ASSET EXCHANGE AGREEMENT
ASSET EXCHANGE AGREEMENT ("Agreement"), dated as of October 15, 1998,
by and between MERRY LAND & INVESTMENT COMPANY, INC., a Georgia corporation
("Merry Land"), and MERRY LAND PROPERTIES, INC., a Georgia corporation
("Merry Land Properties").
RECITALS:
WHEREAS, Merry Land and Equity Residential Properties Trust, a
Maryland real estate investment trust ("EQR"), have entered into an
Agreement and Plan of Merger dated as of July 8, 1998, as amended by the
First Amendment to Agreement and Plan of Merger dated as of September 4,
1998 (the "Merger Agreement"), providing for the merger of EQR with Merry
Land (the "Merger"), with EQR continuing as the surviving entity of the
Merger, upon the terms and subject to the conditions set forth in the
Merger Agreement;
WHEREAS, the Board of Directors of Merry Land has determined that
Merry Land can maximize the value of certain of its assets by not including
them in the Merger, and EQR has indicated that it has no interest in
acquiring such assets;
WHEREAS, the Board of Directors of Merry Land has deemed it
appropriate and advisable, in order to enhance value for the shareholders
of Merry Land, prior to the Merger and as provided in certain Resolutions
adopted by the Board of Directors of Merry Land, to (i) transfer to Merry
Land Properties certain of the assets and liabilities of Merry Land and
(ii) distribute, immediately prior to the Merger, as a taxable distribution
to the holders of common stock, $0.01 par value, of Merry Land (the "Merry
Land Common Stock"), all of the outstanding shares of common stock, $0.01
par value, of Merry Land Properties owned by Merry Land (the "Merry Land
Properties Common Stock");
WHEREAS, Merry Land is prepared to enter into the "Transfer" (as such
term is hereinafter defined) in consideration of the issuance to Merry Land
of the Merry Land Properties Common Stock and the "Preferred Stock" (as
such term is hereinafter defined) and the execution and delivery by Merry
Land Properties of the "Senior Debt Documents" (as such term is hereinafter
defined) and the "Subordinated Debt Documents" (as such term is hereinafter
defined);
WHEREAS, the Board of Directors of Merry Land Properties has deemed it
appropriate and advisable, in order to enhance value for the shareholders
of Merry Land Properties, to accept the Transfer and, in consideration
thereof, issue the Merry Land Properties Common Stock and the Preferred
Stock to Merry Land and execute and deliver to Merry Land the Senior Debt
Documents and the Subordinated Debt Documents;
WHEREAS, following the Transfer and distribution, EQR shall acquire
the remaining businesses, operations, assets and liabilities of Merry Land
and its remaining direct and indirect subsidiaries pursuant to the Merger;
and
WHEREAS, Merry Land and Merry Land Properties have determined that it
is necessary and desirable to set forth the transactions required to effect
such contribution and distribution and to set forth other agreements that
will govern certain other matters following such distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Action" means any action, suit, arbitration, inquiry, regulatory
action, enforcement action proceeding or investigation by or before any
court, any Governmental Authority or any arbitration tribunal, including
without limitation, matters arising under or in connection with
Environmental Laws (including matters relating to Pre-Existing
Environmental Matters).
"Affiliate" means, when used with respect to a specified person,
another person that, directly or indirectly, controls, is controlled by, or
is under common control with, the person specified.
"Agent" means the distribution agent to be appointed by Merry Land to
distribute to the Holders the shares of Merry Land Properties Common Stock
pursuant to the Distribution.
"Agreed Value" means the agreed value for each of the Properties, as
set forth in Schedule 5.23A to the Merry Land Disclosure Letter (as said
Schedule may have been amended pursuant to the Merger Agreement), which
identifies a separate Agreed Value for each of the Apartment Projects,
together with an aggregate Agreed Value for all of the Properties combined.
"Agreed Value Balance Sheet" means a balance sheet reflecting the
assets (determined in accordance with the Agreed Values for said assets)
and Liabilities of Merry Land Properties immediately following the
consummation of the transaction contemplated under Articles 2 and 3 of this
Agreement. The Agreed Value Balance Sheet shall be prepared in accordance
with the Agreed Values and shall not vary in any material respect from the
Pro Forma Balance Sheet; provided that to the extent that the Agreed Value
of the Apartment Projects is less than $51,644,547 because fewer than five
Apartment Projects are being transferred pursuant to this Agreement, then
the assets and Liabilities reflected on the Agreed Value Balance Sheet
shall be adjusted from the levels set forth on the Pro Forma Balance Sheet
to reflect the reduced number of Apartment Projects being Transferred
pursuant to this Agreement, and the corresponding adjustment to the
outstanding principal balance under the Senior Debt Documents and the
Subordinated Debt Documents pursuant to Section 3.1 below; it being
understood, however, that the common stockholders' equity in Merry Land
Properties shall not be altered, by virtue of any such adjustments, from
the value for the common stockholders' equity in Merry Land Properties as
set forth on the Pro Forma Balance Sheet.
"Apartment Leases" means, collectively, all of the leases pursuant to
which Merry Land is leasing space in the Apartment Buildings to the
occupants thereof.
"Apartment Projects" means the Properties that are identified on
Schedule 5.23A of the Merry Land Disclosure Letter as being apartment
projects that are to be transferred to Merry Land Properties pursuant to
this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. <section><section> 9601 ET SEQ, as amended
from time to time.
"Clay Contracts" means all agreements or grants of rights between
Merry Land and any other party with respect to the removal, restoration,
sale, transport or manufacturing of any clay or soils containing clay
located on any of the Properties, including any leases, licenses, permits
or other arrangements in connection therewith. The Clay Contracts are
identified on Schedule 5.23A to the Merry Land Disclosure Letter.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, including any successor
legislation.
