage to any Merry Land Property
in excess of $100,000 for which there is no insurance in effect covering the
cost of the restoration; (vi) of any current renovation or uninsured restoration
to any Merry Land Property the cost of which exceeds $250,000; or (vii) of items
referred to in Section 2.9(c)(iii)-(vi) which aggregate for Merry Land and the
Merry Land Subsidiaries more than $7,500,000.
(d) Except as set forth in Schedule 2.9 to the Merry Land
Disclosure Letter, neither Merry Land nor any of the Merry Land Subsidiaries has
received any written notice to the effect that (i) any condemnation or rezoning
proceedings are pending or threatened with respect to any of the Merry Land
Properties or (ii) any zoning, building or similar law, code, ordinance, order
or regulation is or will be violated in any material respect for any property by
the continued maintenance, operation or use of any buildings or other
improvements on any of the Merry Land Properties or by the continued
maintenance, operation or use of the parking areas.
(e) Except as set forth in Schedule 2.9 to the Merry Land
Disclosure Letter, all of the Merry Land Properties are managed by Merry Land or
a wholly-owned Merry Land Subsidiary.
(f) The Rent Roll for the Merry Land Properties as of June 1,
1998 has been previously delivered or made available to EQR, and is complete and
correct in all material respects as of the date thereof.
(g) Except as set forth in Schedule 2.9 to the Merry Land
Disclosure Letter, all work required to be performed, payments required to be
made and actions required to be taken prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to any
Merry Land Properties (e.g., local improvement district, road improvement
district, environmental mitigation) have been performed, paid or taken, as the
case may be, other than those where, individually or in the aggregate with any
other condition or omission resulting in a breach of the representations and
warranties set forth in this Section 2.9, the failure would not have a Merry
Land Material Adverse Effect, and Merry Land has no Knowledge of any material
work, payments or actions that are required after the date hereof pursuant to
such agreements, except as set forth in development or operating budgets for
such Merry Land Properties delivered to EQR prior to the date hereof.
(h) Merry Land and each of the Merry Land Subsidiaries have
good and sufficient title to all their personal and non-real properties and
assets reflected in their books and records as being owned by them (including
those reflected in the consolidated balance sheet of Merry Land as of December
31, 1997, except as since sold or otherwise disposed of in the ordinary course
of business), free and clear of all liens and encumbrances, except such
Encumbrances reflected on
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Schedule 2.18 or Schedule 2.9 to the Merry Land Disclosure Schedule or on the
consolidated balance sheet of Merry Land as of December 31, 1997, and the notes
thereto, and except for liens for current taxes not yet due and payable, and
liens or encumbrances which are normal to the business of Merry Land and the
Merry Land Subsidiaries and are not, in the aggregate, material in relation to
the assets of Merry Land on a consolidated basis and except also for such
imperfections of title, easement and encumbrances, if any, as do not materially
interfere with the present use of the properties subject thereto or affected
thereby, or otherwise materially impair the consolidated business operations of
Merry Land.
(i) Except as set forth in Schedule 2.9 to the Merry Land
Disclosure Letter, no Merry Land Property is currently under development or
subject to any agreement with respect to development, and neither Merry Land nor
any Merry Land Subsidiary shall enter into any such agreements between the date
hereof and the Effective Time without the prior written approval of EQR.
2.10 ENVIRONMENTAL MATTERS. Merry Land has delivered to EQR a true and
complete copy of the environmental reports listed on Schedule 2.10 of the Merry
Land Disclosure Letter (the "Merry Land Environmental Reports"). To Merry Land's
Knowledge, the Merry Land Environmental Reports constitute all final
environmental reports (including, without limitation, all final versions of
environmental investigations and testing or analysis made by or on behalf of
Merry Land or any of the Merry Land Subsidiaries) with respect to the Merry Land
Properties in the possession of Merry Land or any Merry Land Subsidiary. With
respect to each Merry Land Property, since the day of the most recent
Environmental Report relating to such Merry Land Property, except for any
condition that individually or in the aggregate would not be reasonably likely
to have a Merry Land Material Adverse Effect, (a) no Hazardous Substances (as
defined below) have been used, stored, manufactured, treated, processed or
transported to or from any such Merry Land Property except as necessary to the
conduct of business and in compliance with Environmental Laws (as defined
below); (b) there have been no spills, releases, discharges or disposal of
Hazardous Substances to have occurred or be presently occurring on or from such
Merry Land Property; (c) such Merry Land Property and the business conducted
thereon are not in violation of Environmental Laws; (d) Merry Land and the Merry
Land Subsidiaries have not received and do not reasonably expect to receive any
notice of potential responsibility, letter of inquiry or notice of alleged
liability from any Person regarding such Merry Land Property or the business
conducted thereon. For the purposes of this Paragraph 2.10 only, "Merry Land
Properties" shall be deemed to include all property formerly owned, operated or
leased by Merry Land or the Merry Land Subsidiaries; solely, however, as to the
period of time when such property was so owned, operated, or leased by Merry
Land or the Merry Land Subsidiaries.
"Environmental Laws" shall mean any applicable statute, code,
enactment, ordinance, rule, regulation, permit, consent, approval,
authorization, judgment, order, common law rule (including without limitation
the common law respecting nuisance and tortious liability), decree, injunction,
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or other requirement having the force and effect of law, whether local, county,
state, territorial or national, at any time in force or effect relating to:
(a) emissions, discharges, spills, releases or threatened
releases of Hazardous Substances into ambient air, surface water, groundwater,
watercourses, publicly or privately owned treatment works, drains, sewer
systems, wetlands, septic systems or onto land;
(b) the use, treatment, storage, disposal, handling,
manufacturing, transportation or shipment of Hazardous Substances;
(c) the regulation of storage tanks; or
(d) otherwise relating to pollution or the protection of human
health or the environment.
"Hazardous Substances" shall mean all substances, wastes, pollutants,
contaminants and materials regulated or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic pursuant to any law, by
any local, county, state, territorial or federal governmental authority, or with
respect to which such a governmental authority otherwise requires environmental
investigation, monitoring, reporting, or remediation; including, but not limited
to,
(a) all substances, wastes, pollutants, contaminants and
materials regulated, or defined or designated as hazardous, extremely or
imminently hazardous, dangerous or toxic, under the following federal statutes
and their state counterparts, as well as their statutes' implementing
regulations: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. section 9601 et. seq., the Resource Conservation and
Recovery Act, 42 U.S.C. section 6901 et. seq., the Toxic Substances Control Act,
15 U.S.C. section 2601 et. seq., the Clean Water Act, 33 U.S.C. section 1251 et.
seq., the Clean Air Act, 42 U.S.C. section 7401 et. seq., the Emergency Planning
and Community Right to Know Act, 42 U.S.C. section 11011 et. seq., the Safe
Drinking Water Act, 33 U.S.C. section 300f et. seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. section 136 et. seq., the Atomic Energy
Act, 42 U.S.C. section 22011 et. seq., and the Hazardous Materials
Transportation Act, 42 U.S.C. section 1801 et. seq.;
(b) petroleum and petroleum products including crude oil and
any fractions thereof;
(c) natural gas, synthetic gas, and any mixtures thereof; and
(d) radon, radioactive substances, asbestos, urea
formaldehyde, polychlorinated biphenyls and electromagnetic field radiation.
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2.11 RELATED PARTY TRANSACTIONS. Set forth in Schedule 2.11 to the
Merry Land Disclosure Letter is a list of all arrangements, agreements and
contracts entered into by Merry Land or any of the Merry Land Subsidiaries under
which continuing obligations exist with (a) any consultant, (b) any person who
is an officer, trustee, director or Affiliate (as defined below) of Merry Land
or any of the Merry Land Subsidiaries, any member of the "immediate family" (as
such term is defined in Item 404 of Regulation S-K promulgated under the
Securities Act) of any of the foregoing or any entity of which any of the
foregoing is an Affiliate or (c) any person who acquired Merry Land Shares in a
private placement within the preceding three years, except those of a type
available to Merry Land employees generally. Such documents, copies of all of
which have previously been delivered or made available to EQR, are listed in
Schedule 2.11 to the Merry Land Disclosure Letter. As used in this Agreement,
the term "Affiliate" shall have the same meaning as such term is defined in Rule
405 promulgated under the Securities Act.
2.12 EMPLOYEE BENEFITS. As used herein, the term "Employee Plan"
includes any pension, retirement, savings, disability, medical, dental, health,
life, death benefit, group insurance, profit sharing, deferred compensation,
stock option, stock loan, bonus, incentive, vacation pay, tuition reimbursement,
severance pay, or other employee benefit plan, trust, agreement, contract,
arrangement, policy or commitment (including, without limitation, any pension
plan, as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended and the rules and regulations promulgated thereunder
("ERISA") ("Pension Plan"), and any welfare plan as defined in Section 3(1) of
ERISA ("Welfare Plan")), whether any of the foregoing is funded, insured or
self-funded, written or oral, (i) sponsored or maintained by Merry Land or Merry
Land Subsidiaries (each a "Controlled Group Member") and covering any Controlled
Group Member's active or former employees (or their beneficiaries), (ii) to
which any Controlled Group Member is a party or by which any Controlled Group
Member (or any of the rights, properties or assets thereof) is bound or (iii)
with respect to which any current Controlled Group Member may otherwise have any
material liability (whether or not such Controlled Group Member still maintains
such Employee Plan). Each Employee Plan is listed on Schedule 2.12. With respect
to the Employee Plans:
(a) Except as disclosed in the Merry Land SEC Documents or in
Schedule 2.12 to the Merry Land Disclosure Letter, no Controlled Group
Member has any continuing liability under any Welfare Plan which
provides for continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's termination of
employment, except as may be required by section 4980B of the Code or
Section 601 (et seq.) of ERISA, or under any applicable state law, and
at the expense of the participant or the beneficiary of the
participant.
(b) Each Employee Plan complies in all material respects with
the applicable requirements of ERISA and any other applicable law
governing such Employee Plan, and each Employee Plan has at all times
been properly administered in all material respects in accordance with
all such requirements of law, and in accordance with its terms and the
terms of any applicable collective bargaining agreement to the extent
consistent with all such
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requirements of law. Each Pension Plan which is intended to be
qualified is qualified under Section 401(a) of the Code, has received a
favorable determination letter from the IRS stating that such Plan
meets the requirements of Section 401(a) of the Code and that the trust
associated with such Plan is tax exempt under Section 501(a) of the
Code and no event has occurred which would jeopardize the qualified
status of any such plan or the tax exempt status of any such trust
under Sections 401(a) and Section 501(a) of the Code, respectively. No
lawsuits, claims (other than routine claims for benefits) or complaints
to, or by, any person or governmental entity have been filed or are
pending, Merry Land has received no notice of such a lawsuit, claim or
complaint and, to the Knowledge of Merry Land, there is no fact or
contemplated event which would be expected to give rise to any such
lawsuit, claim (other than routine claims for benefits) or complaint
with respect to any Employee Plan. Without limiting the foregoing, the
following are true with respect to each Employee Plan:
(i) all Controlled Group Members have filed or caused
to be filed every material return, report, statement, notice,
declaration and other document required by any law or
governmental agency, federal, state and local (including,
without limitation, the IRS and the Department of Labor) with
respect to each such Employee Plan, each of such filings has
been complete and accurate in all material respects and no
Controlled Group Member has incurred any material liability in
connection with such filings;
(ii) all Controlled Group Members have delivered or
caused to be delivered to every participant, beneficiary and
other party entitled to such material, all material plan
descriptions, returns, reports, schedules, notices, statements
and similar materials, including, without limitation, summary
plan descriptions and summary annual reports, as are required
under Title I of ERISA, the Code, or both, and no Controlled
Group Member has incurred any material liability in connection
with such deliveries;
(iii) all contributions and payments with respect to
Employee Plans that are required to be made by a Controlled
Group Member with respect to periods ending on or before the
Closing Date (including periods from the first day of the
current plan or policy year to the Closing Date) have been, or
will be, made or accrued before the Closing Date in accordance
with the appropriate plan document, actuarial report,
collective bargaining agreements or insurance contracts or
arrangements or as otherwise required by ERISA or the Code;
(iv) with respect to each such Employee Plan, to the
extent applicable, Merry Land has delivered to EQR true and
complete copies of (A) plan documents, or any and all other
documents that establish the
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existence of the plan, trust, arrangement, contract, policy or
commitment and all amendments thereto, (B) the most recent
determination letter, if any, received from the IRS, (C) the
three most recent Form 5500 Annual Report (and all schedules
and reports relating thereto) and actuarial reports and (D)
all related trust agreements, insurance contract or other
funding agreements that implement each such Employee Plan.
(c) With respect to each Employee Plan, there has not
occurred, and no person or entity is contractually bound to enter into,
any "prohibited transaction" within the meaning of Section 4975(c) of
the Code or Section 406 of ERISA, which transaction is not exempt under
Section 4975(d) of the Code or Section 408 of ERISA.
(d) Except as disclosed in Schedule 2.12A, no Controlled Group
Member has maintained or been obligated to contribute to any Employee
Plan subject to Code Section 412 or Title IV of ERISA. With respect to
each Employee Plan set forth on Schedule 2.12A, Merry Land represents
that each such Employee Plan has been completely terminated in
accordance with all Code and ERISA requirements for a "standard
termination" (as defined in 4041(b) of ERISA), as applicable on the
termination date.
(e) With respect to each pension plan maintained by any
Controlled Group Member, such Plans provide the Plan Sponsor the
authority to amend or terminate the plan at any time, subject to
applicable requirements of ERISA and the Code.
2.13 EMPLOYEE MATTERS. Schedule 2.13 of the Merry Land Disclosure
Letter lists the employee handbooks of Merry Land and each of the Merry Land
Subsidiaries currently in effect. A copy of each such employee handbook has
previously been made available to EQR. Except as set forth in Schedule 2.13 of
the Merry Land Disclosure Letter, such handbooks fairly and accurately summarize
all material employee policies, vacation policies and payroll practices of Merry
Land and the Merry Land Subsidiaries. Neither Merry Land nor any of the Merry
Land Subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
other labor organization, nor has Merry Land or any of the Merry Land
Subsidiaries agreed that any unit of their employees is appropriate for
collective bargaining. No union or other labor organization has been certified
as bargaining representative for any of Merry Land's employees. To the Knowledge
of Merry Land there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened involving
employees of Merry Land or any of the Merry Land Subsidiaries.