"Commercial Buildings" means the Properties that are identified on
Schedule 5.23A of the Merry Land Disclosure Letter.
"Commercial Leases" means, collectively, all of the leases pursuant to
which Merry Land is leasing space in the Commercial Buildings to the
occupants thereof. The Commercial Leases are identified on Schedule 5.23A
of the Merry Land Disclosure Letter.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" has the meaning set forth in Section 4.3.
"Distribution" means the distribution to the "Holders" (as such term
is hereinafter defined) by Merry Land, prior to the effective time of the
Merger, of all the outstanding shares of Merry Land Properties Common Stock
owned by Merry Land on the Distribution Date.
"Distribution Date" means the date determined pursuant to Section 3.1
on which the Distribution will be effected, which date will be the same
date as the record date for determining the shareholders of Merry Land
entitled to receive consideration in connection with the Merger.
"Distribution Record Date" means the close of business on the date to
be determined by the Board of Directors of Merry Land as the record date
for determining the shareholders of Merry Land entitled to receive Merry
Land Properties Common Stock in the Distribution, which will be the date on
which the Merger is effected.
"Effective Time" means the time on the Distribution Date when Merry
Land delivers to the Agent instructions directing the Agent to effect the
Distribution, which time will be immediately prior to the consummation of
the Merger.
"Environmental Laws" means and includes, without limitation, all
federal, state, local and foreign laws, statutes, regulations, codes,
orders, decrees, rules or ordinances or any judicial or administrative
order or judgment, and all principles of common law, in each case
pertaining to, touching or concerning Hazardous Materials, health,
industrial hygiene, pollution, occupational or public safety or health, or
environmental or ecological conditions, or wetlands as any of the same may
be amended and in effect from time to time.
"ERP Operating Partnership" means ERP Operating Limited Partnership,
an Illinois limited partnership, of which EQR is the general partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Hazardous Material" means any hazardous, toxic or radioactive
substance, material, matter or waste which is or becomes regulated by any
Environmental Law and shall include, but not be limited to, asbestos,
petroleum products and the terms "hazardous substance," "hazardous waste"
and "special waste" as defined in CERCLA or RCRA.
"Headquarters Lease" means the lease of even date herewith entered
into by and between Merry Land and Merry Land Properties pursuant to
Section 1.2(e) of the Merger Agreement with respect to certain office space
in Augusta, Georgia.
"Holder" means a holder of record of Merry Land Common Shares on the
Distribution Record Date.
"Intellectual Property Rights" has the meaning set forth in
Section 2.1.
"IRS" means the Internal Revenue Service.
"Liabilities" means any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including,
without limitation, Taxes and those debts, liabilities and obligations
arising under any law (including without limitation Environmental Laws),
rule, regulation, Action, threatened Action, order or consent decree of any
court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising
under any contract, commitment or undertaking.
"Losses" and "Loss" mean any and all losses, charges, Liabilities,
claims, damages, fines and penalties, response costs under CERCLA and
natural resources damages under CERCLA and costs or expenses (including,
without limitation, reasonable attorney's fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending
against any Actions or threatened Actions).
"Merger" has the meaning set forth in the Recitals.
"Merry Land Common Stock" has the meaning set forth in the Recitals.
"Merry Land Disclosure Letter" has the meaning ascribed thereto in the
Merger Agreement.
"Merry Land Liabilities" means, collectively, all the Liabilities of
Merry Land and the Retained Subsidiaries, other than the Merry Land
Properties Liabilities.
"Merry Land Properties Common Stock" has the meaning set forth in the
Recitals.
"Merry Land Properties Liabilities" means, collectively, (i) all the
Liabilities of Merry Land Properties under this Agreement, (ii) all the
Liabilities arising out of or in connection with or otherwise relating to
(A) the Assumed Liabilities, or (B) the Liabilities of Merry Land
Properties and the Merry Land Properties Subsidiaries, incurred after the
Effective Time or relating to events occurring with respect to the
Transferred Assets after the Effective Time.
"Option Agreement" means, with respect to each Option Property, an
Option Agreement and Right of First/Last Offer Agreement in the form
attached hereto as Exhibit D.
"Option Property" has the meaning set forth in Section 3.1(d).
"Other Contracts" means all contracts, agreements, leases, and
licenses to which Merry Land is a party and which relate to the Properties,
with the exception of the Tenant Leases, the Equipment Leases, and the Clay
Contracts. Other Contracts specifically includes any agreements relating
to the development of any undeveloped portions of the Properties. The
Other Contracts are identified on Schedule 5.23A to the Merry Land
Disclosure Letter.
"Pre-Existing Environmental Conditions" means all environmental
conditions (including, but not limited to, Hazardous Materials, Underground
Storage Tanks, solid wastes or materials, toxic wastes or materials, oils
and wetlands) which are on or under any of the Properties on the date that
is one day prior to the Distribution Date.
"Preferred Stock" means the Redeemable Cumulative Preferred Stock of
Merry Land Properties having the terms, preferences, rights and limitations
set forth in Exhibit A to the Preferred Stock Agreement.
"Preferred Stock Agreement" means the Preferred Stock Agreement of
even date herewith between Merry Land and Merry Land Properties, which
shall be in the form attached hereto as Exhibit A.
"Pro Forma Balance Sheet" means the pro forma Agreed Value Balance
Sheet for Merry Land Properties set forth on Schedule 5.23A to the Merry
Land Disclosure Letter.