2.14 TAXES.
(a) Each of Merry Land and the Merry Land Subsidiaries has
filed all tax returns and reports required to be filed by it (after giving
effect to any filing extension properly granted by a Governmental Entity having
authority to do so) and has paid (or Merry Land has paid on its behalf)
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all Taxes (as defined below) shown or reflected on such returns and reports as
required to be paid by it except (i) as set forth in Schedule 2.14 to the Merry
Land Disclosure Letter, or (ii) real estate taxes that are being contested in
good faith by appropriate proceedings and for which Merry Land or the applicable
Merry Land Subsidiary shall have set aside on its books adequate reserves. The
most recent audited financial statements contained in the Merry Land SEC
Documents reflect an adequate reserve for all material Taxes payable or accrued
by Merry Land and the Merry Land Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. Since the Merry
Land Financial Statement Date, Merry Land has incurred no liability for taxes
under Sections 857(b), 860(c) or 4981 of the Code, including, without
limitation, any tax arising from a prohibited transaction described in Section
857(b)(6) of the Code, and neither Merry Land nor any Merry Land Subsidiary has
incurred any liability for taxes other than in the ordinary course of business.
Neither the consummation of the Spin-Off by Merry Land nor the consummation of
the Purchase and Sale Agreement by and between EQR and Spinco will cause Merry
Land or any Merry Land Subsidiary or EQR or any EQR Subsidiary to incur any
liability under Section 857(b)(6) of the Code. No event has occurred, and no
condition or circumstance exists, which presents a material risk that any
material Tax described in the preceding sentence will be imposed upon Merry
Land. No deficiencies for any Taxes have been proposed, asserted or assessed
pursuant to a "30-day letter" or notice of deficiency sent by the IRS, or, to
the Knowledge of Merry Land, otherwise proposed, asserted or assessed against
Merry Land or any of the Merry Land Subsidiaries. No waivers of the time to
assess any such Taxes have been executed by Merry Land or any Merry Land
Subsidiary and, to the Knowledge of Merry Land, no requests for such waivers are
pending. As used in this Agreement, "Taxes" shall include all federal, state,
local and foreign income, property, sales, franchise, employment, excise and
other taxes, tariffs or governmental charges of any nature whatsoever, together
with penalties, interest or additions to Tax with respect thereto.
(b) Merry Land (i) for all taxable years commencing with
January 1, 1987 through December 31, 1997, has been subject to taxation as a
real estate investment trust (a "REIT") within the meaning of Section 856 of the
Code and has satisfied all requirements to qualify as a REIT for such years,
(ii) has operated, and intends to continue to operate, in such a manner as to
qualify as a REIT for the taxable year ending December 31, 1998, and thereafter
until the Effective Time and (iii) has not taken or omitted to take any action
which would reasonably be expected to (A) result in any rents paid by the
tenants of the Properties to be excluded from the definition of "rents from real
property" under Section 856(d)(2)(C) of the Code, or (B) otherwise result in a
challenge to its status as a REIT, and no such challenge is pending or, to Merry
Land's Knowledge, threatened. Each Merry Land Subsidiary which is a partnership,
joint venture or limited liability company (i) has been since its formation and
continues to be treated for federal income tax purposes as a partnership and not
as a corporation or an association taxable as a corporation or ignored as a
separate entity, as the case may be, and (ii) has not since its formation owned
any assets (including, without limitation, securities) that would cause Merry
Land to violate Section 856(c)(4) of the Code. Except for ML Services, Inc.,
each Merry Land Subsidiary which is a corporation or treated as an association
taxable as a corporation has been since its formation a qualified REIT
subsidiary under Section 856(i) of the Code.
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2.15 NO PAYMENTS TO EMPLOYEES, OFFICERS, TRUSTEES OR DIRECTORS. Set
forth in Schedule 2.3 and Schedule 2.15 of the Merry Land Disclosure Letter is a
true and complete list of all cash and non-cash payments, rights to property or
other contract rights which will become payable, accelerated or vested to or in
each employee, officer, trustee or director of Merry Land or any Merry Land
Subsidiary as a result of the Spin-Off and Merger. Except as described in
Schedule 2.3 and Schedule 2.15 to the Merry Land Disclosure Letter, or as
otherwise provided for in this Agreement, there is no employment or severance
contract, or other agreement requiring payments, cancellation of indebtedness or
other obligation to be made on a change of control or otherwise as a result of
the consummation of any of the transactions contemplated by this Agreement, with
respect to any employee, officer, trustee or director of Merry Land or any Merry
Land Subsidiary.
2.16 BROKERS; SCHEDULE OF FEES AND EXPENSES. Except as disclosed in
Schedule 2.16 to the Merry Land Disclosure Letter, no broker, investment banker,
financial advisor or other person, other than Xxxxxx Xxxxxxx & Co. Incorporated,
the fees and expenses of which have previously been disclosed to EQR, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Merry Land or any Merry Land Subsidiary.
2.17 COMPLIANCE WITH LAWS. Except as disclosed in the Merry Land SEC
Documents or in Schedule 2.6 to the Merry Land Disclosure Letter, neither Merry
Land nor any of the Merry Land Subsidiaries has violated or failed to comply
with any statute, law, ordinance, regulation, rule, judgment, decree or order of
any Governmental Entity applicable to its business, properties or operations,
except to the extent that such violation or failure would not have a Merry Land
Material Adverse Effect.
2.18 CONTRACTS; DEBT INSTRUMENTS.
(a) To the Knowledge of Merry Land, except as disclosed in the
Merry Land SEC Documents or in Schedule 2.18 to the Merry Land Disclosure
Letter, there is no contract or agreement that purports to limit in any material
respect the names or the geographic location in which Merry Land or any Merry
Land Subsidiary may conduct its business. Neither Merry Land nor any Merry Land
Subsidiary has received a written notice that Merry Land or any Merry Land
Subsidiary is in violation of or in default under (nor to the Knowledge of Merry
Land does there exist any condition which upon the passage of time or the giving
of notice or both would cause such a violation of or default under) any material
loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, except as set forth in Schedule 2.18 to the
Merry Land Disclosure Letter, nor to the Knowledge of Merry Land does such a
violation or default exist, except to the extent that such violation or default,
individually or in the aggregate, would not have a Merry Land Material Adverse
Effect.
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(b) Except for any of the following expressly identified in
Merry Land SEC Documents, Schedule 2.18 to the Merry Land Disclosure Letter sets
forth a list of each loan or credit agreement, note, bond, mortgage, indenture
and any other agreement and instrument pursuant to which any Indebtedness of
Merry Land or any Merry Land Subsidiary, other than Indebtedness payable to
Merry Land or a Merry Land Subsidiary is outstanding or may be incurred
(collectively, the "Debt Documents"), as well as the amount outstanding under
each Debt Document as of June 30, 1998. For purposes of this Section 2.18,
"Indebtedness" shall mean, to the extent any such item exceeds $50,000, (i)
indebtedness for borrowed money, whether secured or unsecured, (ii) obligations
under conditional sale or other title retention agreements relating to property
purchased by such person, (iii) capitalized lease obligations, (iv) obligations
under interest rate cap, swap, collar or similar transaction or currency hedging
transactions (valued at the termination value thereof) and (v) guarantees of any
such indebtedness of any other person.
(c) To the extent not set forth in response to the
requirements of Section 2.18(b), Schedule 2.18 to the Merry Land Disclosure
Letter sets forth each interest rate cap, interest rate collar, interest rate
swap, currency hedging transaction, and any other agreement relating to a
similar transaction to which Merry Land or any Merry Land Subsidiary is a party
or an obligor with respect thereto.
(d) Except as set forth in Schedule 2.18 to the Merry Land
Disclosure Letter, neither Merry Land nor any of the Merry Land Subsidiaries is
party to any agreement which would restrict any of them from prepaying any of
their Indebtedness without penalty or premium at any time or which requires any
of them to maintain any amount of Indebtedness with respect to any of the Merry
Land Properties.
(e) Neither Merry Land nor any of the Merry Land Subsidiaries
is a party to any agreement relating to the management of any of the Merry Land
Properties except the agreements described in Schedule 2.18 to the Merry Land
Disclosure Letter (the "Third Party Management Agreements"). True and complete
copies of the Third Party Management Agreements have previously been furnished
to EQR.
(f) Neither Merry Land nor any of the Merry Land Subsidiaries
is a party to any agreement pursuant to which Merry Land or any Merry Land
Subsidiary manages any real properties other than Merry Land Properties, except
for the agreements described in Schedule 2.18 to the Merry Land Disclosure
Letter (the "Outside Property Management Agreements").
(g) Except for budgeted construction disclosed in the Merry
Land Capital Budget or in Schedule 2.22 of the Merry Land Disclosure Letter,
Schedule 2.18 of the Merry Land Disclosure Letter lists all agreements entered
into by Merry Land or any of the Merry Land Subsidiaries relating to the
development or construction of, or additions or expansions to, any Merry Land
Properties which are currently in effect and under which Merry Land or any of
the Merry Land
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Subsidiaries currently has, or expects to incur, an obligation in excess of
$250,000. True and correct copies of such agreements have previously been
delivered or made available to EQR.
(h) Schedule 2.18 to the Merry Land Disclosure Letter lists
all agreements entered into by Merry Land or any of the Merry Land Subsidiaries
providing for the sale of, or option to sell, any Merry Land Properties or the
purchase of, or option to purchase, any real estate which are currently in
effect.
(i) Except as set forth in Schedule 2.18 to the Merry Land
Disclosure Letter, neither Merry Land nor any Merry Land Subsidiary has any
continuing contractual liability (i) for indemnification or otherwise under any
agreement relating to the sale of real estate previously owned, whether directly
or indirectly, by Merry Land or any Merry Land Subsidiary, except for standard
indemnification provisions entered into in the normal course of business, (ii)
to pay any additional purchase price for any of the Merry Land Properties, or
(iii) to make any reprorations or adjustments to prorations involving an amount
in excess of $25,000 (other than real estate taxes) that may previously have
been made with respect to any property currently or formerly owned by Merry
Land.
(j) Except as set forth in Schedule 2.18 to the Merry Land
Disclosure Letter, neither Merry Land nor any Merry Land Subsidiary has entered
into or is subject, directly or indirectly, to any "Tax Protection Agreements."
As used herein, a Tax Protection Agreement is an agreement, oral or written, (A)
that has as one of its purposes to permit a person or entity to take the
position that such person or entity could defer federal taxable income that
otherwise might have been recognized upon a transfer of property to the Merry
Land Partnership or any other Merry Land Subsidiary that is treated as a
partnership for federal income tax purposes, and (B) that (i) prohibits or
restricts in any manner the disposition of any assets of Merry Land or any Merry
Land Subsidiary, (including, without limitation, requiring Merry Land or any
Merry Land Subsidiary to indemnify any person for any tax liabilities resulting
from any such disposition), (ii) requires that Merry Land or any Merry Land
Subsidiary maintain, or put in place, or replace, indebtedness, whether or not
secured by one or more of the Merry Land Properties, or (iii) requires that
Merry Land or any Merry Land Subsidiary offer to any person or entity at any
time the opportunity to guarantee or otherwise assume, directly or indirectly,
the risk of loss for federal income tax purposes for indebtedness or other
liabilities of Merry Land or any Merry Land Subsidiary.
(k) Except as set forth in Schedule 2.18 to the Merry Land
Disclosure Letter, there are no material outstanding contractual obligations of
Merry Land or any Merry Land Subsidiary to provide any funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Merry Land Subsidiary or any other Person.
2.19 OPINION OF FINANCIAL ADVISOR. Merry Land has received the opinion
of Xxxxxx Xxxxxxx & Co. Incorporated, dated July 8, 1998, satisfactory to Merry
Land, and a signed copy of which has been provided to EQR.
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2.20 STATE TAKEOVER STATUTES. Merry Land has taken all action necessary
to exempt the transactions contemplated by this Agreement between EQR and Merry
Land and its Affiliates from the operation of any "fair price," "moratorium,"
"control share acquisition" or any other anti-takeover statute or similar
statute enacted under the state or federal laws of the United States or similar
statute or regulation (a "Takeover Statute").
2.21 REGISTRATION STATEMENT. The information relating to Merry Land and
the Merry Land Subsidiaries included in the Registration Statement (as defined
in Section 5.1) will not, as of the effective date of the Registration
Statement, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.22 DEVELOPMENT PROPERTIES. Schedule 2.22 to the Merry Land Disclosure
Letter lists all agreements entered into by Merry Land or any of the Merry Land
Subsidiaries relating to the development or construction of, or additions or
expansions to, any real properties which are currently in effect.
2.23 INVESTMENT COMPANY ACT OF 1940. Neither Merry Land nor any of the
Merry Land Subsidiaries is, or at the Effective Time will be, required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
2.24 TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set forth in
Schedule 2.24 to the Merry Land Disclosure Letter, or to the extent the
inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy) individually or in the aggregate would not have a Merry Land
Material Adverse Effect, Merry Land and each Merry Land Subsidiary owns or
possesses adequate licenses or other legal rights to use all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks and for
service marks, know-how and other proprietary rights and information used or
held for use in connection with the business of Merry Land and the Merry Land
Subsidiaries as currently conducted or as contemplated to be conducted, and
Merry Land has no Knowledge of any assertion or claim challenging the validity
of any of the foregoing. The conduct of the business of Merry Land and the Merry
Land Subsidiaries as currently conducted and as contemplated to be conducted did
not, does not and will not infringe in any way any patent, patent right,
license, trademark, trademark right, trade name, trade name right, service xxxx,
or copyright of any third party that, individually or in the aggregate, could
have a Merry Land Material Adverse Effect. To Merry Land's Knowledge, there are
no infringements of any proprietary rights owned by or licensed by or to Merry
Land or any Merry Land Subsidiary that individually or in the aggregate could
have a Merry Land Material Adverse Effect.
2.25 INSURANCE. Except as set forth on Schedule 2.25 to the Merry Land
Disclosure Letter, each of Merry Land and the Merry Land Subsidiaries are, and
has been continuously since January 1, 1993, insured with financially
responsible insurers in such amounts and against such risks
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and losses as are customary for companies conducting the business as conducted
by Merry Land and the Merry Land Subsidiaries during such time period. Except as
set forth on Schedule 2.25 to the Merry Land Disclosure Letter, neither Merry
Land nor any Merry Land Subsidiary has received any notice of cancellations or
termination with respect to any material insurance policy of Merry Land or any
Merry Land Subsidiary. The insurance policies of Merry Land and each Merry Land
Subsidiary are valid and enforceable policies in all material respects.
2.26 DEFINITION OF KNOWLEDGE OF MERRY LAND. As used in this Agreement,
the phrase "to the Knowledge of Merry Land" (or words of similar import) means
the knowledge of those individuals identified in Schedule 2.26 of the Merry Land
Disclosure Letter.