"Properties" means, collectively, all rights, title and interests of
Merry Land (whether now or hereafter existing) in and to the following
described property, each of which, to the extent relating to a single
Premises, is referred to individually as a "Property":
i. those certain tracts of real estate legally described on
Schedule 5.23(a) to the Merry Land Disclosure Letter, together with
all and singular easements, covenants, agreements, rights, privileges,
tenements, hereditaments and appurtenances thereunto now or hereafter
belonging or appertaining thereto (collectively, the "Land"); and
ii. any award hereafter made or to be made as a result or in lieu
of condemnation with respect to the Properties (all of the foregoing
being included within the term "Land"); and
iii. all of the buildings, structures, fixtures, facilities,
installations and other improvements of every kind and description now
or hereafter in, on, over or under the Land (collectively, the
"Improvements") (the Land and Improvements being collectively referred
to as the "Premises"). Schedule 5.23A to the Merry Land Disclosure
Letter (as said Schedule may have been amended pursuant to Section
5.23 of the Merger Agreement) identifies the Properties that are to be
transferred to Merry Land Properties pursuant to this Agreement by
type (e.g., apartment project, commercial building, clay land, or
apartment development site), sets forth the address of each of the
Properties, and the following additional information with respect to
each of the Properties: (i) the approximate acreage in the case of the
clay land and development sites; (ii) the approximate gross square
footage in the case of the Commercial Buildings; and (iii) the number
of units in the case of the apartment buildings.
iv. all furniture, furnishings, fixtures, equipment, machinery,
maintenance vehicles and equipment, tools, parts, recreational
equipment, carpeting, window treatments, stationery and other office
supplies, and other tangible personal property of every kind and
description situated in, on, over or under the Premises or used solely
in connection therewith, owned by Merry Land or in which Merry Land
otherwise has an interest and which is not owned by tenants under the
Tenant Leases (as such term is hereinafter defined), together with all
replacements and substitutions therefor (together with the intangible
personal property referred to below, the "Personal Property"); and
v. The Tenant Leases, Other Contracts, Clay Contracts, and the
other intangible personal property now or hereafter owned by Merry
Land or in which Merry Land otherwise has an interest in connection
with or arising from the business now or hereafter conducted on or
from the Properties, including, without limitation, permits, licenses,
approvals, claims, choses in action, lease and other contract rights
with respect to the Properties; and
vi. all of Merry Land's rights, title and interests with respect
to any leases of equipment or other personal property used in
connection with the Properties (collectively, the "Equipment Leases").
The Equipment Leases are identified on Schedule 5.23A to the Merry
Land Disclosure Letter.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
<section><section> 6901 ET SEQ.
"Registration Statement" means the registration statement on Form 10
(or other applicable form) to be filed with the Commission by Merry Land
Properties pursuant to the requirements of Section 12 of the Exchange Act,
and the rules and regulations thereunder, in order to register the Merry
Land Properties Common Stock under Section 12(b) of the Exchange Act.
"Representatives" has the meaning set forth in Section 4.3.
"Retained Subsidiaries" means all Subsidiaries of Merry Land other
than the Merry Land Properties Subsidiaries.
"S-4" means the registration statement on Form S-4 to be filed with
the Commission relating to shares issued in connection with the Merger.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt Documents" means, collectively, the documents in the form
attached hereto as Exhibit B.
"Subsidiary" means any entity at least 51% of the total outstanding
voting interests of which are owned, directly or indirectly, by another
entity.
"Subordinated Debt Documents" means, collectively, the documents in
the form attached hereto as Exhibit D.
"Taxes" means all taxes, charges and fees imposed by the United States
or any state, county, local or foreign government or subdivision or agency
thereof.
"Tenant Leases" means, collectively, the Apartment Leases and the
Commercial Leases.
"Transaction Costs Agreement" means that certain Transaction Costs
Agreement referred to in Section 5.4 of the Merger Agreement.
"Transfer" has the meaning set forth in Section 2.4.
"Transferred Asset" and "Transferred Assets" have the meaning set
forth in Section 2.1.
"Transition Period" means the period from the Effective Time until the
date that is six (6) months following the Effective Time.
"Underground Storage Tanks" has the meaning assigned to that term by
Section 9001 of RCRA and shall also include the following: (A) any farm or
residential tank of 1,100 gallons or less capacity used for storing motor
fuel for non-commercial purposes; (B) any tank used for storing heating oil
for consumptive use on the premises where stored; (C) any septic tank;
(D) any tank which would be considered an underground storage tank under
Section 9001 of RCRA but for the fact that it contains hazardous wastes;
and (E) any pipes connected to items (A) through (D).
References to a "Section" are, unless otherwise specified, to one of
the Sections of this Agreement.
ARTICLE 2
TRANSFER OF CERTAIN PROPERTIES AND ASSETS
TO MERRY LAND PROPERTIES
2.1 Subject to the terms and conditions of this Agreement, on the
date that is one day prior to the Distribution Date, Merry Land shall,
without any representations or warranties, express or implied, assign,
transfer, convey and deliver to Merry Land Properties all of Merry Land's
right, title and interest in and to the following properties and assets
(each a "Transferred Asset", and collectively, the "Transferred Assets"),
to the extent that said Transferred Assets are assignable:
(a) the Properties;
(b) furniture, fixtures, equipment and personalty located in the
office premises demised pursuant to the Headquarters Lease;
(c) certain mortgage note receivables, reflecting outstanding
indebtedness currently held by Merry Land, as identified on Schedule
5.23A of the Merry Land Disclosure Letter;
(d) the names "Merry Land", "Merritt," the ticker symbol "MRY",
and the plate used in connection with the engraving and printing of
the Merry Land share certificates (the "Intellectual Property
Rights"), subject to the rights reserved to Merry Land with respect
thereto during the Transition Period, pursuant to Section 5.1 hereof.
Such transfer shall be effected in such a manner that Merry Land and
the Retained Subsidiaries shall have no obligation to Merry Land Properties
with respect to the Transferred Assets after the Effective Time.
2.2 ASSUMPTION.
(a) Subject to the terms and conditions of this Agreement,
simultaneously with the transfer contemplated by Section 2.1, Merry
Land Properties shall (and hereby does) assume and undertake to pay
and discharge all Liabilities relating to events occurring with
respect to the Transferred Assets after the Effective Time, accruing
after the Effective Time in connection with the Transferred Assets or
incurred after the Effective Time in connection with the Transferred
Assets or arising after the Effective Time in connection with the
Transferred Assets (collectively, the "Assumed Liabilities").
(b) Notwithstanding anything contained in Section 2.2(a), Merry
Land hereby retains, and Merry Land Properties does not assume and
will have no liability with respect to, the Merry Land Liabilities.
2.3 AGREEMENTS AND DOCUMENTS TO BE DELIVERED IN CONNECTION WITH
CONTRIBUTION AND SALE. Merry Land and Merry Land Properties shall execute
and deliver, or cause to be executed and delivered, all agreements,
documents and instruments necessary or appropriate to effect the transfer
contemplated by Section 2.1 and the assumption contemplated by Section 2.2,
including, without limitation, those agreements, documents and instruments
described in this Section 2.3:
(a) Merry Land and Merry Land Properties shall execute and
deliver, or cause to be executed and delivered:
(i) an Assignment and Assumption Agreement with respect to
the Tenant Leases, the Clay Contracts, any Other Contracts, the
Equipment Leases, and any other general intangibles intended to
be transferred to Merry Land Properties pursuant to this
Agreement, and all Assumed Liabilities;
(ii) evidence of termination of the existing property
management agreement for each of the Transferred Properties.
(b) Merry Land shall execute and deliver or cause to be executed
and delivered the following documents:
A. Quitclaim deeds in favor of Merry Land Properties with
respect to the Properties;
B. A quitclaim bill of sale in favor of Merry Land
Properties with respect to the tangible Personal Property; and
C. A quitclaim bill of sale granting to Merry Land
Properties all right, title and interest of Merry Land to the
Intellectual Property Rights.
Under each of the documents described in this Section 2.3, the assignment,
conveyance or other transfer of the Assumed Liabilities and Merry Land's
rights, title, interests, obligations and Liabilities with respect to the
Transferred Assets shall be made without recourse, representation or
warranty of any kind by Merry Land with respect to the Transferred Assets,
the Assumed Liabilities, or any instruments or agreements giving rise
thereto.
2.4 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION; TRANSFER DEEMED
EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any assignment,
transfer, conveyance or delivery (each, a "Transfer") of any Transferred
Asset contemplated by this Article 2 shall not have been consummated on or
prior to the Distribution Date, the parties shall cooperate to effect such
Transfer as promptly following the Distribution Date as shall be
practicable. Nothing herein shall be deemed to require the Transfer of any
Transferred Assets which by their terms or operation of law cannot be
assigned, transferred, conveyed or delivered; PROVIDED, HOWEVER, that Merry
Land and Merry Land Properties shall use their best efforts to seek to
obtain any necessary consents or approvals for the Transfer of all
Transferred Assets contemplated to be transferred pursuant to this
Article 2. If, as and when any such Transferred Asset is able to be
assigned, transferred, conveyed or delivered, as the case may be, such
Transfer shall be effected forthwith. The parties agree that, as of the
Distribution Date, Merry Land Properties shall be deemed to have acquired
complete and sole beneficial ownership over all of the Transferred Assets,
together with all rights, powers and privileges incident thereto and all
duties, obligations and responsibilities incident thereto including,
without limitation, to the Assumed Liabilities.
2.5 AS-IS, WHERE-IS; RELEASE BY MERRY LAND PROPERTIES. Merry Land
Properties specifically acknowledges and agrees that Merry Land has made
and makes no representation, warranty or covenant of any kind with respect
to the Transferred Assets, any environmental conditions (including, without
limitation, any Pre-Existing Environmental Conditions) at, or with respect
to, the Transferred Properties , the operations, uses and businesses
conducted thereon or therefrom, or the site or physical conditions
applicable to, or with respect to, the Transferred Properties , the zoning
regulations or other governmental requirements applicable to, or with
respect to, the Transferred Properties , the Tenant Leases, the Land
Leases, the Clay Contracts, the Equipment Leases, or any other matter
affecting the use, occupancy, operation or condition of or with respect to
the Transferred Properties , the level of income or profits with respect to
the Transferred Properties or any matter whatsoever with respect to the
Transferred Assets or the Assumed Liabilities. Merry Land Properties is
familiar with and has inspected the Transferred Properties and the
operations, uses and businesses conducted thereon or therefrom. Merry Land
Properties shall accept the Transferred Properties and the operations,
uses and businesses conducted thereon or therefrom "AS IS," "WHERE IS" and
"WITH ALL FAULTS" (whether detectable or not) on the Distribution Date,
without any adjustment for any change in the physical or financial
condition occurring from and after the date of the Merger Agreement. Merry
Land Properties acknowledges and agrees that neither Merry Land nor its
officers, directors, shareholders, trustees, agents, employees and
representatives nor any of the successors or assigns of any of the
foregoing will have, or be subject to, any liability to Merry Land
Properties or any other person resulting from the distribution to Merry
Land Properties, or Merry Land Properties's use of, any information
pertaining to the Transferred Properties, the Assumed Liabilities or the
other Transferred Assets. With the exception of any right of contribution
that Merry Land Properties may have against Merry Land under CERCLA, RCRA
or other applicable Environmental Laws or common law principles by reason
of any Action instituted against Merry Land Properties, with respect to any
Pre-Existing Environmental Condition, by any Governmental Authority or by
any natural person or entity that is not an Affiliate of Merry Land
Properties, Merry Land Properties for and on behalf of itself, its
successors and assigns and its Affiliates, hereby waives, releases,
relinquishes and forever discharges Merry Land and its officers, directors,
shareholders, trustees, agents, employees and representatives, and the
successors and assigns of all of the foregoing from and against any and all
claims or causes of action that Merry Land Properties may have against
Merry Land or its officers, directors, shareholders, trustees, agents,
employees and representatives and the successors and assigns of all of the
foregoing for and with respect to all Pre-Existing Environmental Conditions
with respect to the Transferred Properties. To the fullest extent
permitted by applicable law, Merry Land Properties waives any requirements
for Merry Land to furnish to Merry Land Properties, or record against title
to the Transferred Properties , any environmental disclosure documents that
would otherwise be required to be furnished or recorded under applicable
law.