2.27 VOTE REQUIRED. Except for the Merry Land Shareholder Approvals, no
other vote or consent by the equity-holders of Merry Land or any Merry Land
Subsidiary (whether by agreement, under applicable law or otherwise) is required
to approve this Agreement and the transactions contemplated hereby; provided,
however, no representation or warranty is being made in this Section 2.27 with
respect to any vote or consent required for any Alternative Merger.
2.28 ESOP ACCRUALS. As of the date hereof, Merry Land has accrued a
total of approximately $559,000 in contributions to the ESOP and, other than
regular monthly accruals in monthly amounts not exceeding $95,000 (the "Monthly
ESOP Accrual"), has made no accruals or contributions to the ESOP during the
previous twelve (12) month period from the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EQR
Except as set forth in the letter of even date herewith signed by the
President of EQR and delivered to Merry Land prior to the execution hereof (the
"EQR Disclosure Letter"), EQR represents and warrants to Merry Land as follows:
3.1 ORGANIZATION, STANDING AND POWER OF EQR. EQR is a real estate
investment trust duly organized and validly existing under the laws of Maryland
and has the requisite power and authority to carry on its business as now being
conducted. EQR is duly qualified or licensed to do business as a foreign trust
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
material adverse effect on the business, properties, assets, financial condition
or results of operations of EQR and the Subsidiaries of EQR (other than
Subsidiaries which are not Affiliates of EQR) ("EQR Subsidiaries") taken as a
whole ("EQR Material Adverse Effect"). EQR has delivered to Merry Land complete
and correct copies of its Second Amended and
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Restated Declaration of Trust and Second Amended and Restated Bylaws, in each
case as amended or supplemented to the date of this Agreement.
3.2 CAPITAL STRUCTURE.
(a) The authorized shares of beneficial interest of EQR
consist of 200,000,000 EQR Common Shares and 100,000,000 preferred shares of
beneficial interest ("EQR Preferred Shares"), including (i) 6,120,000 9-3/8%
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01
par value per share (the "EQR Series A Preferred Shares"), (ii) 500,000 9-1/8%
Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01
par value per share, that are represented by 5,000,000 depository shares (the
"EQR Series B Preferred Shares"), (iii) 460,000 9-1/8% Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share,
that are represented by 4,600,000 depository shares (the "EQR Series C Preferred
Shares"), (iv) 805,000 8.60% Series D Cumulative Redeemable Preferred Shares of
Beneficial Interest (Liquidation Preference $250.00 Per Share) (the "EQR Series
D Preferred Shares"), (v) 4,600,000 Series E Cumulative Convertible Preferred
Shares of Beneficial Interest, $0.01 par value per share (the "EQR Series E
Preferred Shares"), (vi) 2,300,000 9.65% Series F Cumulative Redeemable
Preferred Shares of Beneficial Interest, $0.01 par value per share (the "EQR
Series F Preferred Shares"), and (vii) 1,265,000 7 1/4% Series G Convertible
Cumulative Preferred Shares of Beneficial Interest, $0.01 par value per share
(the "EQR Series G Preferred Shares"). As of June 30, 1998, (i) 97,870,504 EQR
Common Shares, 6,120,000 EQR Series A Preferred Shares, 500,000 EQR Series B
Preferred Shares (represented by 5,000,000 depositary shares), 460,000 EQR
Series C Preferred Shares (represented by 4,600,000 depositary shares), 700,000
EQR Series D Preferred Shares (represented by 7,000,000 depositary shares),
3,998,000 EQR Series E Preferred Shares, 2,300,000 EQR Series F Preferred Shares
and 1,265,000 EQR Series G Preferred Shares were outstanding, (ii) 825,223 EQR
Common Shares were available for issuance under EQR's 1996 Non-Qualified
Employee Share Purchase Plan (the "EQR Employee Share Plan"), (iii) 5,664,717
EQR Common Shares were issuable upon exercise of outstanding share options (the
"EQR Options") to purchase EQR Common Shares and 1,282,059 EQR Common Shares
were available for grant, under EQR's Fourth Amended and Restated 1993 Share
Option and Share Award Plan (the "Employee Share Award and Option Plan"), (iv)
5,996,377 shares were reserved for issuance under EQR's Distribution
Reinvestment and Purchase Plan (the "EQR Distribution Reinvestment Plan"),(v)
9,687,781 EQR Common Shares were reserved for issuance upon redemption of
limited partnership interests in ERP Operating Partnership (" OP Units") for EQR
Common Shares pursuant to the EQR Partnership Agreement, and (vi) 7,623,507
shares were reserved for issuance upon the conversion of the EQR Preferred
Shares which are convertible into EQR Common Shares. On the date hereof, except
as set forth in this Section 3.2 or Schedule 3.2 of the EQR Disclosure Letter,
no shares of beneficial interest or other voting securities of EQR were issued,
reserved for issuance or outstanding.
(b) All outstanding shares of beneficial interest of EQR are
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, except that the
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shareholders may be subject to further assessment with respect to certain claims
for tort, contract, taxes, statutory liability and otherwise in some
jurisdictions to the extent such claims are not satisfied by EQR. There are no
bonds, debentures, notes or other indebtedness of EQR having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of EQR may vote.
(c) Except (i) for the EQR Options, (ii) for the OP Units
(which, subject to certain restrictions, may be exchanged by the holders thereof
for either EQR Common Shares on a one-for-one basis or, at EQR's option, cash),
as are disclosed in Schedule 3.2 to the EQR Disclosure Letter, (iii) for the EQR
Reinvestment Plan, (iv) for the EQR Employee Share Award and Option Plan, or (v)
as set forth in Schedule 3.2 to the EQR Disclosure Letter, as of the date of
this Agreement there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which EQR or any EQR Subsidiary is a party or by which such entity is bound,
obligating EQR or any EQR Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of beneficial interest, voting
securities or other ownership interests of EQR or of any EQR Subsidiary or
obligating EQR or any EQR Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking (other than to EQR or an EQR Subsidiary). Except as set forth on
Schedule 3.2 to the EQR Disclosure Letter or as required under the ERP Operating
Partnership Agreement, there are no outstanding contractual obligations of EQR
or any EQR Subsidiary to repurchase, redeem or otherwise acquire any shares of
beneficial interest of EQR or any capital stock, voting securities, or other
ownership interests in any EQR Subsidiary or make any material investment (in
the form of a loan, capital contribution or otherwise) in any person (other than
an EQR Subsidiary).
(d) EQR owns all of its partnership interests in ERP Operating
Partnership free and clear of all Liens.
3.3 ORGANIZATION, STANDING AND POWER OF ERP OPERATING PARTNERSHIP. ERP
Operating Partnership is a limited partnership duly organized and validly
existing under the laws of Illinois and has the requisite power and authority to
carry on its business as now being conducted. ERP Operating Partnership is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a EQR Material Adverse Effect.
EQR has delivered to Merry Land complete and correct copies of ERP Operating
Partnership's Fourth Amended and Restated Agreement of Limited Partnership, as
amended or supplemented to the date of this Agreement, as well as a form of ERP
Operating Partnership Fifth Amended and Restated Agreement of Limited
Partnership, which EQR currently contemplates adopting, in whole or in part,
prior to the Effective Time.
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3.4 CAPITAL STRUCTURE OF ERP OPERATING PARTNERSHIP. As of June 30,
1998, the number of outstanding OP Units consisted of (a) 97,870,499 units of
general partnership interest, (b) 9,687,781 units of limited partnership
interest, (c) 6,120,000 9-3/8% Series A Cumulative Redeemable Preference Units,
(d) 500,000 9-1/8% Series B Cumulative Redeemable Preference Units, (e) 460,000
9-1/8% Series C Cumulative Redeemable Preference Units, (f) 700,000 8.60% Series
D Cumulative Redeemable Preference Units, (g) 3,998,000 Series E Cumulative
Convertible Preference Units, (h) 2,300,000 Series F Cumulative Redeemable
Preference Units, and (i) 1,265,000 7 1/4% Series G Convertible Cumulative
Preference Units. Except for the units of limited partnership interest, all of
the units of partnership interest in ERP Operating Partnership are owned by EQR
free and clear of all Liens.
3.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) EQR has the requisite power and authority to enter into
this Agreement and, subject to the affirmative vote of at least a majority of
the outstanding EQR Common Shares entitled to vote thereon to approve the Merger
(the "EQR Shareholder Approvals" and, together with the Merry Land Shareholder
Approvals, the "Shareholder Approvals"), to consummate the transactions
contemplated by this Agreement to which EQR is a party. The execution and
delivery of this Agreement by EQR and the consummation by EQR of the
transactions contemplated by this Agreement to which EQR is a party have been
duly authorized by all necessary action on the part of EQR, subject to the EQR
Shareholder Approvals. This Agreement has been duly executed and delivered by
EQR and constitutes a valid and binding obligation of EQR, enforceable against
EQR in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
(b) Except as set forth in Schedule 3.5 to the EQR Disclosure
Letter, the execution and delivery of this Agreement by EQR do not, and the
consummation of the transactions contemplated by this Agreement to which EQR is
a party and compliance by EQR with the provisions of this Agreement will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to loss of a material
benefit under, or result in the creation of any Lien upon any of the properties
or assets of EQR or any EQR Subsidiary under, (i) the Second Amended and
Restated Declaration of Trust or Second Amended and Restated Bylaws of EQR or
the comparable charter or organizational documents or partnership or similar
agreement (as the case may be) of any other EQR Subsidiary, each as amended or
supplemented to the date of this Agreement, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, reciprocal easement agreement, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
EQR or any EQR Subsidiary or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any Laws applicable to EQR or any EQR Subsidiary or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights, loss or Liens that
individually or in the aggregate would not (x) have an EQR Material Adverse
Effect or (y) prevent the
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consummation of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to EQR or any EQR
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation by EQR of any of the transactions contemplated by this
Agreement, except for (i) the filing with the SEC of (x) the Proxy Statement and
(y) such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (ii) the filing of the Articles of Merger with the Department, (iii)
the filing of the Certificate of Merger with the Secretary of State, (iv) such
filings as may be required in connection with the payment of any transfer and
gains taxes and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule 3.5 to
the EQR Disclosure Letter or (B) as may be required under (x) federal, state or
local environmental laws or (y) the securities laws of the State of Maryland or
(C) which, if not obtained or made, would not prevent or delay in any material
respect the consummation of any of the transactions contemplated by this
Agreement or otherwise prevent EQR from performing its obligations under this
Agreement in any material respect or have, individually or in the aggregate, an
EQR Material Adverse Effect.
(c) EQR is making no representation or warranty in this
Section 3.5 with respect to any matters or approvals required for any
Alternative Merger.
(d) For purposes of determining compliance with the Xxxx-Xxxxx
Act, EQR confirms that the conduct of its business consists solely of investing
in, owning and operating real estate for the benefit of its shareholders.
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. EQR
and ERP Operating Partnership have filed all required reports, schedules, forms,
statements and other documents with the SEC since August 18, 1993 through the
date hereof (the "EQR SEC Documents"). Schedule 3.6 to the EQR Disclosure Letter
contains a complete list of all EQR SEC Documents filed by EQR under the
Exchange Act since January 1, 1997 and on or prior to the date of this
Agreement. All of the EQR SEC Documents (other than preliminary material), as of
their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and, in each
case, the rules and regulations promulgated thereunder applicable to such EQR
SEC Documents. None of the EQR SEC Documents at the time of filing contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent such statements have been modified or
superseded by later EQR SEC Documents filed and publicly available prior to the
date of this Agreement. The consolidated financial statements of EQR and the EQR
Subsidiaries included in the EQR SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by the applicable rules and regulations of the SEC) applied on a consistent
basis during
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the periods involved (except as may be indicated in the notes thereto) and
fairly presented, in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of EQR and the EQR Subsidiaries, taken as a whole, as of the dates thereof and
the consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except for liabilities and obligations set forth in the EQR SEC
Documents or in Schedule 3.6 to the EQR Disclosure Letter, neither EQR nor any
EQR Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of EQR or in the notes thereto and which,
individually or in the aggregate, would have an EQR Material Adverse Effect.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
EQR SEC Documents or in Schedule 3.7 to the EQR Disclosure Letter, since the
date of the most recent audited financial statements included in the EQR SEC
Documents (the "EQR Financial Statement Date"), EQR and the EQR Subsidiaries
have conducted their business only in the ordinary course (taking into account
prior practices, including the acquisition of properties and issuance of
securities) and there has not been (a) any material adverse change in the
business, financial condition or results of operations of EQR and the EQR
Subsidiaries taken as a whole (a "EQR Material Adverse Change"), nor has there
been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in an EQR Material Adverse Change, (b) except
for regular quarterly distributions (in the case of EQR) not in excess of $0.67
per EQR Common Share, $0.5859 per EQR Series A Preferred Share, $0.5703 per EQR
Series B Preferred Share, $0.5703 per EQR Series C Preferred Share, $0.5375 per
EQR Series D Preferred Share, $0.4375 per EQR Series E Preferred Share, $0.6031
per EQR Series F Preferred Share and $0.4531 per EQR Series G Preferred Share,
in each case subject to rounding adjustments as necessary and with customary
record and payment dates, any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of EQR's shares of beneficial interest, (c) any split, combination or
reclassification of any of EQR's shares of beneficial interest, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would have
an EQR Material Adverse Effect, or (e) any change made prior to the date of this
Agreement in accounting methods, principles or practices by EQR or any EQR
Subsidiary materially affecting its assets, liabilities or business, except
insofar as may have been disclosed in the EQR SEC Documents or required by a
change in GAAP. EQR is not in default in the payment of distributions on the EQR
Preferred Shares.
3.8 LITIGATION. Except as disclosed in the EQR SEC Documents or in
Schedule 3.8 to the EQR Disclosure Letter, and other than personal injury and
other routine tort litigation arising from the ordinary course of operations of
EQR and the EQR Subsidiaries (a) which are covered by adequate insurance, or (b)
for which all material costs and liabilities arising therefrom are reimbursable
pursuant to common area maintenance or similar agreements, there is no suit,
action or proceeding pending or, to the Knowledge of EQR, threatened in writing
against or affecting EQR or any EQR Subsidiary that, individually or in the
aggregate, could reasonably be expected to
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(i) have an EQR Material Adverse Effect, or (ii) prevent the consummation of any
of the transactions contemplated by this Agreement, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against EQR or any EQR Subsidiary having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
3.9 PROPERTIES.
(a) EQR or one of the EQR Subsidiaries owns fee simple title
to each of the real properties listed in the EQR SEC Filings as owned by it (the
"EQR Properties"), except where the failure to own such title would not have an
EQR Material Adverse Effect.
(b) The EQR Properties are not subject to any Encumbrances or
Property Restrictions which could cause an EQR Material Adverse Effect.