2.6 IMPUTATION OF KNOWLEDGE TO MERRY LAND PROPERTIES. Merry Land
Properties acknowledges and agrees that certain of the key executives of
Merry Land Properties (who have exercised responsibility for the formation
of Merry Land Properties, for the negotiation, execution and delivery of
this Agreement and for effecting the Contribution) were, immediately prior
to the consummation of the Contribution, key executives of Merry Land, that
it is fair and reasonable in the circumstances to impute to Merry Land
Properties as of the execution and delivery of this Agreement and as of the
consummation of the Contribution, all knowledge, if any, of Merry Land with
respect to the Transferred Properties and the Assumed Liabilities, and
that all such knowledge shall so be (and hereby is) imputed to Merry Land
Properties. Merry Land Properties's acknowledgments and agreements set
forth in this Section and in Section 2.5 shall survive the Contribution
indefinitely and shall govern in the event of any conflict, express or
implied, with any of the Contribution Documents. Merry Land Properties is
familiar with and has no reason to believe that there are any material
inaccuracies in the Exhibits to this Agreement or in Schedule 5.23A of the
Merry Land Disclosure Letter.
2.7 CONDEMNATION AND CASUALTY; PHYSICAL CHANGES. The transactions
contemplated under this Article 2 shall be consummated as provided in this
Agreement, without adjustment or delay of any kind, notwithstanding the
occurrence of any damage, destruction or other change in the physical
condition of one or more of the Properties or the initiation or completion
of any proceedings in eminent domain (or any deeds granted by Merry Land in
lieu thereof) with respect thereto; provided that Merry Land shall,
immediately prior to the Distribution Date, assign to Merry Land
Properties, without recourse, representation or warranty, all rights, title
and interest, if any, of Merry Land in and to any insurance proceeds or
condemnation awards or claims therefor related to said damage, destruction
or taking.
2.8 CLOSING PRORATIONS AND ADJUSTMENTS
(a) A rent roll (updated to within 15 days prior to the
Distribution Date) and a proposed statement of prorations and other
adjustments shall be prepared by Merry Land Properties in conformity
with the provisions of this Agreement not less than three (3) business
days prior to the Distribution Date. For purposes of prorations, the
Transfer shall be deemed to have occurred as of 12:01 a.m. on the
Distribution Date. The following items are to be prorated or
adjusted, as the case may require, as of the Distribution Date:
A. real estate and personal property taxes and assessments
(prorated on the basis of the amount of real estate tax liabilities
for the Transferred Properties that is reflected on Merry Land's
balance sheet as of the Distribution Date);
B. the rent payable by tenants under the Tenant Leases;
provided, however, that rent and all other sums which are due and
payable to Merry Land by any tenant but uncollected as of the
Distribution Date shall not be adjusted, but Merry Land Properties
shall use diligent efforts to collect said past-due rents and shall
cause the rent and other sums for the period prior to the Distribution
Date to be remitted to Merry Land if, as and when collected. On the
Distribution Date, Merry Land shall deliver to Merry Land Properties a
schedule (prepared by Merry Land as of the most recent date available)
of all such past due but uncollected rent and other sums owed by
tenants. Merry Land Properties shall promptly remit to Merry Land any
such rent or other sums paid by scheduled tenants, but only if a
deficiency in the then current rent is not thereby created. Merry
Land Properties shall bill tenants who owe rent for periods prior to
the Distribution Date on a monthly basis for six consecutive months
following the Distribution Date. For amounts due Merry Land not
collected within thirty (30) days after the Distribution Date, Merry
Land shall have the right to sue to collect same (and Merry Land shall
have the right to continue any eviction action in process as of said
Distribution Date), but in no event may Merry Land seek to evict any
tenant or terminate any Tenant Lease.;
C. the full amount of security deposits paid under the Tenant
Leases, to the extent unapplied, together with interest thereon if
required by law or otherwise; provided that (to the extent permitted
by applicable law) Merry Land shall have the right to apply security
deposits, if any, against delinquent rents and other obligations of
the tenants;
D. water, electric, telephone and all other utility charges, and
any assignable deposits with utility companies (said assignable
deposits being credited to Merry Land) (to the extent possible,
utility prorations will be handled by meter readings on the
Distribution Date);
E. amounts due and prepayments under the Other Contracts or
Equipment Leases;
F. assignable license and permit fees;
G. amounts payable in connection with the Clay Contracts;
H. other expenses of operation and similar items customarily
prorated in connection with real estate closings for similar
properties in the locality in question; and
I. Merry Land shall be responsible for paying all premiums, fees
and other costs associated with the maintenance or termination of any
insurance policies maintained by Merry Land prior to the Distribution
Date with respect to the Properties, and shall be entitled to any
refunds in connection with the termination of said policies.