(c) Valid policies of title insurance have been issued
insuring EQR's or the applicable EQR Subsidiaries' fee simple title to the EQR
Properties in amounts at least equal to the purchase price thereof paid by EQR
or the applicable EQR Subsidiaries therefor, except where the failure to obtain
such title insurance would not have an EQR Material Adverse Effect.
(d) EQR has no Knowledge (i) that it has failed to obtain a
certificate, permit or license from any governmental authority having
jurisdiction over any of the EQR Properties where such failure would have an EQR
Material Adverse Effect, or of any pending threat of modification or
cancellation of any of the same which would have an EQR Material Adverse Effect,
(ii) of any written notice of any violation of any federal, state or municipal
law, ordinance, order, rule, regulation or requirement affecting any of the EQR
Properties issued by any governmental authorities which would have an EQR
Material Adverse Effect, or (iii) of any structural defects relating to EQR
Properties, EQR Properties whose building systems are not in working order,
physical damage to any EQR Property for which there is no insurance in effect
covering the cost of restoration, any current renovation or uninsured
restoration, except such structural defects, building systems not in working
order, physical damage, renovation and restoration which, in the aggregate,
would not have an EQR Material Adverse Effect.
(e) Neither EQR nor any of the EQR Subsidiaries has received
any written notice to the effect that (i) any condemnation or rezoning
proceedings are pending or threatened with respect to any of the EQR Properties,
or (ii) any zoning, building or similar law, code, ordinance, order or
regulation is or will be violated by the continued maintenance, operation or use
of any buildings or other improvements on any of the EQR Properties or by the
continued maintenance, operation or use of the parking areas, other than such
notices which, in the aggregate, would not have an EQR Material Adverse Effect.
(f) All work to be performed, payments to be made and actions
to be taken by EQR or the EQR Subsidiaries prior to the date hereof pursuant to
any agreement entered into with
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a governmental body or authority in connection with a site approval, zoning
reclassification or similar action relating to any EQR Properties (e.g., Local
Improvement District, Road Improvement District, Environmental Mitigation), has
been performed, paid or taken, as the case may be, except where the failure to
do so would, in the aggregate, not have an EQR Material Adverse Effect, and EQR
has no Knowledge of any planned or proposed work, payments or actions that may
be required after the date hereof pursuant to such agreements which would have
an EQR Material Adverse Effect.
3.10 ENVIRONMENTAL MATTERS. None of EQR, any of the EQR Subsidiaries
or, to EQR's Knowledge, any other Person has caused or permitted (a) the
unlawful presence of any Hazardous Substances on any of the EQR Properties, or
(b) any unlawful spills, releases, discharges or disposal of Hazardous Materials
to have occurred or be presently occurring on or from the EQR Properties as a
result of any construction on or operation and use of such properties, which
presence or occurrence would, individually or in the aggregate, have an EQR
Material Adverse Effect; and in connection with the construction on or operation
and use of the EQR Properties, EQR and the EQR Subsidiaries have not failed to
comply in any material respect with all applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Materials, except to the extent such
failure to comply, individually or in the aggregate, would not have an EQR
Material Adverse Effect. EQR has previously delivered or made available to Merry
Land complete copies of all environmental investigations and testing or analysis
made by or on behalf of EQR or any of the EQR Subsidiaries with respect to the
environment condition of the EQR Properties, all of which are listed in the EQR
Disclosure Letter.
3.11 TAXES.
(a) Each of EQR and the EQR Subsidiaries has filed all tax
returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority to
do so) and has paid (or EQR has paid on its behalf) all Taxes shown on such
returns and reports as required to be paid by it except where the failure to
file such tax returns or reports and failure to pay such Taxes would not have an
EQR Material Adverse Effect. The most recent audited financial statements
contained in the EQR SEC Documents reflect an adequate reserve for all material
Taxes payable by EQR and the EQR Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. Since the EQR
Financial Statement Date, EQR has incurred no liability for taxes under Sections
857(b), 860(c) or 4981 of the Code, including without limitation any tax arising
from a prohibited transaction described in Section 857(b)(6) of the Code, and
neither EQR nor any EQR Subsidiary has incurred any liability for taxes other
than in the ordinary course of business. No event has occurred, and no condition
or circumstance exists, which presents a material risk that any material Tax
described in the preceding sentence will be imposed upon EQR. No deficiencies
for any Taxes have been proposed, asserted or assessed pursuant to a "30-day
letter" or notice of deficiency sent by the IRS, or, to the Knowledge of EQR,
otherwise proposed, asserted or assessed against EQR or any of the EQR
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Subsidiaries. No waivers of the time to assess any such Taxes have been executed
by EQR or any EQR Subsidiary and, to the Knowledge of EQR, no such waivers are
pending.
(b) EQR (i) for all taxable years commencing with 1992 through
the most recent December 31, has been subject to taxation as a REIT within the
meaning of Section 856 of the Code and has satisfied all requirements to qualify
as a REIT for such years, (ii) has operated, and intends to continue to operate,
in such a manner as to qualify as a REIT for the tax year ending December 31,
1998, and (iii) has not taken or omitted to take any action which would
reasonably be expected to (A) result in any rents paid by tenants to the EQR
Properties to be excluded from the definition of "rents from real property"
under Section 856(d)(2) of the Code, or (B) otherwise result in a challenge to
its status as a REIT, and to EQR's Knowledge, no such challenge is pending or
threatened. Each EQR Subsidiary which is a partnership, joint venture or limited
liability company has been treated since its formation and continues to be
treated for federal income tax purposes as a partnership, or ignored as a
separate entity, as the case may be, and not as a corporation or as an
association taxable as a corporation. Each corporation, trust or other entity
taxable as an association which has merged with and into EQR had been subject to
taxation as a REIT at all times since its initial election of REIT status and
had satisfied all requirements to qualify as a REIT for such years, except to
the extent that a failure to satisfy such requirements would not have a EQR
Material Adverse Effect.
3.12 BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person, other than X.X. Xxxxxx Securities
Inc. the fees and expenses of which have previously been disclosed to Merry Land
and will be paid by EQR, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of EQR or any
EQR Subsidiary.
3.13 COMPLIANCE WITH LAWS. Except as disclosed in the EQR SEC
Documents, neither EQR nor any of the EQR Subsidiaries has violated or failed to
comply with any statute, law, ordinance, regulation, rule, judgment, decree or
order of any Governmental Entity applicable to its business, properties or
operations, except to the extent that such violation or failure would not have
an EQR Material Adverse Effect.
3.14 CONTRACTS; DEBT INSTRUMENTS. Neither EQR nor any EQR Subsidiary
has received a written notice that EQR or any EQR Subsidiary is in violation of
or in default under (nor to the Knowledge of EQR does there exist any condition
which upon the passage of time or the giving of notice or both would cause such
a violation of or default under) any material loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or any
other material contract, agreement, arrangement or understanding, to which it is
a party or by which it or any of its properties or assets is bound, nor to the
Knowledge of EQR does such a violation or default exist, except to the extent
such violation or default, individually or in the aggregate, would not have an
EQR Material Adverse Effect, except as set forth in Schedule 3.14 to the EQR
Disclosure Letter.
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3.15 OPINION OF FINANCIAL ADVISOR. EQR has received the opinion of X.X.
Xxxxxx Securities Inc. dated July 8, 1998, satisfactory to EQR, a signed copy of
which has been provided to Merry Land, to the effect that the consideration to
be paid by EQR in connection with the Merger is fair, from a financial point of
view, to EQR.
3.16 STATE TAKEOVER STATUTES. EQR has taken all action necessary to
exempt transactions between EQR and Merry Land and its Affiliates from the
operation of Takeover Statutes.
3.17 REGISTRATION STATEMENT. The information with respect to EQR and
the EQR Subsidiaries included in the Registration Statement will not, as of the
effective date of the Registration Statement, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.18 INVESTMENT COMPANY ACT OF 1940. Neither EQR nor any of the EQR
Subsidiaries is, or at the Effective Time will be, required to be registered
under the 0000 Xxx.
3.19 DEFINITION OF KNOWLEDGE OF EQR. As used in this Agreement, the
phrase "to the Knowledge of EQR" (or words of similar import) means the
knowledge of those individuals identified in Schedule 3.19 to the EQR Disclosure
Letter.
3.20 VOTE REQUIRED. Except for the EQR Shareholder Approvals, no other
vote or consent by the equity-holders of EQR or any EQR Subsidiary (whether by
agreement, under applicable law or otherwise) is required to approve this
Agreement or the transactions contemplated hereby; provided, however, that no
representation or warranty is being made in this Section 3.20 with respect to
any vote or consent required for any Alternate Merger.
3.21 EMPLOYEE POLICIES. Each employee plan or arrangement of EQR is in
material compliance with ERISA, to the extent subject to ERISA, and any other
applicable law governing such employee plan or arrangement.
ARTICLE 4
COVENANTS
4.1 ACQUISITION PROPOSALS. Prior to the Effective Time, Merry Land
agrees that:
(a) neither it nor any of the Merry Land Subsidiaries shall
initiate, solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) with
respect to a merger, acquisition, tender offer, exchange offer,
consolidation, sale of assets or similar transaction involving all or
any significant portion of the assets or any
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equity securities of Merry Land or any of the Merry Land Subsidiaries,
other than the transactions contemplated by this Agreement (any such
proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning or provide any
confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal;
(b) it will use its best efforts not to permit any of its
officers, directors, employees, agents or financial advisors to engage
in any of the activities described in Section 4.1(a);
(c) it will 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 and will take
the necessary steps to inform the individuals or entities referred to
in Section 4.1(b) of the obligations undertaken in this Section 4.1;
and
(d) it will notify EQR immediately if Merry Land receives any
such inquiries or proposals, or any requests for such information, or
if any such negotiations or discussions are sought to be initiated or
continued with it;
provided, however, that nothing contained in this Section 4.1 shall prohibit the
Board of Directors of Merry Land from (i) furnishing information to or entering
into discussions or negotiations with, any person or entity that makes an
unsolicited Acquisition Proposal, if, and only to the extent that (A) the Board
of Directors of Merry Land determines in good faith that such action is required
for the Board of Directors to comply with its duties to shareholders imposed by
law, (B) prior to furnishing such information to, or entering into discussions
or negotiations with, such person or entity, Merry Land provides written notice
to EQR to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which Merry Land determined in good faith
was required to be executed in order for the Board of Directors to comply with
its duties to shareholders imposed by law), Merry Land keeps EQR informed of the
status (not the terms) of any such discussions or negotiations; and (ii) to the
extent applicable, complying with Rule 14e-2 or Rule 14d-9 promulgated under the
Exchange Act with regard to an Acquisition Proposal. Nothing in this Section 4.1
shall (x) permit Merry Land to terminate this Agreement (except as specifically
provided in Article 7 hereof), (y) permit Merry Land to enter into an agreement
with respect to an Acquisition Proposal during the term of this Agreement (it
being agreed that during the term of this Agreement, Merry Land shall not enter
into an agreement with any Person that provides for, or in any way facilitates,
an Acquisition Proposal (other than a confidentiality agreement in customary
form executed as provided above)) or (z) affect any other obligation of Merry
Land under this Agreement; provided, however, that the Board of Directors of
Merry Land may approve and recommend a Superior Acquisition Proposal and, in
connection therewith, withdraw or modify its approval or recommendation of this
Agreement and the Merger. As used herein, "Superior Acquisition
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Proposal" means a bona fide Acquisition Proposal made by a third party which a
majority of the members of the Board of Directors of Merry Land determines in
good faith to be more favorable to Merry Land's shareholders from a financial
point of view than the Merger and which the Board of Directors of Merry Land
determines is reasonably capable of being consummated.
4.2 CONDUCT OF MERRY LAND'S BUSINESS PENDING MERGER. Prior to the
Effective Time, except as (i) contemplated by this Agreement, (ii) set forth in
Schedule 4.2 to the Merry Land Disclosure Letter or (iii) consented to in
writing by EQR, Merry Land shall, and shall cause each of the Merry Land
Subsidiaries to, conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore, and, irrespective of
whether or not in the ordinary course of business, Merry Land shall, and shall
cause each of the Merry Land Subsidiaries to:
(a) use its reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its
officers and employees;
(b) confer on a regular basis with one or more representatives
of EQR to report operational matters of materiality and, subject to
Section 4.1, any proposals to engage in material transactions;
(c) promptly notify EQR of any material emergency or other
material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties, or of any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(d) promptly deliver to EQR true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date
of this Agreement;
(e) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its
methods, principles or practices of accounting in effect at the
Financial Statement Date, except as may be required by the SEC,
applicable law or GAAP;
(f) duly and timely file all reports, tax returns and other
documents required to be filed with federal, state, local and other
authorities, subject to extensions permitted by law, provided Merry
Land notifies EQR that it is availing itself of such extensions and
provided such extensions do not adversely affect Merry Land's status as
a qualified REIT under the Code;
(g) not make or rescind any express or deemed election
relative to Taxes (unless required by law or necessary to preserve
Merry Land's status as a REIT or the status of any
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Merry Land Subsidiary as a partnership for federal income tax purposes
or as a qualified REIT subsidiary under Section 856(i) of the Code, as
the case may be);
(h) other than in connection with those development agreements
set forth in Schedule 2.22 to the Merry Land Disclosure Letter, not
acquire, enter into any option to acquire, or exercise an option or
contract to acquire, additional real property, incur additional
indebtedness except for working capital under its revolving line(s) of
credit, encumber assets or commence construction of, or enter into any
agreement or commitment to develop or construct other real estate
projects;
(i) not amend its Articles of Incorporation, Bylaws, code of
regulations or partnership agreement or comparable charter or
organizational document or the articles of incorporation, Bylaws,
partnership agreement, joint venture agreement or comparable charter or
organization document of any Merry Land Subsidiary without EQR's prior
written consent, which shall not be unreasonably withheld or delayed;
(j) issue no and make no change in the number of shares of
capital stock, membership interests or units of limited partnership
interest issued and outstanding or reserved for issuance, other than
pursuant to (i) those items disclosed in Schedule 2.3 to the Merry Land
Disclosure Letter and (ii) the conversion of any Merry Land Preferred
Shares, in accordance with the terms thereof;
(k) grant no options or other right or commitment relating to
its shares of beneficial interest or capital stock, membership
interests or units of limited partnership interest or any security
convertible into its shares of beneficial interest or capital stock,
membership interests or units of limited partnership interest, or any
security the value of which is measured by shares of beneficial
interest, or any security subordinated to the claim of its general
creditors;
(l) except (i) as provided in Section 5.13 and Section 5.14
hereof, (ii) in connection with the use of Merry Land Shares to pay the
exercise price or tax withholding in connection with equity-based
employee benefit plans by the participants therein, or (iii) for
dividends and distributions by a Merry Land Subsidiary to Merry Land, a
wholly-owned Merry Land Subsidiary, ML Services, Inc., a Georgia
corporation ("Services Corp."), or Merry Land DownREIT, not (x)
authorize, declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its beneficial
interest or capital stock, or (y) directly or indirectly redeem,
purchase or otherwise acquire any shares of beneficial interest, shares
of capital stock, membership interests or units of partnership interest
or any option, warrant or right to acquire, or security convertible
into, shares of beneficial interest, shares of capital stock,
membership interests, or units of partnership interest;
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(m) not sell, lease, mortgage, subject to Lien or otherwise
dispose of any material part of its assets, individually or in the
aggregate, except in the ordinary course of business;
(n) not make any loans, advances or capital contributions to,
or investments in, any other Person, other than loans, advances and
capital contributions to wholly-owned Merry Land Subsidiaries in
existence on the date hereof (other than Spinco and Subsidiaries of
Spinco), Merry Land DownREIT or Services Corp.;
(o) not pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice, or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) furnished to
EQR or incurred in the ordinary course of business consistent with past
practice;
(p) except as reflected in the Merry Land Capital Budget, not
enter into any commitment, contractual obligation, capital expenditure
or transaction (each, a "Commitment") which may result in total
payments or liability by or to it in excess of $1,000,000 or aggregate
Commitments in excess of $5,000,000;
(q) not guarantee the indebtedness of another Person
(including Spinco), enter into any "keep well" or other agreement to
maintain any financial statement condition of another Person or enter
into any arrangement having the economic effect of any of the
foregoing;
(r) not enter into or amend any Commitment with any officer,
director, consultant or Affiliate of Merry Land or any of the Merry
Land Subsidiaries other than Commitments with consultants involving
payments of less than $10,000 per annum;
(s) not increase any compensation or enter into or amend any
employment agreement or other arrangement with any of its officers,
directors or employees earning more than $75,000 per annum as of the
date hereof, other than waivers by employees of benefits under such
agreements, or enter into any employment agreement or arrangement with
any other Person not currently an employee of Merry Land or a Merry
Land Subsidiary, providing for compensation in excess of $75,000 per
annum;
(t) except as otherwise provided in Section 5.10(c) and
Section 5.19, not adopt any new employee benefit plan or amend any
existing plans, options or rights, except for changes which are
required by law and changes which are not more favorable to
participants than provisions presently in effect;
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(u) not settle any shareholder derivative or class action
claims arising out of or in connection with any of the transactions
contemplated by this Agreement;
(v) not change the ownership of any of its Subsidiaries except
pursuant to the Asset Exchange Agreement on the Closing Date;
(w) not accept a promissory note in payment of the exercise
price payable under any option to purchase Merry Land Shares;
(x) not enter into or amend or otherwise modify or waive any
rights under any agreement or arrangement for the persons that are
affiliates, or as of the date hereof, all officers, directors or
employees, of Merry Land or any Merry Land Subsidiary;
(y) Except as provided in Schedule 2.9 or Schedule 2.18 to the
Merry Land Disclosure Letter, not directly or indirectly or through a
subsidiary, merge or consolidate with, acquire all or substantially all
of the assets of, or acquire the beneficial ownership of a majority of
the outstanding capital stock or other equity interest in any person or
entity;
(z) not purchase any property nor conduct any material
business or operations on behalf of or for the benefit of Spinco nor
cause or permit Spinco to purchase any property or conduct any material
business or operations on its own behalf; provided, however, that
Spinco may take steps deemed necessary to prepare for the receipt of
the Transferred Properties and the commencement of operations on the
Effective Date;
(aa) suspend the Merry Land Dividend Reinvestment Plan,
effective as of the date of this Agreement; and
(bb) use its reasonable best efforts to continue to qualify as
a REIT prior to the Effective Time and not enter into any prohibited
transaction, including, without limitation, any transaction consummated
pursuant to the Spin-Off that would be considered a prohibited
transaction as defined in Section 857(b)(6) of the Code.
For purposes of this Section 4.2 only, any contract, transaction or other event
shall be deemed to be material and to be subject to the terms hereof if it would
result or is expected to result in a net impact on Merry Land's consolidated
income statement in excess of $1,000,000, or on Merry Land's consolidated
balance sheet in excess of $1,000,000.
4.3 CONDUCT OF EQR'S BUSINESS PENDING MERGER. Prior to the Effective
Time, except as (i) contemplated by this Agreement, or (ii) consented to in
writing by Merry Land, EQR shall, and shall cause each of the EQR Subsidiaries
to:
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(a) use its reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its
officers and employees;
(b) confer on a regular basis with one or more representatives
of Merry Land to report operational matters of materiality which would
have a EQR Material Adverse Effect;
(c) promptly notify Merry Land of any material emergency or
other material change in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects or the normal
course of its businesses or in the operation of its properties, or of
any material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated);
(d) promptly deliver to Merry Land true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;
(e) maintain its books and records in accordance with GAAP
consistently applied;
(f) duly and timely file all reports, tax returns and other
documents required to be filed with federal, state, local and other
authorities; and
(g) use its reasonable best efforts to continue to qualify as
a REIT prior to the Effective Time and not enter into any prohibited
transaction, including, without limitation, any transaction consummated
pursuant to the Spin-Off that would be considered a prohibited
transaction as defined in Section 857(b)(6) of the Code.
For purposes of this Section 4.3 only, an emergency, change, complaint,
investigation or hearing shall be deemed material if it would reasonably be
expected to have an EQR Material Adverse Effect.
4.4 OTHER ACTIONS. Each of Merry Land on the one hand and EQR on the
other hand shall not, and shall use its reasonable best efforts to cause their
Subsidiaries not to take, any action that would result in (i) any of the
representations and warranties of such party (without giving effect to any
"knowledge" qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
(without giving effect to any "knowledge" qualification) that are not so
qualified becoming untrue in any material respect or (iii) except as
contemplated by Section 4.1, any of the conditions to the Merger set forth in
Article 6 not being satisfied.
4.5 FILING OF CERTAIN REPORTS. The Surviving Trust shall file the
reports required to be filed by it under the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Affiliate of Merry Land or EQR may reasonably request, all
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to the extent required from time to time to enable such Affiliate to sell shares
of beneficial interest of the Surviving Trust received by such Affiliate in the
Merger without registration under the Securities Act pursuant to (i) Rule
145(d)(1) under the Securities Act, as such Rule may be amended from time to
time, or (ii) any successor rule or regulation hereafter adopted by the SEC.
4.6 COMPLIANCE WITH THE SECURITIES ACT. Prior to the Effective Time,
Merry Land shall promptly cause to be prepared and delivered to EQR a list
(reasonably satisfactory to counsel for EQR) identifying all persons who, at the
time of the Merry Land and EQR Shareholders Meetings, may be deemed to be
"affiliates" of Merry Land as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act (the "Affiliates"). Merry Land shall use its
best efforts to cause each person who is identified as an Affiliate in such list
to deliver to Merry Land on or prior to the Effective Time a written agreement,
in the form previously approved by the parties hereto, that such Affiliate will
not sell, pledge, transfer or otherwise dispose of any EQR Common Shares issued
to such Affiliate pursuant to the Merger, except pursuant to an effective
registration statement under the Securities Act or in compliance with Rule 145.
EQR shall be entitled to place legends as specified in such written agreements
on the certificates representing any EQR Common Shares to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the EQR Common Shares,
consistent with the terms of such agreements.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT;
MERRY LAND SHAREHOLDERS MEETING AND EQR SHAREHOLDERS MEETING.
(a) Merry Land and EQR shall use their reasonable best efforts
to prepare and file with the SEC a preliminary Proxy Statement (which shall also
constitute an information statement with respect to Spinco), in form and
substance satisfactory to each of EQR and Merry Land and such registration
statements under the Securities Act and Exchange Act as may be required
(collectively, the "Registration Statement") as soon as practicable following
the date of this Agreement. To the extent practicable, the parties shall utilize
one document for transmittal to their respective shareholders to meet applicable
legal requirements. Each of Merry Land and EQR shall promptly use its reasonable
best efforts to (i) respond to any comments of the SEC and (ii) have the
Registration Statement declared effective under the Securities Act and Exchange
Act and the rules and regulations promulgated under such acts as promptly as
practicable after such filing and to keep the Registration Statement effective
as long as is necessary to consummate the Merger. Each of Merry Land and EQR
will use its reasonable best efforts to cause the Proxy Statement to be mailed
to Merry Land's shareholders and EQR's shareholders, respectively, as promptly
as practicable after the Registration Statement is declared effective under the
Securities Act. Each party agrees to date
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its Proxy Statement as of the same date, which shall be the approximate date of
mailing to the shareholders of the respective parties. Each party will notify
the other promptly of the receipt of any comments from the SEC and of any
request by the SEC for amendments or supplements to the Registration Statement
or the Proxy Statement or for additional information and will supply the other
with copies of all correspondence between such party or any of its
representatives and the SEC, with respect to the Registration Statement or the
Proxy Statement. The Registration Statement and the Proxy Statement shall comply
in all material respects with all applicable requirements of law. Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Registration Statement or the Proxy Statement, EQR or Merry Land, as the
case may be, shall promptly inform the other of such occurrences and cooperate
in filing with the SEC and/or mailing to the shareholders of EQR and the
shareholders of Merry Land such amendment or supplement to the Proxy Statement.
Merry Land also shall take any action required to be taken under any applicable
state securities or "blue sky" laws in connection with the issuance of shares of
beneficial interest of the Surviving Trust pursuant to the Merger, and Merry
Land shall furnish all information concerning Merry Land and the holders of
Merry Land Shares and rights to acquire Merry Land Shares as may be reasonably
requested in connection with any such action.
(b) EQR will, as soon as practicable following the date of
this Agreement (but in no event sooner than 20 business days following the date
the Proxy Statement is mailed to the shareholders of EQR), duly call, give
notice of, convene and hold a meeting of its shareholders (the "EQR Shareholders
Meeting") for the purpose of obtaining the EQR Shareholder Approvals. EQR will,
through its Board of Trustees, recommend to its shareholders approval of this
Agreement, the Merger, and the transactions contemplated by this Agreement.
(c) Merry Land will, as soon as practicable following the date
of this Agreement (but in no event sooner than 20 business days following the
date the Proxy Statement is mailed to the shareholders of Merry Land), duly
call, give notice of, convene and hold a meeting of its shareholders (the "Merry
Land Shareholders Meeting", and, together with the EQR Shareholders Meeting, the
"Shareholders Meetings") for the purpose of obtaining Merry Land Shareholder
Approvals. Merry Land will, through its Board of Directors, recommend to its
shareholders approval of this Agreement, the Merger and the transactions
contemplated by this Agreement; provided, that prior to the Merry Land
Shareholders Meeting, such recommendation may be withdrawn, modified or amended
to the extent that, as a result of the commencement or receipt of a proposal
constituting a Superior Acquisition Proposal, the Board of Directors of Merry
Land determines in good faith that such withdrawal, modification or amendment is
appropriate.
(d) EQR and Merry Land shall use their best efforts to hold
their respective shareholder meetings on the same day, which day, subject to the
provisions of Sections 5.1(b) and 5.1(c), shall be a day not later than 35 days
after the date the Proxy Statement is mailed.
(e) If on the date for the EQR Shareholders Meeting and Merry
Land Shareholders Meeting established pursuant to Section 5.1(d) of this
Agreement, either EQR or Merry
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Land has not received a sufficient number of proxies to approve the Merger (but
less than a majority of the outstanding common shares of beneficial interest or
common stock, as the case may be, of such party have voted against the Merger),
then both parties shall adjourn their respective shareholders meetings until the
first to occur of (i) the date ten (10) days after the originally scheduled date
of the shareholders meetings or (ii) the date on which the requisite number of
proxies approving the Merger has been obtained or proxies have been received
representing more than a majority of its outstanding common shares of beneficial
interest or common stock, as the case may be, which voted against the Merger.
5.2 ACCESS TO INFORMATION: CONFIDENTIALITY. Subject to the requirements
of confidentiality agreements with third parties, each of Merry Land and EQR
shall, and shall cause each of the Merry Land Subsidiaries and EQR Subsidiaries,
respectively, to afford to the other party and to the officers, employees,
accountants, counsel, financial advisors and other representatives of such other
party, reasonable access during normal business hours prior to the Effective
Time to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, each of Merry Land and EQR shall,
and shall cause each of the Merry Land Subsidiaries and EQR Subsidiaries,
respectively, to furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Each of Merry Land and EQR shall, and shall
cause the Merry Land Subsidiaries and EQR Subsidiaries, respectively, to use
commercially reasonable efforts to cause its officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to, hold
any nonpublic information in confidence to the extent required by, and in
accordance with, and will comply with the provisions of the letter agreement
dated as of May 26, 1998 between Merry Land and EQR (the "Confidentiality
Agreement").
5.3 BEST EFFORTS; NOTIFICATION.
(a) Subject to the terms and conditions herein provided, Merry
Land and EQR shall: (i) use all reasonable best efforts to cooperate with one
another in (A) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated by such agreements and (B) timely making all such filings and
timely seeking all such consents, approvals, permits and authorizations; (ii)
use all reasonable best efforts to obtain in writing any consents required from
third parties to effectuate the Merger, such consents to be in form reasonably
satisfactory to Merry Land and EQR; and (iii) use all reasonable best efforts to
take, or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or
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desirable to carry out the purpose of this Agreement, the proper officers and
trustees of Merry Land and EQR shall take all such necessary action.
(b) Merry Land shall give prompt notice to EQR, and EQR shall
give prompt notice to Merry Land, (i) if any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becomes
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becomes untrue or inaccurate in any material respect or (ii)
of the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.4 COSTS OF TRANSACTION. On the Closing Date, EQR and Merry Land shall
execute, and Merry Land shall cause Spinco to execute, the Transaction Costs
Agreement in substantially the form attached hereto as Exhibit "F" (the
"Transaction Costs Agreement"). In the event that the Merger is not consummated,
each of EQR and Merry Land shall pay their own costs and expenses relating to
the Merger and the other transactions contemplated by this Agreement; provided,
however, that all printing costs and SEC filing fees in connection with the
Merger shall be paid 50% by Merry Land and 50% by EQR and, provided further,
that this Section 5.4 shall in no way affect the rights and obligations of the
parties hereto under Article 7.
5.5 TAX TREATMENT. Each of EQR and Merry Land shall use its reasonable
best efforts to cause the Merger to qualify as a reorganization under the
provisions of Sections 368(a) of the Code and to obtain the opinions of counsel
referred to in Sections 6.2(e) and 6.3(g).