The net amount of any prorations shall be paid in cash on the Distribution
Date to Merry Land or Merry Land Properties, as the case may be, by the
other party. Any proration (other than general real estate and personal
property taxes) which must be estimated on the Distribution Date shall be
re-prorated and finally adjusted as soon as practicable after the
Distribution Date; otherwise, all prorations shall be final.
2.9 REPRESENTATIONS AND WARRANTIES OF MERRY LAND PROPERTIES. Merry
Land Properties represents and warrants to Merry Land that, (i) as of the
date hereof, Merry Land Properties has no obligations with respect to any
indebtedness or other material Liabilities of a definite or ascertainable
amount other than the indebtedness evidenced by the Senior Debt Documents,
and the Subordinated Debt Documents, and (ii) upon the consummation of the
transactions contemplated by this Agreement, the Agreed Value Balance Sheet
(prepared in accordance with the definitions set forth in this Agreement)
shall be accurate and complete in all material respects.
2.10 TRANSITION SERVICES FEE. In connection with the Merger, Merry
Land hereby agrees to pay Merry Land Properties, for transition services to
be provided by Merry Land Properties in connection with the Merger, a fee
in the amount of $2,400,000 (the "Transition Services Fee"). The
Transition Services Fee shall be due and payable by Merry Land (or by EQR
as successor to Merry Land as a result of the Merger) upon and subject to
the consummation of the Merger.
ARTICLE 3
ISSUANCE OF MERRY LAND PROPERTIES PREFERRED STOCK TO
MERRY LAND; EXECUTION AND DELIVERY OF
FINANCING DOCUMENTS AND OTHER MATTERS
3.1 GENERAL. In consideration of the Contribution, as a condition
thereto, and simultaneously therewith:
(a) Merry Land and Merry Land Properties shall execute and
deliver the Preferred Stock Agreement and, in accordance therewith,
Merry Land Properties shall issue to Merry Land five thousand (5,000)
shares of Preferred Stock, and Merry Land Properties shall deliver to
Merry Land a certificate representing Merry Land's ownership of said
shares;
(b) Merry Land Properties shall execute and deliver to Merry Land
the Senior Debt Documents. By virtue of the consummation of the
Transfer, proceeds of the loan evidenced by the Senior Debt Documents
shall be deemed to have been disbursed to Merry Land Properties in the
amount of $18,317,429 (the "Agreed Senior Debt Initial Advance");
(c) Merry Land Properties shall execute and deliver to Merry Land
the Subordinated Debt Documents. By virtue of the consummation of the
Contribution, the loan evidenced by the Subordinated Debt Documents
shall be deemed to have been disbursed in the amount of twenty million
Dollars ($20,000,000) (the "Agreed Subordinated Debt Initial
Advance");
(d) Merry Land Properties and Merry Land shall execute, deliver
and record an Option Agreement with respect to each of the two (2)
Properties that are identified on Schedule 5.23(a) to the Merry Land
Disclosure Letter as being "Option Properties".
(e) Merry Land Properties shall issue the Merry Land Properties
Common Stock to Merry Land.
Notwithstanding anything to the contrary herein contained, to the
extent that the aggregate Agreed Value of the Apartment Projects is less
than $51,644,547, said difference (the "Value Differential") shall be
deducted from the Agreed Senior Debt Initial Advance and the Agreed
Subordinated Debt Initial Advance as follows:
(i) first, the Agreed Senior Debt Initial Advance shall be
reduced, but not below zero, by the amount of the Value
Differential; and
(ii) second, the Agreed Subordinated Debt Initial Advance
shall be reduced, but not below zero, by the amount, if any, of
the Value Differential that has not previously been applied
pursuant to clause (i) above.
ARTICLE 4
DISTRIBUTION AND RELATED TRANSACTIONS
4.1 ACTIONS PRIOR TO DISTRIBUTION.
(a) The Board of Directors of Merry Land shall, establish the
Distribution Record Date and the Distribution Date in accordance with this
Agreement and shall establish any procedures necessary or appropriate in
connection with the Distribution, but in no event shall the Distribution
occur prior to such time as the conditions set forth in this Agreement have
been satisfied or waived.
(b) Merry Land and Merry Land Properties shall prepare and mail,
prior to the Distribution Date, to the holders of Merry Land Common Shares,
such information concerning Merry Land Properties, its business, operations
and management, the Distribution and such other matters as Merry Land shall
reasonably determine to be necessary and as may be required by law. Merry
Land and Merry Land Properties will prepare, and Merry Land Properties
will, to the extent required under applicable law, file with the Commission
any such documentation which Merry Land determines are necessary or
desirable to effectuate the Distribution, and Merry Land and Merry Land
Properties shall each use its reasonable best efforts to obtain all
necessary approvals from the Commission with respect thereto as soon as
practicable.
(c) Merry Land and Merry Land Properties shall take all such action
as may be necessary or appropriate under the securities or blue sky laws of
the United States (and any comparable laws under any foreign jurisdiction)
in connection with the Distribution.
(d) Merry Land and Merry Land Properties shall take all reasonable
steps necessary and appropriate to cause the conditions set forth in
Section 6.1 to be satisfied and to effect the Distribution on the
Distribution Date.
(e) Merry Land Properties shall prepare and file, and shall use its
reasonable best efforts to have approved on or prior to the Distribution
Date, an application for the listing of the Merry Land Properties Common
Stock to be distributed in the Distribution on the New York Stock Exchange,
the American Stock Exchange or NASDAQ National Market System, subject to
official notice of issuance.