5.6 PUBLIC ANNOUNCEMENTS. EQR and Merry Land will consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other written public statements with respect
to the transactions contemplated by this Agreement, including the Merger and the
Spin-Off, and shall not issue any such press release or make any such written
public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement will be in the form agreed to by the parties hereto prior to
the execution of this Agreement.
5.7 LISTING. Prior to the Effective Time, EQR shall use its best
efforts to have the NYSE approve for listing, upon official notice of issuance,
the shares of beneficial interest in EQR to be issued in the Merger and listed
on the NYSE after the Effective Time.
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5.8 LETTERS OF ACCOUNTANTS.
(a) Merry Land shall use its reasonable best efforts to cause
to be delivered to EQR on or before the date of the mailing of the Proxy
Statement, the "comfort" letter of Xxxxxx Xxxxxxxx, LLP, Merry Land's
independent public accountants, of the kind contemplated by the Statement of
Auditing Standards with respect to Letters to Underwriters promulgated by the
American Institute of Certified Public Accountants (the "AICPA Statement"),
dated and delivered the date on which the Registration Statement shall become
effective and as of the Effective Time, and addressed to EQR, in form and
substance reasonably satisfactory to EQR and reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with transactions such as those contemplated by this Agreement.
(b) EQR shall use its reasonable best efforts to cause to be
delivered to Merry Land on or before the date of the mailing of the Proxy
Statement, the "comfort" letter of Ernst & Young LLP, EQR's independent public
accountants, of the kind contemplated by the AICPA Statement, dated the date on
which the Registration Statement shall become effective and as of the Effective
Time, and addressed to Merry Land, in form and substance reasonably satisfactory
to Merry Land and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with transactions such
as those contemplated by this Agreement.
5.9 TRANSFER AND GAINS TAXES. EQR and Merry Land shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement (together with
any related interests, penalties or additions to tax, "Transfer and Gains
Taxes"). From and after the Effective Time, the Surviving Trust shall, or shall
cause ERP Operating Partnership, as appropriate, to pay or cause to be paid,
without deduction or withholding from any amounts payable to the holders of
beneficial interests in the Surviving Trust, all Transfer and Gains Taxes.
5.10 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS.
(a) BENEFIT PLANS. After the Effective Time, all employees of
Merry Land who are employed by the Surviving Trust shall, at the option of the
Surviving Trust, either continue to be eligible to participate in an "employee
benefit plan", as defined in Section 3(3) of ERISA, currently maintained by
Merry Land which is, at the option of the Surviving Trust, continued by the
Surviving Trust, or alternatively shall be eligible to participate in the same
manner as other similarly situated employees of the Surviving Trust who were
formerly employees of EQR in any "employee benefit plan," as defined in Section
3(3) of ERISA, sponsored or maintained by the Surviving Trust for similarly
situated employees after the Effective Time. With respect to each such employee
benefit plan, service with EQR or any EQR Subsidiary or with Merry Land or any
Merry Land Subsidiary (as applicable) shall be included for purposes of
determining eligibility to participate and
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vesting (if applicable). With respect to medical benefits provided by the
Surviving Trust on and after the Closing Date, coverage that would otherwise be
denied due to a preexisting illness shall be provided to those employees who had
such coverage under a plan sponsored by EQR, Merry Land or any of the EQR
Subsidiaries or Merry Land Subsidiaries before the Closing Date.
(b) RETENTION AND SEVERANCE PROGRAM. Prior to the Effective
Time, Merry Land shall adopt a severance/bonus/Retention and Severance Program
(the "Retention and Severance Program") attached hereto as Exhibit "G". The
Retention and Severance Program shall allow for the payment of (i) cash
severance and bonus payments ("Severance Payments") to be allocated among
certain employees of Merry Land and the Merry Land Subsidiaries, in lieu of any
and all other severance payments, but exclusive of and not in lieu of any bonus,
ESOP, or other compensation accrued in the ordinary course of business with
respect to services rendered in 1998 to the Effective Date, all in accordance
with past practice, as compensation for remaining employed by Merry Land or a
Merry Land Subsidiary until the Effective Time and (ii) retention payments
("Retention Payments") for entering into employment arrangements with EQR or a
EQR Subsidiary subsequent to the Effective Time. Schedule 5.10 to the Merry Land
Disclosure Letter sets forth those employees (the "Merry Land Schedule 5.10
Employees") who will be offered Severance Payments, as well as the amount of
each such Severance Payment. The Surviving Trust shall maintain the Retention
and Severance Program in accordance with the terms thereof. In no event shall
Merry Land adopt or agree to any other severance or Retention and Severance
Program in addition to the Retention and Severance Program, except as otherwise
specifically set forth in this Agreement. Neither the Retention and Severance
Program nor any other term of this Agreement shall require the Surviving Trust
to continue the employment of any employee of Merry Land after the Effective
Time. As a condition to receiving any payment under this Section 5.10(b), each
Merry Land Schedule 5.10 Employee shall execute a release in the form provided
in the Retention and Severance Program (an "Employment Release").
(c) OPTIONEES.
(i) Prior to the Closing, each individual holding a Merry Land
Option shall have the right to enter into a written agreement with EQR
providing for the cancellation of the vested portion of such option
immediately following the Effective Time for cash in an amount equal to
the difference between the Closing Price of Merry Land Common and the
applicable exercise price set forth in such option, multiplied by the
number of Merry Land Common Shares subject to such option to the extent
such option is vested at the Effective Time, it being understood that
all employees whose employment does not continue after the Effective
Time shall be deemed vested as of the Effective Time. For purposes of
this paragraph, "Closing Price" shall mean the unweighted average
closing price of a Merry Land Common Share, reported as "New York Stock
Exchange Composite Transactions" by The Wall Street Journal (Midwest
Edition) for the ten (10) Trading Days ending on the third Trading Day
immediately prior to the Closing Date. For the purposes of the
paragraph only,
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"Trading Day" shall mean any day on which Merry Land Common Shares are
traded on the NYSE.
(ii) Merry Land and EQR agree to take all appropriate action
to cause each Merry Land Option which remains unexercised as of the
Effective Time (other than those options to be terminated pursuant to
Section 5.10(c)(i)) to be amended to (i) adjust the number of shares
for which such option is thereafter exercisable by multiplying such
number of shares by .54, (ii) adjust the per share exercise price by
dividing such exercise price by .54, and (iii) to provide that such
option shall be exercisable for EQR Common Shares. Accordingly, as more
fully described in the Merry Land Stock Option and Incentive Plan (the
"Plan"), upon conversion of the number of shares and the exercise
price, all Merry Land options shall remain subject to the Plan's terms.
EQR agrees to register the shares subject to the Plan on a registration
statement on Form S-8 filed with the SEC as soon as practicable
following the Effective Time.
(iii) From and after the date hereof the Merry Land Board of
Directors will not authorize, and Merry Land will not grant any
Incentive Stock Options, Nonstatutory Stock Options, Stock Loan Rights,
Director Stock Loan Rights, Dividend Rights, or Restricted Stock Grants
under the Merry Land Stock Option and Incentive Plan. Furthermore, the
Merry Land Board of Directors will not authorize any additional Stock
Appreciation Rights under Section 7 of the Merry Land Stock Option and
Incentive Plan and shall terminate any Stock Appreciation Rights
heretofore granted pursuant to such Section 7 to the extent such
termination will not violate the rights of any optionee and, in lieu
thereof, Merry Land will assist such Optionees in making a "cashless"
exercise of such options through a broker.
(d) WITHHOLDING. Merry Land shall require each employee who
exercises a Merry Land Option, receives Merry Land Shares pursuant to
any existing commitment, receives any payment or loan satisfaction
pursuant to Section 5.10(f) hereof, or otherwise receives any payment
from Merry Land as a result of the transactions contemplated by this
Agreement, to pay to Merry Land in cash or Merry Land Shares an amount
sufficient to satisfy in full Merry Land's obligation to withhold Taxes
incurred by reason of such exercise, issuance or receipt.
(e) PAYMENTS/LOAN FORGIVENESS.
(i) The compensation, benefits, payments, accelerations, share
options and share appreciation rights of the executives and directors
of Merry Land, as set forth in Schedule 2.15 of the Merry Land
Disclosure Letter, shall be satisfied at the Effective Time or as
otherwise set forth in this Agreement in accordance with the terms set
forth in Schedule 2.15 and Schedule 5.10(e) to the Merry Land
Disclosure Letter.
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(ii) All outstanding loans made to the employees and directors
of Merry Land under the Merry Land Stock Loan Program shall be forgiven
at the Effective Time; provided, however, that 60% of any dividends or
distributions declared on the Merry Land Common Shares after the date
hereof, where the record date for such dividends or distributions is
prior to the Effective Time (other than the Distribution), shall
continue to be applied towards the repayment of such loans.
As a condition to each employee and director of Merry Land receiving
compensation, benefits, payments, accelerations, share options, appreciation
rights and loan forgiveness described in this Section 5.10(e), such employee or
director shall execute an Employment Release.
5.11 TAX INDEMNIFICATION. If the compensation, benefits, payment
accelerations, share option acceleration, appreciation rights or loan
forgiveness received by an employee of Merry Land who will receive a Severance
Payment (as to each such employee or director, the "Payments") will be subject
to the excise tax imposed by Section 4999 of the Code and any successor
provision, or any comparable provision of state or local tax law (collectively,
"Section 4999"), or any interest, penalty or addition to tax will be incurred by
such persons with respect to such excise tax (such excise tax, together with any
such interest, penalty or addition to tax being referred to herein as the
"Excise Tax"), then, those employees of Merry Land who will receive Severance
Payments shall receive an additional cash payment (a "Gross-Up Payment") in an
amount such that after the payment by such employee of Merry Land of all taxes,
interest, penalties, and additions to tax imposed with respect to the Gross-Up
Payment (including, without limitation, any income tax, employment tax payable
by the employee and Excise Tax imposed upon the Gross-Up Payment), such employee
of Merry Land retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such Payments; provided, however, that in no event shall the
aggregate amount of Gross-Up Payments paid in accordance with this Section 5.11
exceed $16,250,000 and in no event shall the aggregate payments made to any
individual pursuant to this Section 5.11 exceed the Gross-Up Payment (i.e., the
amount necessary to offset the amount of the Excise Tax). Schedule 5.11 to the
Merry Land Disclosure Letter sets forth the name of each individual who shall be
entitled to a Gross-Up Payment pursuant to this Section 5.11, as well as the
estimated amount of each such Gross-Up Payment. In calculating the Gross-Up
Payment, each Gross-Up Payment recipient will be deemed to pay Federal income
taxes at the highest marginal rate of Federal income taxation as of the year in
which the Gross-Up Payment is to be made and state and local taxes at the
highest marginal rate of taxation in the state or locality of the Gross-Up
Payment recipient's state of residence as of the date the Effective Time occurs,
net of the maximum reduction in Federal income taxes which could be obtained
from deducting the state and local taxes if paid in the year in which the
Effective Time occurs.
5.12 INDEMNIFICATION.
(a) From and after the Effective Time, EQR shall provide
exculpation and indemnification for each person who is now or has been at any
time prior to the date hereof or who
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becomes prior to the Effective Time, an officer or director of Merry Land or any
Merry Land Subsidiary (including X. Xxxxxxx Houston, in his capacity as trustee
under the ESOP) (the "Indemnified Parties") which is the same as the exculpation
and indemnification provided to the Indemnified Parties by Merry Land (including
advancement of expenses, if so provided) immediately prior to the Effective Time
in its Amended and Restated Articles of Incorporation and Bylaws, the ESOP or
any other Employee Plan as in effect at the close of business on the date
hereof; provided, that such exculpation and indemnification covers actions on or
prior to the Effective Time, including, without limitation, all transactions
contemplated by this Agreement and; provided further, that EQR shall not be
obligated under any circumstances to provide exculpation or indemnification for
any officer or director of Spinco in their capacity as an officer or a director
of Spinco. EQR shall obtain and maintain in effect at the Effective Time and
continuing until the sixth anniversary thereof "run-off" directors and officers
liability insurance with a coverage amount and other terms and conditions
comparable to Merry Land's current directors and officers liability insurance
policy covering the directors and officers of Merry Land with respect to their
service as such prior to the Effective Time. The premium for such policy shall
be paid in full at the Effective Time. If EQR has directors' and officers'
insurance, such insurance shall apply to all directors and officers of EQR
serving as such during the period such coverage is in effect.
(b) The provisions of this Section 5.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of EQR and Merry Land. EQR agrees to pay all costs and
expenses (including fees and expenses of counsel) that may be incurred by any
Indemnified Party or his or her heirs or his or her personal representatives in
successfully enforcing the indemnity or other obligations of EQR under this
Section 5.12. The provisions of this Section 5.12 shall survive the Merger and
are in addition to any other rights to which an Indemnified Party may be
entitled.
(c) In the event that the Surviving Trust or any of its
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.12, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each trustee, director and officer
covered hereby.
5.13 ASSET EXCHANGE AND PURCHASE AND SALE AGREEMENTS. Merry Land shall
(i) cause Spinco to execute the Purchase and Sale Agreement, (ii) execute, and
cause Spinco to execute, the Asset Exchange Agreement and any other agreement
related to the transactions contemplated hereby to which Merry Land or Spinco is
a party and (iii) use its commercially reasonable efforts to obtain all material
consents required to be obtained by Merry Land and the Merry Land Subsidiaries
from third parties in order to perform their respective obligations under the
Purchase and Sale Agreement, the Asset Exchange Agreement and the other
agreements contemplated thereby to which Merry Land
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or Spinco is a party. Merry Land shall keep EQR currently apprised of its
progress in obtaining such consents. Merry Land shall inform EQR promptly if it
appears unlikely that any given consent will be obtained. Merry Land shall
cooperate with EQR in taking any action to either obtain such consents or to put
Merry Land and the Merry Land Subsidiaries in a position so that such consents
are no longer required.
5.14 DECLARATION OF DIVIDENDS AND DISTRIBUTIONS. From and after the
date of this Agreement, Merry Land shall not make any dividend or distribution
to its shareholders without the prior written consent of EQR; provided, however,
the written consent of EQR shall not be required for (i) the distribution of
Spinco shares pursuant to the Spin-Off , (ii) the authorization and payment of
quarterly distributions with respect to the Merry Land Series A Shares of up to
$0.4375 per share, the Merry Land Series B Shares of up to $0.5513 per share,
the Merry Land Series C Shares of up to $0.5375 per share, the Merry Land Series
D Shares of up to $1.0363 per share, and the Merry Land Series E Shares of up to
$0.4765 per share or (iii) the authorization and payment of quarterly
distributions with respect to the Merry Land Common Shares (and, if required
under the Amended and Restated Partnership Agreement of Merry Land DownREIT,
with respect to the DownREIT Units), on a per share (or per unit) basis, of up
to$0.41 for the third and fourth quarters of 1998, provided that the record
dates for such distributions shall be September 16, 1998, and, provided that the
Merger has not previously been consummated, December 16, 1998, respectively.