4.2 DISTRIBUTION. On or prior to the Distribution Date, subject to
the conditions and rights of termination set forth in this Agreement, Merry
Land shall (i) deliver to the Agent for the benefit of the Holders a
single stock certificate representing all the Merry Land Properties Common
Stock owned by Merry Land, endorsed by Merry Land in blank, and
(ii) deliver to the Agent written instructions to distribute on the
Distribution Date to the Holders all of the Merry Land Properties Common
Stock.
4.3 UNCLAIMED STOCK. Any Merry Land Properties Common Stock that
remain unclaimed by any Holder 180 days after the Distribution Date shall
be returned to Merry Land, and any such Holder shall look only to Merry
Land for the Merry Land Properties Common Stock, subject in each case to
applicable escheat or other abandoned property laws.
4.4 NO REPRESENTATIONS OR WARRANTIES. Each of the parties hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
making any representation or warranty whatsoever, including, without
limitation, as to title, value or legal sufficiency.
ARTICLE 5
COVENANTS
5.1 UNDERTAKING BY MERRY LAND. Promptly following the Merger, and in
any event prior to the completion of the Transition Period, Merry Land
shall remove all references to the name "Merry Land" from the names of the
Retained Subsidiaries and all of its stationery; provided that Merry Land
shall not be required to remove said references prior to the expiration of
the Transition Period. Notwithstanding the foregoing, Merry Land shall
have the right and license, in perpetuity, to maintain in existence and use
the names of Merry Land Down REIT I LP, Merry Land Apartment Communities,
Inc., ML Apartments Limited, ML Texas Apartments LP and Merry Land LLC.
5.2 CORPORATE RECORDS. Merry Land shall use its best efforts to
arrange, as soon as practicable following the Distribution Date, for the
transportation and delivery to Merry Land Properties of all original
agreements, documents, books, records and files relating to or affecting
Merry Land Properties, the Transferred Assets or the Assumed Liabilities,
to the extent such items are not already in the possession of Merry Land
Properties, provided that Merry Land may retain any tax returns, reports,
forms or work papers, and Merry Land Properties will be provided with
copies of such returns, reports, forms or work papers.
5.3 CONFIDENTIALITY. Each of Merry Land and Merry Land Properties
shall hold, and shall cause its respective trustees, directors, officers,
Affiliates, employees, agents, accountants, consultants and advisors
(collectively, "Representatives") to hold, in strict confidence all
information concerning the other relating to the Transferred Assets and the
Assumed Liabilities in its possession (except to the extent that such
information has been (a) in the public domain through no fault of such
party or any of its Representatives, including information contained in the
Registration Statement and the S-4 and other statements and reports filed
with the Commission, or (b) later lawfully acquired from other sources by
such party) to the extent such information (i) relates to the period up to
the Effective Time, (ii) relates to this Agreement or (iii) is obtained
from the other party pursuant to this Agreement ("Confidential
Information"). Each party shall not release or disclose, or permit to be
released or disclosed by any of its Representatives or otherwise, any
Confidential Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors
who need to know such information, unless compelled to disclose by judicial
or administrative process or, as advised by its counsel, by other
requirements of law. In the event that either party or its Representatives
(a "Disclosing Party") is compelled to release or disclose, or permit to be
released or disclosed, any Confidential Information as provided in the
immediately preceding sentence, such Disclosing Party shall (i) immediately
notify the other party (the "Providing Party") of the existence, terms and
circumstances surrounding such a requirement, (ii) consult with the
Providing Party on the advisability of taking legally available steps to
resist or narrow such requirement, and (iii) if disclosure of such
information is nevertheless required, furnish only that portion of the
Confidential Information which, in the opinion of such Disclosing Party's
counsel, such Disclosing Party is legally compelled to disclose and to
cooperate with any action by the Providing Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment
will be accorded the Confidential Information (it being agreed that the
Providing Party shall reimburse the Disclosing Party for all reasonable
out-of-pocket expenses incurred by the Disclosing Party in connection with
such cooperation).
5.4 FURTHER ASSURANCES. Each of the parties hereto shall use their
best reasonable efforts, prior to, on and after the Distribution Date, to
take or cause to be taken, all actions, and to do, or cause to be done, all
things, necessary, proper or desirable under applicable laws and
regulations to carry out the purposes of this Agreement and to vest Merry
Land Properties with full title to all Transferred Assets. Without
limiting the foregoing, Merry Land and Merry Land Properties shall use
their reasonable best efforts to obtain all consents and approvals, to
enter into all amendatory agreements and to make all filings and
applications and take all other actions which may be required for the
consummation of the transactions contemplated by this Agreement, including,
without limitation, all applicable regulatory filings. Notwithstanding the
foregoing, Merry Land and Merry Land Properties acknowledge and agree that
certain of the Transferred Assets may be subject to rights of first refusal
or rights of first offer held by parties to the Clay Contracts or Other
Contracts. Merry Land agrees to consummate the Transfer as contemplated
herein, notwithstanding (but subject to) the rights of the holders of said
rights of first offer or rights of first refusal; provided that Merry Land
Properties hereby agrees (i) to hold Merry Land harmless from any claims by
the holders of said rights of first offer or rights of first refusal, and
(ii) to transfer the Properties in question to the holders of said rights
of first offer or rights of first refusal, if necessary in order to prevent
Merry Land from having any liability to said holders, it being understood
that Merry Land Properties shall retain all rights to any proceeds in
connection with any sale of said Properties by Merry Land Properties to
said holders.
ARTICLE 6
CONDITIONS TO THE TRANSFER AND THE DISTRIBUTIONS
6.1 CONDITIONS PRECEDENT TO THE DISTRIBUTIONS. The obligation of
Merry Land to cause the Transfer of the Transferred Assets pursuant to
Article 2 and to cause the consummation of the Distributions pursuant to
Article 4 shall be subject, at the option of Merry Land, to the fulfillment
or waiver, of each of the following conditions:
(a) EFFECTIVE DATE OF REGISTRATION STATEMENT. Each of the
Registration Statement and the S-4 shall have been declared effective
by order of the Commission and shall not be the subject of any stop
order or proceeding by the Commission seeking a stop order.