5.15 TRANSFER OF MERRY LAND ASSETS AFTER EFFECTIVE TIME. Merry Land
acknowledges that immediately after the Effective Time, the real properties
owned by Merry Land and the Merry Land Subsidiaries (or the equity interests in
the entity then holding such properties) and the equity interests in certain of
the Merry Land Subsidiaries shall be transferred through one or more
transactions to ERP Operating Partnership, subject to all liabilities of Merry
Land and the Merry Land Subsidiaries, as a capital contribution in exchange for
a number of units and preferred units of ERP Operating Partnership equal to the
number of common shares of beneficial interest and preferred shares of
beneficial interest of the Surviving Trust issued in the Merger to the owners of
the shares of beneficial interest of Merry Land in the Merger; provided,
however, that Merry Land makes no representation or warranty regarding EQR's
ability to accomplish the foregoing, the costs that would be incurred, whether
under Section 5.9 hereof or otherwise, in connection therewith or any consents
or approvals that may be required therefor.
5.16 NOTICES.
(a) Within the time period provided for in the Second Amended
and Restated Declaration of Trust of EQR, as amended as provided in the Articles
of Merger, EQR shall notify the holders of convertible Merry Land Preferred
Shares (which have been converted into preferred shares of EQR pursuant to the
Merger) of the conversion rate applicable to such shares after giving effect to
the Merger.
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(b) Each party shall provide such notice to its shareholders
of the Merger and other transactions contemplated hereby as is required under
Maryland law and Georgia law.
5.17 RESIGNATIONS. On the Closing Date, if requested by EQR, Merry Land
shall cause the directors and officers of Merry Land and each of the Merry Land
Subsidiaries (excluding Spinco and any Subsidiaries thereof) to submit their
resignations from such positions, effective as of the Effective Time.
5.18 10b-17 NOTICE. Merry Land shall give any notice required under
Rule 10b-17 promulgated under the Exchange Act of the record date for
determining the holders of Merry Land Common Shares entitled to receive the
distribution of the shares of Spinco owned by Merry Land. The parties shall
co-operate in establishing the date for the Closing Date in order to facilitate
compliance with said Rule.
5.19 ESOP. With respect to the ESOP, prior to the Effective Time, Merry
Land shall, in accordance with ERISA and any other applicable law, use its best
efforts to cause (i) the satisfaction of the ESOP's outstanding acquisition
loan; (ii) the termination of the ESOP; and (iii) the completion of termination
distributions to all participants and beneficiaries of the ESOP. Prior to the
Effective Time, Merry Land shall make no accruals, contributions or other
payments to the ESOP other than accruals, contributions or other payments in
respect of the Monthly ESOP Accrual or as otherwise contemplated by this Section
5.19.
5.20 VALUATION OF DISTRIBUTION. For the purposes of valuing the
Distribution in order to adjust the applicable conversion prices of the Merry
Land Series A, B and C Shares (according to the terms of such shares), Merry
Land hereby covenants that such valuation shall be such that when the adjusted
conversion price of such shares is multiplied by the Exchange Ratio, such number
shall be no greater than the conversion price of such shares on the date of this
Agreement multiplied by .54.
5.21 MERGER OF MERRY LAND DOWNREIT. Merry Land hereby acknowledges
that, prior to the Effective Time, EQR may desire to effectuate (i) the merger
of Merry Land DownREIT with and into ERP Operating Partnership or an affiliate
of ERP Operating Partnership, (ii) the contribution by the limited partners of
Merry Land DownREIT of their DownREIT Units to ERP Operating Partnership in
exchange for limited partnership interests in ERP Operating Partnership, and/or
(iii) another transaction or transactions related to the ownership and/or
operation of Merry Land DownREIT. Merry Land hereby undertakes to use its best
efforts to cooperate with and assist EQR (at EQR's request) in the effectuation
of any or all of the above transactions, it being understood, however, that the
consummation of any such transaction is not a condition to the Merger or the
other transactions contemplated by this Agreement.
5.22 TRANSFER OF SERVICES COMPANY SHARES. At the Closing, Merry Land
shall cause the owners (other than Merry Land or a wholly-owned subsidiary of
Merry Land) to transfer to such
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person or persons as EQR shall designate by written notice delivered to Merry
Land prior to the Closing, all of the shares of Services Corp. owned by them,
constituting all the outstanding shares of the Services Corp. which are not
owned by Merry Land or a wholly-owned subsidiary of Merry Land for an aggregate
consideration of $1.00, unless Services Corp. was dissolved prior to the Closing
Date.
5.23 CERTAIN PROPERTIES.
(a) EQR hereby acknowledges that five (5) specified assets, as
set forth in the Asset Exchange Agreement and Purchase and Sale Agreement
attached hereto as Exhibits "B" and "F", respectively (collectively, the "Spinco
Assets"), are to be either transferred by Merry Land to Spinco prior to the
consummation of the Merger pursuant to the Asset Exchange Agreement or sold to
Spinco by ERP Operating Partnership or an Affiliate of ERP Operating Partnership
pursuant to the Purchase and Sale Agreement subsequent to the Effective Time.
EQR agrees that Merry Land shall have the right to determine which of the one or
more five (5) Spinco Assets that will be transferred to Spinco pursuant to the
Asset Exchange Agreement and which of the five (5) Spinco Assets that will be
sold to Spinco pursuant to the Purchase and Sale Agreement subject to the
approval of EQR, which will not be unreasonably withheld; provided, however,
that in no event shall the excess of (i) the Agreed Value (as defined in the
Purchase and Sale Agreement) of the Spinco Assets sold to Spinco pursuant to the
Purchase and Sale Agreement over (ii) the adjusted tax basis of such assets as
of the date such assets are sold to Spinco exceed the Gain Limitation (as
defined below). Schedule 5.23A of the EQR and Merry Land Disclosure Letters sets
forth the current allocation of the Spinco Assets as between those Spinco Assets
which will be transferred to Spinco pursuant to the Asset Exchange Agreement and
those Spinco Assets which will be sold to Spinco pursuant to the Purchase and
Sale Agreement; provided, however, that if the parties hereinafter agree to a
different allocation of Spinco Assets pursuant to this Section 5.23, Schedule
5.23A shall be amended to reflect such different allocation.
(b) For purposes of this Section 5.23, the "Gain Limitation"
shall mean the amount by which (i) the distributions that EQR is expected to pay
to the former holders of Merry Land Shares on the first dividend payment date of
EQR following the Closing (determined using the estimated dividend rates set
forth on Schedule 5.23B to the EQR and Merry Land Disclosure Letters), exceeds
(ii) the "Short Period Merry Land E&P" (as defined below). The parties further
acknowledge and agree that in the event the Effective Time occurs on the same
date that Merry Land has paid a dividend on the Merry Land Shares, then the Gain
Limitation shall be zero. For purposes of this Section 5.23, the "Short Period
Merry Land E&P" shall mean (i) the "earnings and profits" of Merry Land (as
determined under the Code and agreed upon by EQR and Merry Land) for the period
beginning on January 1 of the year of Closing through the Closing Date
(excluding any gain on the sale of the Spinco Assets recognized by Xxxxxxx and
any deductions for any Payments and Gross-Up Payments made by Xxxxxxx)
multiplied by (ii) a fraction, the numerator of which is the number of days in
the calendar year from the Closing Date through the end of the calender quarter
in which the Closing Date occurs and the denominator of which is 360 less the
number of days in
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the calendar year from the Closing Date to December 31 of the year of Closing.
Schedule 5.23B to the EQR and Merry Land Disclosure Letters sets forth an
illustration of the foregoing formula.
(c) Notwithstanding to the foregoing, the Gain Limitation
shall be reduced (but not below zero) by the amount of any and all Payments and
Gross-Up Payments (as defined in Section 5.11 hereof), to the extent any such
items are deductible by Merry Land for Federal income tax purposes. The parties
further agree that in the event that the earnings and profits of Merry Land (as
agreed upon by EQR and Merry Land) for the period beginning on January 1 of the
year of Closing and ending on the Closing Date are greater than zero after
taking into account all income and deductions for such period (including,
without limitation, any gain recognized by Merry Land as a result of the
transfer of Spinco Assets to Spinco under the Asset Exchange Agreement and any
distribution of Spinco common shares to the holders of the Merry Land Common
Shares), then to the extent permitted under Section 857(b)(3)(D) of the Code,
Merry Land shall treat the amount (if any) of such earnings and profits in
excess of zero as an undistributed capital gain in accordance with Section
857(b)(3)(D) of the Code.
ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) SHAREHOLDER APPROVALS. This Agreement, the Merger and the
transactions contemplated by this Agreement shall have been approved
and adopted by the Shareholder Approvals.
(b) LISTING OF SHARES. The NYSE shall have approved for
listing the shares of beneficial interest of the Surviving Trust to be
issued in the Merger and to be listed on the NYSE after the Effective
Time, subject to official notice of issuance.
(c) REGISTRATION STATEMENT. The Registration Statement shall
have become effective under the Securities and Exchange Act and shall
not be the subject of any stop order or proceedings by the SEC seeking
a stop order.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other
transactions contemplated hereby shall be in effect.
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(e) BLUE SKY LAWS. The Surviving Trust shall have received all
state securities or "blue sky" permits and other authorizations
necessary (i) to issue shares of beneficial interest to the
shareholders of Merry Land.
(f) OPINION OF MARYLAND COUNSEL. EQR and Merry Land shall have
received the opinion of Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP, to the
effect that this Agreement and the Articles of Merger are enforceable
under Maryland law, that all requisite approval of the Merger by the
shareholders of EQR has been obtained, and as to such other matters as
are customary in a transaction such as the Merger.
(g) OPINION OF GEORGIA COUNSEL. EQR and Merry Land shall have
received the opinion of Hull, Xxxxxx, Xxxxxx & Xxxxxxx, P.C. to the
effect that this Agreement and the Certificate of Merger are
enforceable under Georgia law, that all the requisite approvals of the
Merger by the shareholders of Merry Land have been obtained, and as to
such other matters as are customary in transactions such as the Merger.
6.2 CONDITIONS TO OBLIGATIONS OF EQR. The obligations of EQR to effect
the Merger and to consummate the other transactions contemplated to occur on the
Closing Date are further subject to the following conditions, any one or more of
which may be waived in writing by EQR:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Merry Land set forth in this Agreement shall be true and
correct as of the Closing Date (other than changes thereto which
occurred solely by reason of the Spin-Off, except with respect to the
representations and warranties provided in Section 2.14), as though
made on and as of the Closing Date, except to the extent the
representation or warranty is expressly limited by its terms to another
date, and EQR shall have received a certificate (which certificate may
be qualified by Knowledge to the same extent as the representations and
warranties of Merry Land contained herein are so qualified) signed on
behalf of Merry Land by the chief executive officer or the chief
financial officer of Merry Land, in such capacity, to such effect;
provided, however, that no representation or warranty shall be deemed
to have been breached as a result of any act of Spinco and its
Subsidiaries taken or omitted to be taken after the date of this
Agreement, if such act or omission was taken or omitted to be taken
without causing Spinco to breach Section 4.2 of this Agreement. For the
purposes of Section 6.2(a), the representations and warranties of Merry
Land shall be deemed true and correct unless the breach of such
representations and warranties, in the aggregate, could reasonably be
expected to have a Merry Land Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF MERRY LAND. Merry Land shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and EQR shall have received a certificate signed on behalf of Merry
Land by the chief executive officer or the chief financial officer of
Merry Land, in such capacity, to such effect.
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(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Merry Land Material Adverse Change and EQR
shall have received a certificate of the chief executive officer or
chief financial officer of Merry Land, in such capacity, certifying to
such effect.
(d) OPINION RELATING TO REIT AND PARTNERSHIP STATUS. EQR shall
have received an opinion of Hull, Xxxxxx, Xxxxxx & Xxxxxxx, P.C., and,
if requested by EQR, Xxxxxx Xxxxxxxx LLP, reasonably satisfactory to
EQR, that, (i) commencing with its taxable year ended December 31,
1987, Merry Land was organized and has operated in conformity with the
requirements for qualification as a REIT under the Code (with customary
exceptions, assumptions and qualifications and based upon customary
representations) and (ii) each Merry Land Subsidiary which is a
partnership, joint venture or limited liability company has not been at
any time since it became a Merry Land Subsidiary treated for federal
income tax purposes as an association taxable as a corporation.
(e) OTHER TAX OPINION. EQR shall have received an opinion
dated the Closing Date from counsel to EQR, based upon customary
certificates and representation letters, and dated the Closing Date, to
the effect that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code.
(f) COMFORT LETTER. EQR shall have received the letter from
the accountants for Merry Land required by Section 5.8 hereof.
(g) OPINION OF COUNSEL. EQR shall have received an opinion
from Hull, Xxxxxx, Xxxxxx & Xxxxxxx, P.C. and Piper & Marbury L.L.P. or
other counsel to Merry Land reasonably satisfactory to EQR dated the
Closing Date in form and substance reasonably satisfactory to EQR
addressing the matters set forth in Exhibit "H" hereto.
(h) CONSENTS. Except as set forth on Schedule 6.2 to the Merry
Land Disclosure Letter, all consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties
necessary in connection with the consummation of the transactions
contemplated by this Agreement shall have been obtained, other than
such consents and waivers from third parties, which, if not obtained,
would not result, individually or in the aggregate, in an EQR Material
Adverse Effect or a Merry Land Material Adverse Effect.
(i) ASSET EXCHANGE AGREEMENT. Merry Land and Spinco shall have
entered into the Asset Exchange Agreement and each of the transactions
contemplated thereby shall have been completed to the extent required
to be completed thereunder as of such time.
(j) PREFERRED STOCK PURCHASE AGREEMENT. Merry Land shall have
executed and delivered the Preferred Stock Purchase Agreement.
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(k) DEVELOPMENT AGREEMENT. Spinco shall have executed and
delivered the Development Agreement.
(l) PURCHASE AND SALE AGREEMENT. Spinco shall have executed
and delivered the Purchase and Sale Agreement.
6.3 CONDITIONS TO OBLIGATIONS OF MERRY LAND. The obligation of Merry
Land to effect the Merger and to consummate the other transactions contemplated
to occur on the Closing Date is further subject to the following conditions, any
one or more of which may be waived in writing by Merry Land:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of EQR set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date, as though
made on and as of the Closing Date, except to the extent the
representation or warranty is expressly limited by its terms to another
date, and Merry Land shall have received a certificate (which
certificate may be qualified by Knowledge to the same extent as the
representations and warranties of EQR contained herein are so
qualified) signed on behalf of EQR by the chief executive officer and
the chief financial officer of such party to such effect. For the
purposes of this Section 6.3(a), the representations and warranties of
EQR shall be deemed true and correct unless the breach of such
representations and warranties, in the aggregate, could reasonably be
expected to have an EQR Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF EQR. EQR shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and Merry Land shall have received a certificate of EQR signed on
behalf of EQR by the chief executive officer or the chief financial
officer of EQR, in such capacity, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no EQR Material Adverse Change and Merry Land
shall have received a certificate of the chief executive officer or
chief financial officer of EQR, in such capacity, certifying to such
effect.
(d) COMFORT LETTER. Merry Land shall have received the letter
from the accountants for EQR required by Section 5.8 hereof.
(e) OPINION RELATING TO REIT STATUS AND PARTNERSHIP STATUS.
Merry Land shall have received an opinion of Xxxxxxx & Xxxxx,
reasonably satisfactory to Merry Land, that, commencing with its
taxable year ended December 31, 1992, (A) EQR was organized and has
operated in conformity with the requirements for qualification as a
REIT under the Code and (B) ERP Operating Partnership has been during
and since 1993 and continues to
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be, treated for federal income tax purposes as a partnership, and not
as a corporation or association taxable as a corporation (with
customary exceptions, assumptions and qualifications and based upon
customary representations).
(f) OTHER TAX OPINION. Merry Land shall have received an
opinion dated the Closing Date from Piper & Marbury L.L.P., based upon
customary certificates and representation letters and dated the Closing
Date, to the effect that the Merger will qualify as a reorganization
under the provisions of Section 368(a) of the Code.
(g) OPINION OF COUNSEL. Merry Land shall have received an
opinion from Xxxxxxx & Xxxxx or other counsel to EQR reasonably
satisfactory to Merry Land dated the Closing Date in form and substance
reasonably satisfactory to Merry Land addressing the matters set forth
in Exhibit "I" hereto dated the Closing Date.
(h) CONSENTS. All consents and waivers (including, without
limitation, waivers or rights of first refusal) from third parties
necessary in connection with the consummation of the transactions
contemplated hereby shall have been obtained, other than such consents
and waivers from third parties, which, if not obtained, would not
result, individually or in the aggregate, in an EQR Material Adverse
Effect or a Merry Land Material Adverse Effect.
(i) PREFERRED STOCK PURCHASE AGREEMENT. ERP Operating
Partnership shall have executed and delivered the Preferred Stock
Purchase Agreement.
(j) DEVELOPMENT AGREEMENT. ERP Operating Partnership shall
have executed and delivered the Development Agreement.
(k) PURCHASE AND SALE AGREEMENT. ERP Operating Partnership
shall have executed and delivered the Purchase and Sale Agreement.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the filing of the Articles of Merger with the Department, whether before or
after either of the Shareholder Approvals are obtained:
(a) by mutual written consent duly authorized by both the
Board of Trustees of EQR and Board of Directors of Merry Land;
(b) by EQR, upon a breach of any representation, warranty,
covenant, obligation or agreement on the part of Merry Land set forth
in this Agreement, in either case such that
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the conditions set forth in Section 6.2(a) or Section 6.2(b), as the
case may be, would be incapable of being satisfied by February 28, 1999
(or as otherwise extended);
(c) by Merry Land, upon a breach of any representation,
warranty, covenant obligation or agreement on the part of EQR set forth
in this Agreement, in either case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b), as the case may be, would be
incapable of being satisfied by February 28, 1999 (or as otherwise
extended);
(d) by either EQR or Merry Land, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent
authority preventing the consummation of the Merger shall have become
final and nonappealable;
(e) by either EQR or Merry Land, if the Merger shall not have
been consummated before February 28, 1999; provided, in the case of
termination pursuant to this Section 7.1(e), the terminating party
shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to
the occurrence of the failure referred to in this Section;
(f) by either EQR or Merry Land if, upon a vote at a duly held
Merry Land Shareholders Meeting or any adjournment thereof, the Merry
Land Shareholder Approvals shall not have been obtained as contemplated
by Section 5.1;
(g) by either EQR or Merry Land if, upon a vote at a duly held
EQR Shareholders Meeting or any adjournment thereof, the EQR
Shareholder Approvals shall not have been obtained as contemplated by
Section 5.1;
(h) by Merry Land, if prior to the Merry Land Shareholders
Meeting, the Board of Directors of Merry Land shall have withdrawn or
modified its approval or recommendation of the Merger or this Agreement
in connection with, or approved or recommended, a Superior Acquisition
Proposal; and
(i) by EQR if (i) prior to the Merry Land Shareholders
Meeting, the Board of Directors of Merry Land shall have withdrawn or
modified in any manner adverse to EQR its approval or recommendation of
the Merger or this Agreement in connection with, or approved or
recommended, any Superior Acquisition Proposal, or (ii) Merry Land
shall have entered into a definitive agreement with respect to any
Acquisition Proposal.
7.2 CERTAIN FEES AND EXPENSES. If this Agreement shall be terminated
(i) pursuant to Section 7.1(h) or 7.1(i), then Merry Land will pay EQR (provided
Merry Land was not entitled to terminate this Agreement pursuant to Section
7.1(c) at the time of such termination) a fee equal to the Break-Up Fee (as
defined below), or (ii) pursuant to Section 7.1(b) or 7.1(f), then Merry Land
will pay EQR (provided Merry Land was not entitled to terminate this Agreement
pursuant to
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Section 7.1(c) at the time of such termination) an amount equal to the Break-Up
Expenses (as defined below). If this Agreement shall be terminated pursuant to
Section 7.1(c) or 7.1(g), then EQR will pay Merry Land (provided EQR was not
entitled to terminate this Agreement pursuant to Section 7.1(b) at the time of
such termination), an amount equal to the Break-Up Expenses. If the Merger is
not consummated (other than due to the termination of this Agreement pursuant to
Section 7.1(a), 7.1(c) or 7.1(g), or by EQR pursuant to 7.1(e), and at the time
of the termination of this Agreement an Acquisition Proposal has been received
by Merry Land, and either prior to the termination of this Agreement or within
twelve (12) months thereafter Merry Land or any Merry Land Subsidiary enters
into any written Acquisition Proposal which is subsequently consummated (whether
or not such Acquisition Proposal is the same Acquisition Proposal which had been
received at the time of the termination of this Agreement), then Merry Land
shall pay the Break-Up Fee to EQR. The payment of the Break-Up Fee shall be
compensation and liquidated damages for the loss suffered by EQR as a result of
the failure of the Merger to be consummated and to avoid the difficulty of
determining damages under the circumstances and neither party shall have any
other liability to the other after the payment of the Break-Up Fee. The Break-Up
Fee shall be paid by Merry Land to EQR, or the Break-Up Expenses shall be paid
by Merry Land to EQR or EQR to Merry Land (as applicable), in immediately
available funds within fifteen (15) days after the date of the event giving rise
to the obligation to make such payment occurred. As used in this Agreement,
"Break-Up Fee" shall be an amount equal to the lesser of (i) $45,000,000 plus
Break-Up Expenses (the "Base Amount") and (ii) the sum of (A) the maximum amount
that can be paid to EQR without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by independent
accountants to EQR, and (B) in the event EQR receives a letter from outside
counsel (the "Break-Up Fee Tax Opinion") indicating that EQR has received a
ruling from the IRS holding that EQR's receipt of the Base Amount would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code (the "REIT Requirements") or
that the receipt by EQR of the excess of the Base Amount over the amount payable
in clause (A) following the receipt of and pursuant to such ruling would not be
deemed constructively received prior thereto, the Base Amount less the amount
payable under clause (A) above. In the event that EQR is not able to receive the
full Base Amount, Merry Land shall place the unpaid amount in escrow and shall
not release any portion thereof to EQR unless and until Merry Land receives any
one or combination of the following: (i) a letter from EQR's independent
accountants indicating the maximum amount that can be paid at that time to EQR
without causing EQR to fail to meet the REIT Requirements or (ii) a Break-Up Fee
Tax Opinion, in which event Merry Land shall pay to EQR the lesser of the unpaid
Base Amount or the maximum amount stated in the letter referred to in (i) above.
Merry Land's obligation to pay any unpaid portion of the Break-Up Fee shall
terminate three years from the date of this Agreement. The "Break-Up Expenses"
payable to EQR or Merry Land, as the case may be (the "Recipient"), shall be an
amount equal to the lesser of (i) $5,000,000, (ii) the Recipient's out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, all attorneys', accountants'
and investment bankers' fees and expenses) and (iii) the sum
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of (A) the maximum amount that can be paid to the Recipient without causing it
to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code
determined as if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to the Recipient, and (B) in
the event the Recipient receives a Break-Up Fee Tax Opinion indicating that the
Recipient has received a ruling from the IRS holding that the Recipient's
receipt of the Expense Fee would either constitute Qualifying Income or would be
excluded from gross income within the meaning of the REIT Requirements or that
receipt by the Recipient of the excess of the Expense Fee over the amount
payable under clause (A) following the receipt of and pursuant to such ruling
would not be deemed constructively received prior thereto, the Expense Fee less
the amount payable under clause (A) above. In the event that the Recipient is
not able to receive the full Expense Fee, the Payor shall place the unpaid
amount in escrow and shall not release any portion thereof to the Recipient
unless and until the Payor receives any one or combination of the following: (i)
a letter from the Recipient's independent accountants indicating the maximum
amount that can be paid at that time to the Recipient without causing the
Recipient to fail to meet the REIT Requirements or (ii) a Break-Up Fee Tax
Opinion, in which event the Payor shall pay to the Recipient the lesser of the
unpaid Expense Fee or the maximum amount stated in the letter referred to in (i)
above. The obligation of EQR or Merry Land, as applicable ("Payor"), to pay any
unpaid portion of the Break Up Expenses shall terminate three years from the
date of this Agreement.
7.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Merry Land or EQR as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of EQR, or Merry Land, other than the last sentence of
Section 5.2, Section 7.2, this Section 7.3 and Article 8; provided that (a) if
this Agreement is terminated by EQR pursuant to Section 7.1(b), Merry Land shall
not be entitled to any of the benefits of Section 7.2, or (b) if this Agreement
is terminated by Merry Land pursuant to Section 7.1(c), EQR shall not be
entitled to any of the benefits of Section 7.2.
7.4 AMENDMENT. This Agreement may be amended by the parties in writing
by action of their respective Boards of Trustees and Board of Directors at any
time before or after any Shareholder Approvals are obtained and prior to the
filing of the Articles of Merger with the Department or Certificate of Merger
with the Secretary of State; provided, however, that, after the Shareholder
Approvals are obtained, no such amendment, modification or supplement shall be
made which by law requires the further approval of shareholders without
obtaining such further approval.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.4, waive compliance with any of the agreements or conditions of the other
party contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any
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party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE 8
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
8.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to EQR, to: Equity Residential Properties Trust
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax No. (000) 000-0000
with a copy to: Xxxxxxx & Xxxxx
000 X. XxXxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax No. (000) 000-0000
(b) if to Merry Land, to: Merry Land & Investment Company, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx
Fax No. (000) 000-0000
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with a copy to: Hull, Xxxxxx, Xxxxxx & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Trust Company Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
and: Piper & Marbury L.L.P.
Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: X.X. Xxxxx, Xx., Esq.
All notices shall be deemed given only when actually received.
8.3 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Merry Land Disclosure Letter, the EQR Disclosure Letter, the Confidentiality
Agreement and the other agreements entered into in connection with the
Transactions (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and (b) except as provided in
Section 5.10 (with respect to the Schedule 5.10 Employees who do not receive
Retention and Severance Program Letters) and Section 5.11 ("Third Party
Provisions"), are not intended to confer upon any person other than the parties
hereto any rights or remedies. The Third Party Provisions may be enforced by the
beneficiaries thereof or on behalf of the beneficiaries thereof by the directors
of Merry Land who had been directors of Merry Land prior to the Effective Time.
8.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
8.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned or delegated, in whole or
in part, by operation of law or
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otherwise by any of the parties without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
8.8 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Illinois or Georgia or in any Illinois or Georgia State
court located in Illinois or Georgia, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself (without making such submission exclusive)
to the personal jurisdiction of any federal court located in the State of
Illinois or Georgia or any Illinois or Georgia State court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
8.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.10 NON-RECOURSE TO DIRECTORS, TRUSTEES AND OFFICERS.
(a) This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Merry Land by the undersigned in his capacity as a
director or officer of Merry Land, which has been formed as a Georgia
corporation pursuant to Articles of Incorporation dated as of January 25, 1966,
as amended and restated, and not individually, and neither the directors,
officers nor shareholders of Merry Land shall be personally bound or have any
personal liability hereunder. EQR shall look solely to the assets of Merry Land
for satisfaction of any liability of Merry Land with respect to this Agreement
and any other agreements to which it is a party. EQR will not seek recourse or
commence any action against any of the shareholders of Merry Land or any of
their personal assets, and will not commence any action for money judgments
against any of the directors or officers of Merry Land or seek recourse against
any of their personal assets, for the performance or payment of any obligation
of Merry Land hereunder or thereunder.
(b) This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of EQR by the undersigned in his capacity as a trustee or
officer of EQR, which has been formed as a Maryland real
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estate investment trust pursuant to an Amended and Restated Declaration of Trust
of EQR dated as of November 2, 1992, as amended and restated, and not
individually, and neither the trustees, officers nor shareholders of EQR shall
be personally bound or have any personal liability hereunder. Merry Land shall
look solely to the assets of EQR for satisfaction of any liability of EQR with
respect to this Agreement and any other agreements to which it is a party. Merry
Land will not seek recourse or commence any action against any of the
shareholders of EQR or any of their personal assets, and will not commence any
action for money judgments against any of the trustees or officers of EQR or
seek recourse against any of their personal assets, for the performance or
payment of any obligation of EQR hereunder or thereunder.
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IN WITNESS WHEREOF, EQR and Merry Land have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the date
first written above.
EQUITY RESIDENTIAL PROPERTIES
TRUST
By: /s/ Xxxxxxx X. Xxxxxxx XX
Name: Xxxxxxx X. Xxxxxxx XX
Title: President and Chief
Executive Officer
MERRY LAND & INVESTMENT
COMPANY, INC.
By: /s/ X. Xxxxxxx Houston
Name: X. Xxxxxxx Houston
Title: President
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