(b) NO PROHIBITIONS. Consummation of the transactions
contemplated hereby shall not be prohibited by applicable law and no
Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the
Distribution, the Merger or any transaction contemplated by this
Agreement or the Merger Agreement, it being understood that the
parties hereto hereby agree to use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be
vacated or lifted as promptly as possible.
(c) CONDITIONS PRECEDENT TO MERGER SATISFIED. Each condition to
the closing of the Merger set forth in Sections 6.1 and 6.3 of the
Merger Agreement shall have been satisfied or waived.
(d) CONDITIONS PRECEDENT TO ACQUISITION OF PREFERRED STOCK
SATISFIED. Each of the conditions to the acquisition of the Preferred
Stock, as set forth in Article 4 of the Preferred Stock Agreement, and
in the applicable sections of the Senior Debt Documents and the
Subordinated Debt Documents, shall have been satisfied or waived.
(e) TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Merry Land Properties pursuant to
Section 2.9 of this Agreement shall reasonably be expected to be true
and correct in all material respects after giving effect to the
transactions contemplated under Articles 2 and 3 hereof.
ARTICLE 7
MISCELLANEOUS
7.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the
Schedules, constitutes the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all previous
negotiations, commitments and writings with respect to such subject matter.
7.2 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement will survive the Distribution Date.
7.3 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Maryland, without regard to the
principles of conflicts of laws thereof.
7.4 NOTICES. All notices and other communications hereunder must be
in writing and must be delivered by hand, mailed by registered or certified
mail (return receipt requested) or sent by facsimile transmission to the
parties at the following addresses (or at such other addresses for a party
as may be specified by like notice) and will be deemed given on the date on
which such notice is received:
To Merry Land:
Before the Distribution Date, to:
Merry Land & Investment Company, Inc.
624 Ellis Street
Augusta, Georgia 30901
Attention: John Gibson
Fax No. (706) 722-4681
with a copy to:
Hull, Towill, Norman & Barrett, P.C.
801 Broad Street, 7{th} Floor
Trust Company Bank Building
Augusta, Georgia 30901
Attention: Mark S. Burgreen, Esq.
and:
Piper & Marbury L.L.P.
Charles Center South
Baltimore, Maryland 21201-3018
Attention: R.W. Smith, Jr., Esq.
After the Distribution Date, to:
Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Bruce C. Strohm
Fax No. (312) 454-8703
with a copy to:
Rudnick & Wolfe
203 N. LaSalle St., Suite 1800
Chicago, Illinois 60601
Attention: Errol R. Halperin, Esq.
Fax No. (312) 236-7516
To Merry Land Properties:
Merry Land Properties, Inc.
624 Ellis Street
Augusta, GA 30901
Attention: Michael N. Thompson
7.5 AMENDMENTS. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties.
7.6 SUCCESSORS AND ASSIGNS. Except in connection with the Merger,
this Agreement shall not be assignable, in whole or in part, directly or
indirectly, by either party hereto without the prior written consent of the
other, and any attempt to assign any rights or obligations arising under
this Agreement without such consent shall be void; PROVIDED, HOWEVER, that
the provisions of this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective
successors and permitted assigns; PROVIDED, FURTHER, that the rights and
obligations of Merry Land under this Agreement may be assigned after the
Merger to ERP Operating Partnership.
7.7 NO THIRD-PARTY BENEFICIARIES. Except for the provisions of
Article V relating to Indemnitees and as otherwise expressly provided
herein, the provisions of this Agreement are solely for the benefit of the
parties hereto and their respective successors and permitted assigns and
should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
7.8 TITLE AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
7.9 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise
available to any party hereto, each party hereto acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder are
specifically enforceable.
7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
7.11 PRODUCTION OF WITNESSES. From and after the Effective Time, each
party shall use reasonable efforts to make available to the other party,
upon written request, its officers, directors, trustees, employees and
agents as witnesses to the extent that any such person may reasonably be
required in connection with any legal, administrative or other proceedings
in which the requesting party may from time to time be involved.
7.12 NON-RECOURSE. 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, and not individually, and neither the directors, officers or
shareholders of Merry Land shall be personally bound or have any personal
liability hereunder. Merry Land Properties shall look solely to the assets
of Merry Land Properties for satisfaction of any liability of Merry Land
with respect of this Agreement and all documents, agreements,
understandings and arrangements relating to this Agreement and will not
seek recourse or commence any action against any of the trustees or
officers of Merry Land or any of their personal assets for the performance
or payment of any obligation of Merry Land hereunder or thereunder.
7.13 NON-RECOURSE. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Merry Land Properties by the undersigned in his
capacity as a director or officer of Merry Land Properties, which has been
formed as a Georgia corporation, and not individually, and neither the
directors, officers or shareholders of Merry Land Properties shall be
personally bound or have any personal liability hereunder. Merry Land
shall look solely to the assets of Merry Land Properties for satisfaction
of any liability of Merry Land Properties with respect of this Agreement
and all documents, agreements, understandings and arrangements relating to
this Agreement and will not seek recourse or commence any action against
any of the trustees or officers of Merry Land Properties or any of their
personal assets for the performance or payment of any obligation of Merry
Land Properties hereunder or thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
MERRY LAND & INVESTMENT COMPANY, INC., a
Georgia corporation
By:
Name:
Title:
MERRY LAND PROPERTIES, INC., a Georgia
corporation
By:
Name:
Title: