<PAGE>
As filed with the Securities and Exchange Commission on September 10, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
September 10, 1997
(Date of report)
EQUITY RESIDENTIAL PROPERTIES TRUST
(Exact Name of Registrant as Specified in Charter)
1-12252
(Commission File No.)
Maryland 13-3675988
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 474-1300
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
ITEM 5. Other Events
On August 27, 1997, Equity Residential Properties Trust, a Maryland real
estate investment trust (EQR"), and Evans Withycombe Residential, Inc., a
Maryland corporation ("EWR"), entered into an Agreement and Plan of Merger dated
as of August 27, 1997 pursuant to which EWR will merge with and into EQR (the
"Merger"). EWR and its subsidiaries own and operate 55 multifamily properties
containing 15,932 units in the Phoenix and Tucson, Arizona metropolitan areas
and Southern California. Pursuant to the Merger, the shares of common stock of
EWR issued and outstanding immediately prior to the Merger will be converted
into 0.50 of a common share of beneficial interest of EQR. EQR is filing the
information contained herein in order to provide investors with additional
information relating to the Merger. The Merger is subject to approval of the
shareholders of EQR and EWR and, therefore, completion of the Merger is
conditioned upon such approval and certain other closing conditions. Upon
completion of the Merger, Mr. Stephen O. Evans, the Chairman of the Board of
EWR, will become a trustee of EQR.
In connection with the Merger, EQR is hereby filing additional
information contained in EWR's Annual Report on Form 10-K for the year ended
December 31, 1996 and Quarterly Report on Form 10-Q for the period ended June
30, 1997 regarding the business and properties of EWR to be acquired in the
Merger as follows:
General
Evans Withycombe Residential, Inc. was formed in August 1994 as a self-
managed and self-administered real estate investment trust to continue and
expand the multifamily apartment operations of Evans Withycombe. Unless the
context otherwise requires, references to the "Company" shall include EWR, its
predecessor, Evans Withycombe, Inc., and its affiliates, predecessors and
partners (collectively, "Evans Withycombe"), Evans Withycombe Residential, L.P.,
Evans Withycombe Finance Partnership, L.P., Evans Withycombe Finance, Inc. and
Evans Withycombe Management, Inc. The Company is regionally focused in Arizona
and Southern California.
The Company's portfolio consists of stabilized communities and
communities under construction and in lease-up:
. Stabilized Communities. At December 31, 1996, the Company owned and managed
49 stabilized apartment communities (a property is considered stabilized
when it reaches 93 percent occupancy) located in metro Phoenix, Arizona;
metro Tucson, Arizona; and Riverside/San Bernardino, California. The
stabilized portfolio increased 2,852 units or 25.8 percent from 11,053
units at December 31, 1995 to 13,905 units at December 31, 1996.
. Communities Under Construction And In Lease-Up. At December 31, 1996, the
Company owned five apartment communities under construction and in lease-up
with a total of 1,078 apartments. Three of these communities were new
developments and two were expansions of existing communities owned by the
Company.
Company Formation
The Company was incorporated on May 24, 1994 to develop, acquire, own and
manage upscale multifamily apartment communities. On August 17, 1994, the
Company completed an initial public offering (the "Initial Public Offering") and
engaged in various formation transactions designed to transfer ownership of the
communities and other assets of the predecessor company to Evans Withycombe
Residential, L. P. (the "Operating Partnership") or Evans Withycombe Finance
Partnership, L.P. (the "Financing Partnership"). The Company is the sole
general partner of and owned a 79.7 percent interest in the Operating
Partnership at December 31, 1996. The Operating Partnership owns 99 percent of
the Financing Partnership. The remaining one percent interest in the Financing
Partnership is owned by Evans Withycombe Finance, Inc., a wholly owned
subsidiary of the Company. The Company also holds a noncontrolling interest in
Evans Withycombe Management, Inc. (the "Management Company").
2
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
EVANS WITHYCOMBE
RESIDENTIAL, INC.
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
| | Other |
| | ------------------- |
| | | |
| | | |
| | | |
General partner Limited partner Limited partner 100%
interest interest interest common stock
1% 78.7% 20.3% |
| | | |
| | | |
| | | |
---------------------------------------------------------------------------- --------------------------------------
Evans Withycombe Evans Withycombe
Residential, L.P. Finance, Inc.
[Operating Partnership]
---------------------------------------------------------------------------- --------------------------------------
| | |
| | |
| | |
| | |
Current and former | | |
members of senior | | |
management | | |
- ------------------- | | |
| 100% Non-voting common stock 99% 1%
| 1% Voting common stock Limited partner General partner interest
| (99% of economic interest) interest
| | | |
| | | |
99% Voting common stock | | |
(1% economic interest) | | |
| | | |
| | | |
| ----------------------------------------------- --------------------------------------
| Evans Withycombe Evans Withycombe
-------- Management, Inc. Finance Partnership, L.P.
[Management Company] [Financing Partnership]
----------------------------------------------- --------------------------------------
</TABLE>
3
<PAGE>
The Company elected to be taxed as a real estate investment trust
("REIT") for Federal income tax purposes. A corporate REIT is a legal entity
which holds real estate interests and, through payments of dividends to
shareholders, is permitted to reduce or avoid the payment of federal income
taxes at the corporate level. The Company was incorporated under the laws of
the State of Maryland in May 1994. The Company's principal executive offices
are located at 6991 East Camelback Road, Suite A-200, Scottsdale, Arizona 85251
and its telephone number is (602) 840-1040. To maintain the Company's
qualifications as a REIT while realizing income from its fee management and
related service business, the Company's management operations are conducted
through the Management Company pursuant to the terms of a management agreement.
Competition
The Communities are located in areas that include other apartment
communities and that may include new apartment communities that are under
construction. The number of competitive communities in a particular area could
have an effect on the Company's ability to lease apartments at the Communities
or at any newly developed or acquired properties and on the rents charged by the
Company. In addition, other forms of housing, such as single family homes,
townhomes and condominiums provide alternatives to potential residents of high
quality apartment complexes like the Communities.
Environmental Matters
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and clean-
up costs incurred by such parties in connection with the contamination.
The Company believes that the Communities are in compliance in all
material respects with all federal, state and local laws, ordinances and
regulations regarding hazardous or toxic substances or petroleum products. The
Company has not been notified by any governmental authority, and is not
otherwise aware, of any material noncompliance, liability or claim relating to
hazardous or toxic substances or petroleum products in connection with any of
its present properties.
Employees
As of January 15, 1997, the Company, primarily through the Management
Company, employed 583 persons. The Management Company and/or the Operating
Partnership employ substantially all of the professional employees that are
currently engaged in the residential property management, development,
acquisition and construction businesses of the Company. The Company believes
that its relations with its employees are good.
Regulation
Apartment communities are subject to various laws, ordinances and
regulations, including laws, ordinances and regulations related to fair housing,
Americans with disabilities and building safety. The Company believes that each
Community has the necessary permits and approvals to operate its business and
that each Community is in material compliance with present laws, ordinances and
regulations.
Seasonality
The fall and winter months in the Company's Arizona markets generally
experience somewhat higher seasonal occupancies.
4
<PAGE>
PROPERTIES
Stabilized Properties
The following sets forth certain information regarding the current
Stabilized Communities. All of the Communities are owned 100 percent in fee by
the Company (indirectly through the Operating Partnership or the Financing
Partnership). For a description of liens on certain of the Communities listed
below, see Schedule III - Real Estate Investments and Accumulated Depreciation
on page 25.
<TABLE>
<CAPTION>
Physical
Average Average Occupancy
Year Unit Physical as of
Developed Size Occupancy December
Number of Developed/ or (Square During 31,
Stabilized Communities City Apartments Acquired Acquired Feet) 1996(1) 1996 (1)
- ---------------------- ------------ ---------- ----------- --------------- ------ ------- -------
Arizona:
- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix:
Acacia Creek Scottsdale 508 Acquired 1995 910 97% 98%
Bayside at the Islands Gilbert 272 Developed 1988 870 93% 94%
Country Brook (4) Chandler 396 Acq/Dev 1991/1993/1996 961 93% 92%
Deer Creek Village Phoenix 308 Acquired 1991 819 97% 92%
Gateway Villas Scottsdale 180 Developed 1995 998 96% 97%
Greenwood Village Tempe 270 Acquired 1993 884 96% 93%
Heritage Point Mesa 148 Acquired 1994 773 95% 91%
La Mariposa Mesa 222 Acquired 1990 928 95% 93%
La Valencia Mesa 361 Acquired 1990 950 92% 87%
Ladera Phoenix 248 Developed 1996 1,012 95% 98%
Little Cottonwoods Tempe 379 Acq/Acq/Dev 1989/89/90 1,023 91% 85%
Los Arboles (2) Chandler 232 Developed 1985 851 95% 92%
Mirador Phoenix 316 Developed 1996 987 85% 94%
Miramonte Scottsdale 151 Developed 1983 782 98% 99%
Morningside Scottsdale 160 Acquired 1992 1,019 95% 99%
Mountain Park Ranch Phoenix 240 Developed 1995 961 93% 93%
Park Meadow (4) Gilbert 224 Acq/Dev 1992/1996 880 96% 93%
Preserve at Squaw Peak Phoenix 108 Acquired 1991 952 96% 90%
Promontory Pointe (3) Phoenix 304 Acquired 1988 986 91% 83%
Rancho Murietta Tempe 292 Acquired 1995 866 97% 87%
Scottsdale Courtyards Scottsdale 274 Developed 1993 1,044 97% 100%
Scottsdale Meadows Scottsdale 168 Developed 1984 888 95% 99%
Shadow Brook Phoenix 224 Acquired 1993 1,010 97% 98%
Shores at Andersen Springs Chandler 299 Developed 1989/1993 889 97% 97%
Silver Creek Phoenix 174 Acquired 1991 775 98% 97%
Sonoran Phoenix 429 Developed 1995 965 93% 89%
Sun Creek Glendale 175 Acquired 1993 762 98% 98%
Superstition Vista Mesa 316 Acquired 1995 950 97% 96%
The Enclave Tempe 204 Developed 1995 952 97% 100%
The Heritage Phoenix 204 Developed 1995 973 93% 92%
The Ingleside Phoenix 120 Developed 1995 987 96% 94%
The Meadows Mesa 306 Acquired 1987 809 94% 92%
The Palms Phoenix 132 Developed 1990 1,026 93% 96%
The Pines Mesa 194 Acquired 1992 887 96% 94%
Towne Square (4) Chandler 584 Acq/Dev 1992/1995/1996 960 92% 90%
Villa Encanto Phoenix 382 Developed 1983 810 99% 99%
Village at Lakewood Phoenix 240 Developed 1988 857 94% 98%
------
9,744
------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Physical
Average Average Occupancy
Year Unit Physical as of
Developed Size Occupancy December
Number of Developed/ or (Square During 31,
City Apartments Acquired Acquired Feet) 1996(1) 1996 (1)
------------ ---------- ----------- --------------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Tucson:
Harrison Park (3) Tucson 172 Acquired 1991/1996 809 87% 85%
La Reserve Oro Valley 240 Developed 1988 900 91% 92%
Orange Grove Village (4) Tucson 400 Acq/Dev 1991/1996 714 93% 87%
Suntree Village Oro Valley 424 Acquired 1992 831 91% 93%
The Arboretum Tucson 496 Acq/Dev 1992/1995 886 93% 89%
The Legends Tucson 312 Developed 1995 1,041 94% 94%
Village at Tanque Verde Tucson 217 Acq/Dev 1990/1995 694 90% 83%
------
2,261
------
Total Arizona 12,005
California:
- -----------
The Ashton Corona Hills 492 Acquired 1995 850 94% 92%
Canyon Crest Views (5) Riverside 178 Acquired 1996 1,193 97% 96%
Portofino (6) Chino Hills 176 Acquired 1996 873 99% 98%
Parkview Terrace (6) Redlands 558 Acquired 1996 801 96% 95%
Redlands Lawn & Tennis (7) Redlands 496 Acquired 1996 795 89% 89%
------ ------
Total California 1,900
======
Total 13,905 44,343
====== ======
Weighted 283 905
Average ====== ======
</TABLE>
- --------------------
(1) Physical occupancy is defined as apartments occupied or leased (including
models and employee apartments) divided by the total number of leasable
apartments within the Community, expressed as a percentage.
(2) The Company owns approximately a 10 percent interest in the joint venture
that owns Los Arboles II, as well as two promissory notes with an
outstanding balance of approximately $760,000, secured by subordinated
liens on such property. Los Arboles II contains 200 apartments, was
developed in 1987, has an average unit size of 843 square feet and had
average physical occupancy during 1996 of 95 percent and physical occupancy
as of December 31, 1996 of 92 percent.
(3) Another phase of this community is currently under development. See
"Development and Construction Activity" below.
(4) A new phase of this community was completed and reached stabilized
occupancy in 1996.
(5) Property was acquired June 1996.
(6) Property was acquired July 1996.
(7) Property was acquired December 1996.
Of the current Stabilized Communities included in the table, 37 are
located in the greater Phoenix area, seven are located in the Tucson area and
five are located in California. All of the Stabilized Communities are managed
and operated by the Company and have an average size of 283 units. The
Stabilized Communities are primarily oriented to upscale residents seeking high
levels of amenities, such as clubhouses, exercise rooms, tennis courts, swimming
pools, therapy pools and covered parking. The average unit size of the
Stabilized and Communities under Construction combined is 905 square feet. All
have fully-equipped kitchens with upgraded cabinets, individual utility
metering, dishwashers, microwave ovens, separate dining areas, individual
storage, spacious patios and balconies, and ceramic tile entries. Most have
washers/dryers; and many offer high ceilings, fireplaces, and alarm system
prewiring.
6
<PAGE>
Development and Construction Activity
The apartment Communities under Construction and in Lease-Up are listed below:
<TABLE>
<CAPTION>
Actual Actual or
Average Estimated Date of Estimated Estimated
Unit Construction Construction Commence- Date of
Total Size Cost Commence- ment of Stabilized
Name City Units (Sq. Ft.) (Millions) ment Lease-Up Occupancy
- ------------------------------------------------------------------------------------------------------------------------------
Quarter
----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix
- -------
The Hawthorne Phoenix 276 904 $17 4:95 3:96 3:97
The Isle at Arrowhead Ranch Glendale 256 940 17 2:96 4:96 4:97
Promontory Pointe II
Expansion Phoenix 120 1,013 8 4:95 3:96 2:97
------- ----------
652 42
Tucson
- ------
Bear Canyon Tucson 238 973 15 3:95 2:96 2:97
Harrison Park II Expansion Tucson 188 974 10 3:95 2:96 2:97
------- ----------
426 25
------- ----------
Total 1,078 $67
======= ==========
</TABLE>
The Company owns sites in the Phoenix area intended for the development
of four additional multifamily apartment communities, which, if completed, are
expected to contain approximately 1115 apartment units. In February 1997, the
Company began the construction at one of the sites of the first phase of The
Retreat, which will contain 240 apartment units. The Company currently
anticipates that the first phase of the Retreat will achieve stabilized
occupancy in the third quarter of 1998. The Company currently anticipates that
it will develop three additional communities in the Phoenix area (with
approximately an aggregate of 635 units) and the second phase of the Retreat
(with an additional 240 units) over the course of the next two years. The
Company currently estimates that such developments, if completed, would reach
stabilized occupancy during the latter part of 1998 through the end of 1999.
There can be no assurance that the Company will succeed in obtaining any
necessary governmental approvals or any financing required to develop the
remaining sites or the completion of phase II of the Retreat, or that the
Company will decide to develop any particular project.
The forward-looking information set forth in the table and paragraph
above is based upon a number of estimates and assumptions that are inherently
subject to business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company's control. The actual development cost,
completion date and stabilization date of any project will be dependent upon a
variety of factors beyond the control of the Company including, for example,
labor and other personnel costs, material costs, weather conditions, government
fees and leasing rates.
7
<PAGE>
ITEM 7. Financial Statements, Pro forma Financial Information and Exhibits
(a) Financial Statements of Business to be Acquired
FINANCIAL STATEMENTS OF EVANS WITHYCOMBE RESIDENTIAL, INC.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Evans Withycombe Residential, Inc.
We have audited the accompanying consolidated balance sheets of Evans
Withycombe Residential, Inc. and subsidiaries (the Company) as of December 31,
1996 and 1995 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule. These
financial statements and the schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly,
in all material respects the information set forth therein.
Ernst & Young LLP
Phoenix, Arizona
January 31, 1997
8
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for number of shares)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
ASSETS
Real Estate:
<S> <C> <C>
Land....................................................... $121,915 $ 95,908
Buildings and improvements................................. 543,839 389,846
Furniture and fixtures..................................... 29,567 23,736
Construction-in-progress................................... 66,229 77,693
-------- --------
761,550 587,183
Less accumulated depreciation.............................. (38,331) (17,511)
-------- --------
723,219 569,672
Cash and cash equivalents.................................... 2,568 3,634
Restricted cash.............................................. 1,622 522
Accounts and notes receivable................................ 3,500 2,065
Deferred costs, net of accumulated amortization
of $1,265 and $507 at December 31, 1996
and 1995, respectively..................................... 3,838 2,946
Other assets................................................. 1,587 1,656
-------- --------
Total assets................................................. $736,334 $580,495
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and notes payable................................... $436,172 $297,456
Accounts payable and other liabilities....................... 7,833 9,379
Dividends payable............................................ - 6,127
Accrued interest............................................. 1,417 605
Accrued property taxes....................................... 2,912 2,358
Resident security deposits................................... 1,818 1,497
Prepaid rent................................................. 585 438
-------- --------
Total liabilities............................................ 450,737 317,860
Minority interest............................................ 56,592 64,487
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, issued and outstanding - none................ - -
Common stock, $.01 par value, 100,000,000 shares
authorized, 18,366,902 and 16,123,279 issued
and outstanding at December 31, 1996 and
1995, respectively....................................... 184 161
Additional paid-in capital................................. 253,425 209,344
Unamortized employee restricted stock compensation......... (465) (698)
Distributions in excess of net income...................... (24,139) (10,659)
-------- --------
Total stockholders' equity................................... 229,005 198,148
-------- --------
Total liabilities and stockholders' equity................... $736,334 $580,495
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
9
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for number of shares and per share amounts)
<TABLE>
<CAPTION>
Evans
Evans Evans Withycombe
Withycombe Withycombe Residential,
Residential, Residential, Inc.
Inc. Inc. and Group
------------ ------------ ------------
Year Ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rental...................................... $ 94,350 $ 68,864 $ 51,097
Third party management fees................. 1,157 1,268 1,668
Interest and other.......................... 6,195 4,478 4,424
----------- ----------- -----------
Total revenues............................ 101,702 74,610 57,189
Expenses:
Repairs and maintenance..................... 11,607 8,293 6,288
Property operating.......................... 12,713 8,699 7,834
Advertising................................. 1,864 1,244 966
Real estate taxes........................... 6,915 4,723 3,204
Property management......................... 3,225 2,825 2,505
General and administrative.................. 1,698 1,588 1,409
Interest.................................... 24,225 12,650 7,836
Depreciation and amortization............... 20,885 13,762 10,333
Other....................................... -- -- 5,233
----------- ----------- -----------
Total expenses............................ 83,132 53,784 45,608
----------- ----------- -----------
Income before minority interest............... 18,570 20,826 11,581
Minority interest............................. (4,010) (4,594) (1,548)
----------- ----------- -----------
Net income.................................... $ 14,560 $ 16,232 $ 10,033
=========== =========== ===========
Earnings per share............................ $ 0.84 $ 1.01
=========== ===========
Earnings per share, period from
August 17 to December 31, 1994.............. $ 0.38
===========
Weighted average shares outstanding........... 17,409,897 16,053,453 15,967,432
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
10
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except for number of shares and per share amounts)
<TABLE>
<CAPTION>
Additional Unamortized
Paid-in Employee
Capital Restricted Distributions
Number of Common (Owners' Stock in Excess of
Shares Stock Equity) Compensation Net Income Total
--------- ------ ------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Owners' equity, December 31, 1993............... - $ - $142,886 $ - $ - $142,886
Capital contributions......................... - - 9,660 - - 9,660
Distributions................................. - - (15,204) - - (15,204)
Net income, January 1 to August 16, 1994...... - - 4,012 - - 4,012
----------- ------ -------- ------------- -------- --------
- - 141,354 - - 141,354
The Offering and formation of the Company..... 16,021,078 160 119,287 - - 119,447
Minority interest of unitholders in
Operating Partnership at date of Offering... - - (53,343) - - (53,343)
Net Income, August 17 to December 31, 1994.... - - - - 6,021 6,021
Dividends on common stock ($.55 per share).... - - - - (8,812) (8,812)
----------- ------ -------- ------------- -------- --------
Stockholders' equity, December 31, 1994......... 16,021,078 160 207,298 - (2,791) 204,667
Net income.................................... - - - - 16,232 16,232
Dividends on common stock ($1.50 per share)... - - - - (24,100) (24,100)
Conversion of units to common stock........... 19,399 - 390 - - 390
Issuance of restricted common stock for
executive deferred compensation............. 82,802 1 1,656 (1,657) - -
Amortization of deferred compensation......... - - - 959 - 959
----------- ------ -------- ------------- -------- --------
Stockholders' equity, December 31, 1995......... 16,123,279 161 209,344 (698) (10,659) 198,148
Net income.................................... - - - - 14,560 14,560
Dividends on common stock ($1.58 per
share)........................................ - - - - (28,040) (28,040)
Proceeds of second offering, net of
underwriting discount and offering costs of
$3,237...................................... 2,088,889 21 40,870 - - 40,891
Conversion of units to common stock........... 132,793 2 2,581 - - 2,583
Exercise of stock options..................... 19,500 - 390 - - 390
Issuance of restricted stock.................. 10,895 - 240 (240) - -
Forfeiture of restricted stock................ (8,454) - - - - -
Amortization of deferred compensation......... - - - 473 - 473
----------- ------ -------- ------------- -------- --------
Stockholders' equity, December 31, 1996......... 18,366,902 $184 $253,425 $ (465) $(24,139) $229,005
=========== ====== ======== ============= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
11
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Evans Evans Evans
Withycombe Withycombe Withycombe
Residential, Residential, Residential,
Inc. Inc. Inc.
---- ---- and Group
---------
Year Ended December 31,
--------------------------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................................. $ 14,560 $ 16,232 $ 10,033
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 21,578 14,420 10,703
Amortization of executive deferred comp............ 390 693 267
Minority interest.................................. 4,010 4,594 1,548
Write-off of development and acquisition
costs............................................. 227 - -
Write-off of deferred loan costs................... - 172 -
Decrease (increase) in assets
Restricted cash.................................... (1,100) 561 (129)
Accounts and notes receivable...................... (1,435) (758) (1,111)
Other assets....................................... 69 (1,104) 3,136
(Decrease) increase in liabilities
Accounts payable and other liabilities............. (1,546) 153 4,444
Due to related parties and owners.................. - - (6,482)
Accrued interest................................... 812 505 (818)
Accrued property taxes............................. 554 825 62
Resident security deposits......................... 321 500 54
Prepaid rent....................................... 147 (262) (98)
--------- --------- ---------
Net cash provided by operating activities.............. 38,587 36,531 21,609
Cash flows from investing activities
Purchase of real estate assets......................... (127,811) (116,716) (207,978)
Payment for organization and loan costs................ (1,650) (1,345) (3,673)
--------- --------- ---------
Net cash (used) in investing activities................ (129,461) (118,061) (211,651)
Cash flows from financing activities
Proceeds from Public Offering, net of expenses......... 40,891 - 181,262
Proceeds from exercise of options...................... 390 - -
Proceeds from mortgage notes and
credit facility...................................... 269,778 315,653 122,522
Principal payments on mortgage notes................... (177,762) (202,477) (101,280)
Dividends paid......................................... (34,167) (23,901) (2,884)
Minority interest distributions........................ (9,322) (6,550) (2,265)
Distributions to owners................................ - - (17,012)
Capital contributions.................................. - - 9,660
--------- --------- ---------
Net cash provided by financing activities.............. 89,808 82,725 190,003
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.......................................... (1,066) 1,195 (39)
Cash and cash equivalents, beginning of year........... 3,634 2,439 2,478
--------- --------- ---------
Cash and cash equivalents, end of year................. $ 2,568 $ 3,634 $ 2,439
========= ========= =========
Supplemental information
Cash paid during the year for interest................. $ 22,648 $ 11,487 $ 8,284
========= ========= =========
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C>
Supplemental disclosure of non-cash activity
Assumption of debt related to the acquisition of
apartment communities $46,700 $56,493 $ -
======= ======= ====
Acquisition of apartment communities through
issuance of units in the Operating Partnership $ - $14,207 $ -
======= ======= ====
Issuance of stock under restricted stock
incentive plan $ 83 $ 959 $ -
======= ======= ====
Conversion of units to common stock $ 2,583 $ 390 $ -
======= ======= ====
</TABLE>
See Notes to Consolidated Financial Statements
13
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(Amounts in thousands, except for number of shares or units and per share
amounts)
1. Organization and Formation of the Company
Evans Withycombe Residential, Inc. (the "Company") is one of the largest
developers and managers of upscale apartment communities in Arizona and is
expanding its operation into selected sub-markets in Southern California. The
Company owns and manages 49 stabilized multifamily apartment communities
containing 13,905 units, of which 44 stabilized multifamily apartment
communities are located in Phoenix and Tucson, Arizona, containing a total of
12,005 units and five stabilized multifamily apartment communities are located
in the Riverside/San Bernardino, California market containing a total of 1,900
units. The Company considers an apartment community stabilized when it reaches
93 percent physical occupancy. The Company is also in the process of developing
or expanding five multifamily apartment communities comprising 1,078 units in
its Arizona markets. The Company is fully integrated with expertise in
development, acquisitions, construction and management of apartment communities.
The Company had approximately 580 employees at December 31, 1996.
The Company was incorporated on May 24, 1994 to develop, acquire, own and
manage upscale multifamily apartment communities. On August 17, 1994, the
Company completed an initial public offering and engaged in various formation
transactions designed to transfer ownership of the communities and other assets
of the predecessor company to Evans Withycombe Residential, L. P. (the
"Operating Partnership") or Evans Withycombe Finance Partnership, L.P. (the
"Financing Partnership"). The Company is the sole general partner of and owned a
79.7 percent, 77.02 percent and 79.50 percent interest in the Operating
Partnership at December 31, 1996, 1995 and 1994, respectively. The Company also
holds a noncontrolling interest in Evans Withycombe Management, Inc. (the
"Management Company").
In the second quarter of 1996, the Company completed the Second Offering.
The net proceeds from the Second Offering were used to repay a portion of the
Revolving Credit Facility.
The Company elected to be taxed as a real estate investment trust
("REIT") for Federal income tax purposes. A corporate REIT is a legal entity
which holds real estate interests and, through payments of dividends to
stockholders, is permitted to reduce or avoid the payment of federal income
taxes at the corporate level.
2. Basis of Presentation
The accompanying consolidated financial statements of Evans Withycombe
Residential, Inc. include the consolidated accounts of the Company, the
Operating Partnership, the Financing Partnership and the Management Company from
the date of the Offering, August 17, 1994. The accompanying financial statements
of Evans Withycombe Residential Group (the "Predecessor") prior to August 17,
1994, include the accounts of various partnerships sponsored by Evans
Withycombe. The Predecessor was a combination of affiliated entities that had
ownership in multifamily communities in the Phoenix and Tucson, Arizona area; it
was not a separate legal entity. The Predecessor accounts are presented on a
combined basis because all of the communities were managed by Evans Withycombe
which had a significant ownership interest in each of the communities and
because these communities were the subject of business combination in connection
with the formation of the Company.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
Reclassification
Certain amounts in the 1995 balance sheet and statement of stockholders'
equity have been reclassified to conform to the 1996 presentation.
3. Summary of Significant Accounting Policies
14
<PAGE>
Real Estate Assets and Depreciation
The Company records its real estate assets in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", which
was issued by the Financial Accounting Standards Board in March 1995 and the
Company adopted in 1996. SFAS No. 121 requires that long-lived assets such as
real estate assets, be reviewed whenever events or changes in circumstances
indicate that the book value of the asset may not be recoverable. If the sum of
the estimated future net cash flows (undiscounted and without interest charges)
from an asset to be held and used is less than the book value of the asset, an
impairment loss must be recognized in the amount of the difference between book
value and fair value as opposed to the difference between book value and net
realizable value under the previous accounting standard. For long-term assets
like apartment communities, the determination of whether there is an impairment
loss is dependent primarily on the Company's estimates on occupancy, rent and
expense increases, which involves numerous assumptions and judgments as to
future events over a period of many years. At December 31, 1996 the Company does
not hold any assets that meet the impairment criteria of SFAS No. 121.
Costs related directly to the acquisition and improvement of real estate
are capitalized. Interest costs incurred during construction of a new property
are capitalized until completion of construction on a building-by-building
basis. Interest capitalized was $2,714, $5,048 and $2,724, for the years ended
December 31, 1996, 1995 and 1994, respectively.
Ordinary repairs, maintenance and costs incurred in connection with
resident turnover such as unit cleaning, painting, and carpet cleaning are
expensed as incurred; major replacements and betterments are capitalized and
depreciated over their estimated useful lives. Depreciation is computed on a
straight-line basis over the expected useful lives of depreciable property,
which ranges from 10 to 40 years for buildings and improvements and five to
eight years for furnishings and equipment.
The Company reports developments and lease-up properties as construction-
in-progress until construction on the apartment community has been completed and
the apartment community has reached stabilized occupancy.
The Company also reports land relating to construction-in-progress as
land on its balance sheet. Land associated with construction-in-progress was
$16,542 and $16,414 at December 31, 1996 and 1995, respectively.
Revenue Recognition
Rental income attributable to residential leases is recorded when due
from residents. Leases are for periods of up to one year, with rental payments
due monthly.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent
investments with original maturities of three months or less, primarily
consisting of demand deposits in banks.
Restricted Cash
Restricted cash includes restricted deposits for sinking fund accounts
related to tax exempt bonds, property taxes and escrow accounts.
Deferred Costs
Costs incurred in obtaining long-term financing are deferred. These costs
are amortized on the effective interest method over the terms of the related
debt agreements.
15
<PAGE>
Income Taxes
The Company has made an election to be taxed as a REIT and accordingly,
no federal or state income taxes have been provided in the accompanying
consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
Earnings Per Share
Earnings per share has been computed by dividing net income for the years
ended December 31, 1996 and 1995 and the period ended December 31, 1994,
respectively, by the weighted average number of shares outstanding. Historical
earnings per share data for the periods ended prior to the Offering on August
17, 1994 are not relevant since the financial information prior to such date is
comprised of combined operations of partnerships and corporations.
4. Other
Prior to the Initial Public Offering, Evans Withycombe, Inc. had in place
an Executive Incentive Deferred Compensation Plan (the "Executive Plan").
Pursuant to the Executive Plan, certain executives of Evans Withycombe, Inc.
(the "Participants") were granted unfunded, unsecured rights to receive cash
payments based on the distributions from certain partnerships in which Evans
Withycombe owned an interest. The awards would have vested over a six-year
period from the date of grant. In connection with the Initial Public Offering,
all rights of Participants under the Executive Plan were canceled, and the
participants received (a) an aggregate of approximately $2,600 in cash which was
funded by Evans Withycombe, Inc. prior to the Initial Public Offering and (b)
the right to receive an aggregate of 98,500 shares of restricted stock from the
Company one year following the Offering if they remain as employees of the
Company during such period. One third of the shares will vest on each of the
second, third and fourth anniversaries of the Offering based on an offering
price per share of $20 (See Stock Incentive Plan footnote). The $2,600 cash
payment, which represents an estimate of the executives' vested share of the
gain, was expensed by Evans Withycombe, Inc. during the third quarter of 1994
prior to the Initial Public Offering.
In connection with the repayment of existing indebtedness at the time of
the offering, prepayment penalties and lender participation (additional
interest) totaling $2,600 were paid.
16
<PAGE>
5. Mortgage and Notes Payable
The Company's mortgage notes and notes payable consists of the following
at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Mortgage note payable at fixed interest rate of 7.2 percent, monthly principal $ - $ 5,457
and interest payments through August 18, 1996. The unpaid principal balance was
repaid on August 18, 1996.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal 5,380 5,463
and interest payments. The unpaid principal balance was repaid on January 9,
1997.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal 4,340 4,406
and interest payments. The unpaid principal balance was repaid on January 9,
1997.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal 8,951 9,063
and interest payments. The unpaid principal balance was repaid on January 9,
1997.
Mortgage note payable at fixed interest rate of 8.28 percent, monthly principal 6,225 6,339
and interest payments. The unpaid principal balance was repaid on January 31,
1997.
Mortgage note payable at fixed interest rate of 9.95 percent, monthly principal 12,065 12,184
and interest payments through September 15, 1997, remaining balance due
September 15, 1997.
Mortgage note payable at fixed interest rate of 9.3 percent, monthly principal 3,182 3,212
and interest payments through September 15, 1997, remaining balance due
September 15, 1997
$50 million securitized debt at a fixed interest rate of 7.17 percent, monthly 49,509 50,000
principal and interest payments through January 1, 2006, remaining balance due
January 1, 2006. Secured by first mortgage liens on 5 communities.
Securitized debt at a fixed stated interest rate of 7.98 percent, with an 130,520 130,439
effective interest rate of 8.05 percent, monthly interest only payments through
August 1, 2001. Secured by first mortgage liens on 22 communities. The face
amount of $131 million is due August 1, 2001. The balance is net of
unamortized discount of $480 and $561 at December 31, 1996 and 1995,
respectively.
$13 million short term note payable at a fixed interest rate of 6.0 percent. - 13,000
Interest only payments with the unpaid principal balance due January 5, 1996.
The unpaid principal balance was repaid on January 5, 1996.
$17.3 million tax exempt bonds with a floating interest rate based on the tax 17,300 17,300
exempt note rate set by the remarketing agent, or at the option of the Company
can convert to a fixed rate as determined by the remarketing agent. Secured by
a $17.5 million direct pay letter of credit agreement, interest payments only
matures December 1, 2007 (Effective interest rate of 5.16 percent at December
31, 1996).
$22.6 million tax exempt bonds with a floating interest rate based on the tax 22,650 -
exempt note rate set by the remarketing agent, interest payments only. Secured
by a $22.8 million direct pay letter of credit, matures February 1, 2016.
(Effective interest rate of 5.65 percent at December 31, 1996).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
$24.05 million tax exempt bonds with a floating interest rate based on the tax $ 24,050 $ -
exempt note rate set by the remarketing agent. Interest payments only. Secured
by a $24.4 million direct pay letter of credit agreement, matures August 1,
2005. (Effective interest rate of 6.14 percent at December 31, 1996).
$225 million unsecured Revolving Credit Facility with floating interest rate 152,000 40,593
based on LIBOR plus 1.50 percent or at the option of the Company at prime,
interest payments only. Matures September 24, 1999 (Effective interest rate
of 7.2 percent at December 31, 1996).
-------- --------
$436,172 $297,456
======== ========
</TABLE>
Each of the mortgage loans is secured by a first mortgage on separate
communities.
Principal maturities as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 40,625
1998 563
1999 152,605
2000 650
2001 131,218
Thereafter 110,511
--------
$436,172
========
</TABLE>
18
<PAGE>
The $225 million Revolving Credit Facility provides funding for working capital,
construction activities and acquisitions.
The Company has three direct pay letters of credit of $17,500, $22,800 and
$24,400 which serve as a credit enhancement for the tax exempt bonds. The
letters of credit are secured by a first mortgage on four apartment
communities.
On January 9, 1997, the Company extinguished the debt on three mortgages with
unpaid principal balances of approximately $18,700 with proceeds from the
Revolving Credit Facility. As a result, the Company incurred a loss from the
early extinguishment of debt of approximately $1,200. The Company prepaid the
$6,225 mortgage note on January 31, 1997 with proceeds from the Revolving
Credit Facility which resulted in an additional loss from the early
extinguishment of debt of approximately $300. The loss from early
extinguishment of debt was recorded by the Company in the first quarter 1997.
6. Distributions
On December 31, 1996, the Company paid a distribution of $.40 per share ($7,311)
to shareholders and $.40 per unit ($1,906) to unitholders of record as of
December 24, 1996. Approximately 36 percent and 30 percent of the dividends and
distributions paid during 1996 and 1995 represented return of capital to the
shareholders and unitholders.
7. Management and Development Fees
The Company performs management services for certain unaffiliated communities.
Management fees received from managed communities were $1,157, $1,268, and
$1,668 for the years ended December 31, 1996, 1995 and 1994, respectively.
Included in 1996 third party management fees is a non recurring $500 fee
received in exchange for terminating the management contract on nine apartment
communities containing 1,298 apartment units in the second quarter of 1996.
Prior to the Offering, in conjunction with development of projects, the
communities paid development fees to affiliates of $4,554 for the period ended
August 16, 1994.
8. Retirement Plan
The Company has a defined contribution wealth accumulation plan and trust (the
"Plan") covering all employees who have elected to participate in the Plan.
Each participant may make pretax contributions to the Plan up to the maximum
allowed by the IRS. The Company makes a matching contribution of 25 percent of
the participant's contribution up to 1 percent of a participant's salary,
which totaled $113, $53, and $91 for 1996, 1995, and 1994, respectively.
19
<PAGE>
9. Commitments and Contingencies
The Company leases office space in buildings and certain equipment under
noncancelable operating leases. Future minimum payments under these leases
with initial terms of one year or more consist of the following at December
31, 1996:
<TABLE>
<S> <C>
1997 $358
1998 364
1999 224
2000 4
----
$950
====
</TABLE>
Rent expense for the years ended December 31, 1996, 1995 and 1994 was $360,
$300, and $288, respectively.
10. Stock Incentive Plan
Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for 1995 and 1996, respectively: risk-free interest rates of 6.5% and 6.5%;
dividend yields of 7.5% and 7.4%; volatility factors of the expected market
price of the Company's common stock of 0.18 and 0.18; and a weighted-average
expected life of the option of 5 years. Because Statement 123 is applicable
only to options granted subsequent to December 31, 1994, its pro forma effect
will not be fully reflected until 1997.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (amounts in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Pro forma net income $14,557 $16,232
Pro forma primary earnings per share $ 0.84 $ 1.01
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$18.25 to $22.25. The weighted-average remaining contractual life of those
options is 7.6 years.
20
<PAGE>
Initially 1,830,000 shares of the Company's common stock were reserved for
issuance under the plan. Information with respect to stock options granted
during 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise Price
Shares Per Share
------ ---------
<S> <C> <C>
Options granted on August 17, 1994 685,200 $20.00
Exercised - -
Granted 16,000 19.65
Forfeited (4,840) 20.00
-------- ------
Options outstanding at December 31, 1994 696,360 19.99
Exercised - -
Granted 21,000 19.74
Forfeited (18,185) 20.00
-------- ------
Options outstanding at December 31, 1995 699,175 19.98
Exercised (19,500) 20.00
Granted 345,000 21.96
Forfeited (115,825) 20.00
-------- ------
Options outstanding at December 31, 1996 908,850 $20.63
======== ======
Options exercisable:
December 31, 1994 - -
December 31, 1995 175,300 $20.00
December 31, 1996 357,700 $19.98
</TABLE>
Options to purchase 901,650, 1,130,825 and 1,133,640 shares of common stock
were available for grant under the plan at December 31, 1996, 1995 and 1994,
respectively.
Executive Stock Incentive Plan
Prior to the Offering, the Company's predecessor Evans Withycombe, Inc. had in
place an Executive Incentive Deferred Compensation Plan (the "Executive Plan").
Pursuant to the Executive Plan, certain executives of Evans Withycombe, Inc.
(the "Participants") were granted the right to receive an aggregate of 98,500
shares of restricted stock from the Company one year following the Offering if
they remain employees of the Company during such period. One-third of the shares
vest on each of the second, third and fourth anniversaries of the Offering based
on an offering price per share of $20. The expense is being amortized ratably
over the periods in which the shares vest and an expense of $390 and $698 and
$267 for the years ended December 31, 1996, 1995 and 1994, respectively, is
included in general and administrative expense. Information with respect to the
executive restricted stock incentive plan is as follows:
<TABLE>
<CAPTION>
Shares
------
<S> <C>
Restricted stock at December 31, 1994 98,500
Forfeited (15,698)
-------
Restricted stock at December 31, 1995 82,802
Forfeited (8,454)
-------
Restricted stock at December 31, 1996 74,348
=======
Number of shares vested 27,600
</TABLE>
21
<PAGE>
Restricted Stock Program
In 1996, the Company awarded 10,895 shares of restricted stock to certain
employees of the Company under its 1994 Stock Incentive Plan. The restricted
stock vests ratably over periods ranging from one to four years from the date
of the award and are based on the price of the stock at the award date which
ranges from $20.75 to $22.25. The related expense will be amortized ratably
over the periods in which the shares vest and an expense of $83 is included in
general and administrative expense for the year ended December 31, 1996.
11. Minority Interest
Minority interest at December 31, 1996, 1995 and 1994, respectively, is
comprised of the following:
<TABLE>
<CAPTION>
Number
of Units Dollars
---------- -------
<S> <C> <C>
Minority interest of unit holders in
operating partnership at date of offering 4,119,452 $53,343
Allocation of net income - 1,548
Distributions ($.55 per unit) - (2,265)
--------- -------
Balance at December 31, 1994 4,119,452 52,626
Issuance of units to acquire apartment communities 710,550 14,207
Conversion of units to common stock (19,399) (390)
Allocation of net income - 4,594
Distributions ($1.50 per unit) - (6,550)
--------- -------
Balance at December 31, 1995 4,810,603 64,487
Conversion of units to common stock (132,793) (2,583)
Allocation of net income - 4,010
Distributions ($1.58 per unit) - (9,322)
--------- -------
Balance at December 31, 1996 4,677,810 $56,592
========= =======
</TABLE>
The Units can be redeemed for cash or shares of common stock of the Company on
a one-for-one basis at the Company's option. Minority interest of unitholders
in the Operating Partnership is calculated based on the weighted average of
shares of common stock and Units outstanding during the period.
12. Fair Value of Financial Instruments
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
Judgment is necessary to interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize on disposition of the financial
instruments. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
Cash equivalents, accounts receivable, accounts payable and other accruals are
carried at amounts that reasonably approximate their fair values as of December
31, 1996 and 1995. The Company's debt has an estimated aggregate fair value of
approximately $437,800 at December 31, 1996 compared to the carrying value of
$436,172. At December 31, 1995, the Company's debt had an estimated fair value
of approximately $298,800 compared to the carrying value of $297,456. Fair
values were estimated using discounted cash flow analyses, based on interest
rates currently available to the Company for issuance of debt with similar terms
and remaining maturities.
22
<PAGE>
13. 1994 Results of Operations
The 1994 results of operations of the Company and its Predecessor are as
follows:
<TABLE>
<CAPTION>
Evans Withycombe Evans Withycombe
Residential, Inc. Residential Group
----------------- -----------------
August 17 to January 1 to
December 31, 1994 August 16, 1994
----------------- ---------------
<S> <C> <C>
Revenues:
Rental............................. $20,185 $30,912
Third party management fees........ 560 1,108
Interest and other................. 1,258 3,166
------- -------
Total revenues....................... 22,003 35,186
Expenses:
Repairs and maintenance............ 2,642 3,646
Property operating................. 2,392 5,442
Advertising........................ 345 621
Real estate taxes.................. 1,251 1,953
Property management................ 1,104 1,401
General and administrative......... 644 765
Interest........................... 2,302 5,534
Depreciation and amortization...... 3,754 6,579
Other.............................. - 5,233
------- -------
Total expenses....................... 14,434 31,174
------- -------
Income before
minority interest.................. 7,569 4,012
Minority interest.................... (1,548) -
------- -------
Net income........................... $ 6,021 $ 4,012
======= =======
</TABLE>
23
<PAGE>
14. Selected Quarterly Financial Information (Unaudited, in thousands, except
per share amounts)
<TABLE>
<CAPTION>
Quarter
First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
1996
Revenue $24,179 $24,106 $25,956 $27,461
Net operating income............ 16,858 16,308 16,742 18,695
Income before
minority interest.............. 5,283 4,682 3,927 4,678
Minority interest............... (1,212) (1,027) (812) (959)
Net income...................... 4,071 3,655 3,115 3,719
Earnings per share.............. $ .25 $ .22 $ .17 $ .20
1995
Revenue $16,300 $17,530 $19,088 $21,692
Net operating income............ 11,444 12,015 12,312 15,880
Income before
minority interest.............. 5,606 4,868 4,586 5,766
Minority interest............... (1,173) (1,095) (1,030) (1,296)
Net income...................... 4,433 3,773 3,556 4,470
Earnings per share.............. $ .28 $ .23 $ .22 $ .28
</TABLE>
The Company defines net operating income as earnings before property management,
general and administrative expense, interest and depreciation.
24
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Costs Capitalized Subsequent
Initial Cost to Acquisition / Construction
------------------------------------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Same Store
Phoenix
Bayside at the Islands
Gilbert, AZ $ 6,589 $1,877 $6,623 $1,429 $ 3,491
Country Brook
Chandler, AZ 7,792 937 3,886 25 6,578
Deer Creek Village
Phoenix, AZ 5,116 919 5,454 506 3,465
Greenwood Village
Tempe, AZ 6,553 1,770 7,119 349 2,322
Heritage Point
Mesa, AZ - 666 5,125 - 397
La Mariposa
Mesa, AZ 4,750 1,440 3,962 608 2,620
La Valencia
Mesa, AZ 7,792 2,485 6,569 1,068 4,283
Little Cottonwoods
Tempe, AZ 9,424 2,834 6,655 216 7,161
Los Arboles
Chandler, AZ - 1,160 7,836 - 237
Miramonte
Scottsdale, AZ 4,340 1,133 3,711 - 123
Morningside
Scottsdale, AZ 4,542 533 6,316 137 2,115
Park Meadow
Gilbert, AZ 2,936 607 2,828 225 1,275
Preserve at Squaw Peak
Phoenix, AZ 3,172 377 4,252 141 1,939
Promontory Pointe
Phoenix, AZ 7,610 2,038 6,987 (379) 7,861
(9,905) *
Scottsdale Courtyards
Scottsdale, AZ 10,442 2,946 8,385 33 3,087
Scottsdale Meadows
Scottsdale, AZ 5,381 1,512 4,203 - 113
Shadow Brook
Phoenix, AZ 7,922 2,440 9,320 625 3,388
Shores at Andersen Springs
Chandler, AZ 8,196 2,095 9,682 649 3,949
* Write-down of real estate assets
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts at Which
Carried at Close of Period
---------------------------------
Buildings and Accumulated Year Year Depreciable
Description Land Improvements Total Depreciation Developed Acquired Lives in Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Same Store
Phoenix
Bayside at the Islands
Gilbert, AZ $3,306 $10,114 $13,420 $815 1988-1989 5 to 40 years
Country Brook
Chandler, AZ 962 10,464 11,426 954 1991 5 to 40 years
Deer Creek Village
Phoenix, AZ 1,425 8,919 10,344 912 1991 5 to 40 years
Greenwood Village
Tempe, AZ 2,119 9,441 11,560 961 1993 5 to 40 years
Heritage Point
Mesa, AZ 666 5,522 6,188 424 1994 5 to 40 years
La Mariposa
Mesa, AZ 2,048 6,582 8,630 528 1990 5 to 40 years
La Valencia
Mesa, AZ 3,553 10,852 14,405 829 1990 5 to 40 years
Little Cottonwoods
Tempe, AZ 3,050 13,816 16,866 939 1989 5 to 40 years
Los Arboles
Chandler, AZ 1,160 8,073 9,233 895 1993 5 to 40 years
Miramonte
Scottsdale, AZ 1,133 3,834 4,967 481 1993 5 to 40 years
Morningside
Scottsdale, AZ 670 8,431 9,101 731 1992 5 to 40 years
Park Meadow
Gilbert, AZ 832 4,103 4,935 450 1992 5 to 40 years
Preserve at Squaw Peak
Phoenix, AZ 518 6,191 6,709 500 1991 5 to 40 years
Promontory Pointe
Phoenix, AZ 1,659 4,943 6,602 392 1988 5 to 40 years
Scottsdale Courtyards
Scottsdale, AZ 2,979 11,472 14,451 1,035 1993 5 to 40 years
Scottsdale Meadows
Scottsdale, AZ 1,512 4,316 5,828 539 1993 5 to 40 years
Shadow Brook
Phoenix, AZ 3,065 12,708 15,773 1,157 1993 5 to 40 years
Shores at Andersen Springs
Chandler, AZ 2,744 13,631 16,375 1,078 1993 5 to 40 years
</TABLE>
25
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Costs Capitalized Gross Amounts
Subsequent to at Which Carried
Initial Cost Acquisition/Construction at Close of Period
------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Same Store (continued)
Silver Creek
Phoenix, AZ $3,211 $484 $3,157 $228 $2,429 $712 $5,586 $6,298
Sun Creek
Glendale, AZ 3,811 715 3,950 182 1,648 897 5,598 6,495
The Meadows
Mesa, AZ - 650 4,797 - 2,795 650 6,231 6,881
(1,361)*
The Palms
Phoenix, AZ 4,895 2,152 4,455 1,133 2,764 3,285 7,219 10,504
The Pines
Mesa, AZ 3,707 577 3,725 351 2,559 928 6,284 7,212
Towne Square
Chandler, AZ - 1,042 8,413 277 3,614 1,319 12,027 13,346
Villa Encanto
Phoenix, AZ 8,951 2,884 8,558 - 844 2,884 9,402 12,286
Village at Lakewood
Phoenix, AZ 8,317 1,652 5,776 1,514 5,897 3,166 11,673 14,839
Tucson
Harrison Park
Tucson, AZ 3,315 516 3,511 - 743 516 4,254 4,770
La Reserve
Oro, Valley 6,409 2,309 6,356 956 3,656 3,265 10,012 13,277
Orange Grove Village
Tucson, AZ 3,786 814 3,233 906 2,575 1,720 5,808 7,528
Suntree Village
Oro, Valley 8,550 1,246 8,862 326 3,713 1,572 12,575 14,147
The Arboretum
Tucson, AZ 16,684 1,014 8,323 1,526 3,349 2,540 11,6 72 14,212
Village at Tanque Verde
Tucson, AZ 6,436 690 1,280 745 4,895 1,435 6,175 7,610
-----------------------------------------------------------------------------------------------
Subtotal Same Store 180,629 44,514 183,309 13,776 84,619 58,290 267,928 326,218
Communities Stabilized Less Than
Two Years
Phoenix
Gateway Villas
Phoenix, AZ - 1,431 11,238 - (50) 1,431 11,188 12,619
</TABLE>
<TABLE>
<CAPTION>
Accumulated Year Year Depreciable
Depreciation Developed Acquired Lives in Years
-----------------------------------------------------
<S> <C> <C> <C> <C>
Same Store (continued)
Silver Creek
Phoenix, AZ $546 1991 5 to 40 years
Sun Creek
Glendale, AZ 624 1993 5 to 40 years
The Meadows
Mesa, AZ 532 1987 5 to 40 years
The Palms
Phoenix, AZ 512 1990 5 to 40 years
The Pines
Mesa, AZ 679 1992 5 to 40 years
Towne Square
Chandler, AZ 1,607 1992 5 to 40 years
Villa Encanto
Phoenix, AZ 983 1991 5 to 40 years
Village at Lakewood
Phoenix, AZ 915 1991 5 to 40 years
Tucson
Harrison Park
Tucson, AZ 393 1991 5 to 40 years
La Reserve
Oro, Valley 732 1988 5 to 40 years
Orange Grove Village
Tucson, AZ 605 1991 5 to 40 years
Suntree Village
Oro, Valley 1,348 1992 5 to 40 years
The Arboretum
Tucson, AZ 1,584 1992 5 to 40 years
Village at Tanque Verde
Tucson, AZ 589 1990 5 to 40 years
-------
Subtotal Same Store 25,269
Communities Stabilized Less Than
Two Years
Phoenix
Gateway Villas
Phoenix, AZ 561 1994-1995 5 to 40 years
</TABLE>
* Write-down of real estate assets
26
<PAGE>
<TABLE>
<CAPTION>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Subsequent Gross Amounts at Which
Initial Cost to Acquisition / Construction Carried at Close of Period
------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Communities Stabilized Less Than
Two Years (continued)
Mountain Park Ranch
Phoenix, AZ $ 9,704 $1,662 $12,540 $- $ 28 $1,662 $12,568
Sonoran
Phoenix, AZ - 2,362 20,802 - 17 2,362 20,819
The Enclave
Tempe, AZ 8,367 1,500 10,527 - 26 1,500 10,553
The Heritage
Phoenix, AZ - 1,211 12,370 - (13) 1,211 12,357
Towne Square Expansion Phase II
Chandler, AZ - - 6,061 - - - 6,061
Tucson
Arboretum Expansion Phase II
Tucson, AZ - 914 8,383 - - 914 8,383
-----------------------------------------------------------------------------------------
Subtotal Communities Stabilized
Less than Two Years 18,071 9,080 81,921 - 8 9,080 81,929
Developments and Lease-Up Properties
Phoenix
Country Brook Expansion Phase III
Chandler, AZ - 543 6,779 - - 543 6,779
The Hawthorne
Phoenix, AZ - 2,695 14,087 - - 2,695 14,087
Ingleside
Phoenix, AZ - 1,204 6,242 - - 1,204 6,242
The Isle at Arrowhead Ranch
Glendale, AZ - 1,652 9,806 - - 1,652 9,806
Ladera
Phoenix, AZ - 2,979 14,884 - - 2,979 14,884
Mirador
Phoenix, AZ - 2,597 20,885 - - 2,597 20,885
Park Meadow Expansion Phase II
Gilbert, AZ - 4 3,998 - - 4 3,998
Promontory Pointe Expansion Phase II
Phoenix, AZ - 665 8,141 - - 665 8,141
Towne Square Expansion Phase III
Chandler, AZ - 605 6,092 - - 605 6,092
</TABLE>
<TABLE>
<CAPTION>
Accumulated Year Year Depreciable
Total Depreciation Developed Acquired Lives in Years
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Communities Stabilized Less Than
Two Years (continued)
Mountain Park Ranch
Phoenix, AZ $14,230 $1,032 1994-1995 5 to 40 years
Sonoran
Phoenix, AZ 23,181 1,142 1994-1995 5 to 40 years
The Enclave
Tempe, AZ 12,053 860 1994-1995 5 to 40 years
The Heritage
Phoenix, AZ 13,568 769 1994-1995 5 to 40 years
Towne Square Expansion Phase II
Chandler, AZ 6,061 - 1994-1995 5 to 40 years
Tucson
Arboretum Expansion Phase II
Tucson, AZ 9,297 - 1994-1995 5 to 40 years
---------------------
Subtotal Communities Stabilized
Less than Two Years 91,009 4,364
Developments and Lease-Up Properties
Phoenix
Country Brook Expansion Phase III
Chandler, AZ 7,322 136 1995 5 to 40 years
The Hawthorne
Phoenix, AZ 16,782 122 1995 5 to 40 years
Ingleside
Phoenix, AZ 7,446 386 1995 5 to 40 years
The Isle at Arrowhead Ranch
Glendale, AZ 11,458 3 1996 5 to 40 years
Ladera
Phoenix, AZ 17,863 727 1994-1995 5 to 40 years
Mirador
Phoenix, AZ 23,482 921 1994-1995 5 to 40 years
Park Meadow Expansion Phase II
Gilbert, AZ 4,002 100 1995 5 to 40 years
Promontory Pointe Expansion Phase II
Phoenix, AZ 8,806 68 1995 5 to 40 years
Towne Square Expansion Phase III
Chandler, AZ 6,697 177 1995 5 to 40 years
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Subsequent Gross Amounts at Which
Initial Cost to Acquisition / Construction Carried at Close of Period
-------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Developments and Lease-Up
Properties (continued)
The Retreat (1)
Phoenix, AZ $ - $ 3,477 $ 2,578 $ - $ - $ 3,477 $ 2,578 $ 6,055
Scottsdale & Mountain View (1)
Scottsdale, AZ - 3,456 508 - - 3,456 508 3,964
Vista Grove (1)
Mesa, AZ - 1,343 1,897 - - 1,343 1,897 3,240
The Gates Project (2)
Various Locations - - 551 - - - 551 551
Laguna at Arrowhead (1)
Glendale, AZ - 879 592 - - 879 592 1,471
Tucson
Bear Canyon
Tucson, AZ - 1,645 12,926 - - 1,645 12,926 14,571
Harrison Park Expansion Phase II
Tucson, AZ - 749 8,912 - - 749 8,912 9,661
The Legends
Tucson, AZ - 2,728 17,893 - - 2,728 17,893 20,621
Orange Grove Expansion Phase II
Tucson, AZ - 93 7,213 - - 93 7,213 7,306
------------------------------------------------------------------------------------------------
Subtotal Developments and
Lease-Up Properties - 27,314 143,984 - - 27,314 143,984 171,298
Acquisitions
Phoenix
Acacia Creek
Scottsdale, AZ 15,247 6,122 24,382 - 599 6,122 24,981 31,103
Rancho Murietta
Tempe, AZ 6,225 1,766 10,208 - 993 1,766 11,201 12,967
Superstition Vista
Mesa, AZ - 1,641 12,272 - 1,512 1,641 13,784 15,425
Accumulated Year Year Depreciable
Description Depreciation Developed Acquired Lives in Years
- ------------------------------------------------------------------------------------
Developments and Lease-Up
Properties (continued)
The Retreat (1)
Phoenix, AZ $ - 1997 5 to 40 years
Scottsdale & Mountain View (1)
Scottsdale, AZ - 1997 5 to 40 years
Vista Grove (1)
Mesa, AZ - 1997 5 to 40 years
The Gates Project (2)
Various Locations - Various 5 to 40 years
Laguna at Arrowhead (1)
Glendale, AZ - 1997 5 to 40 years
Tucson
Bear Canyon
Tucson, AZ 237 1995 5 to 40 years
Harrison Park Expansion Phase II
Tucson, AZ 235 1995 5 to 40 years
The Legends
Tucson, AZ 1,235 1994-1995 5 to 40 years
Orange Grove Expansion Phase II
Tucson, AZ 297 1995 5 to 40 years
------
Subtotal Developments and
Lease-Up Properties 4,644
Acquisitions
Phoenix
Acacia Creek
Scottsdale, AZ 1,486 1995 5 to 40 years
Rancho Murietta
Tempe, AZ 698 1995 5 to 40 years
Superstition Vista
Mesa, AZ 480 1995 5 to 40 years
</TABLE>
28
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Costs Capitalized Gross Amounts
Subsequent to at Which Carried
Initial Cost Acquisition/Construction at Close of Period
------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquisitions (continued)
California
Canyon Crest Views
Riverside, CA $-- $ 1,745 $ 12,163 $ -- $ -- $ 1,745 $ 12,163 $ 13,908
The Ashton
Corona Hills, CA 17,300 2,594 18,679 -- 2,185 2,594 20,864 23,458
Portofino
Chino Hills, CA -- 3,572 9,031 -- -- 3,572 9,031 12,603
Parkview Terrace Club
Redlands, CA 22,650 4,969 28,301 -- -- 4,969 28,301 33,270
Redlands Lawn and Tennis
Club Redlands, CA 24,050 4,822 24,045 -- -- 4,822 24,045 28,867
--------------------------------------------------------------------------------------------------
Subtotal Acquisitions 85,472 27,231 139,081 -- 5,289 27,231 144,370 171,601
Corporate Office
Scottsdale, AZ -- -- 325 -- 1,099 -- 1,424 1,424
--------------------------------------------------------------------------------------------------
Total $284,172 $108,139 $548,620 $13,776 $91,015 $121,915 $639,635 $761,550
==================================================================================================
Accumulated Year Year Depreciable
Depreciation Developed Acquired Lives in Years
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisitions (continued)
CaliforniaCanyon Crest Views
Riverside, CA $141 1996 5 to 40 years
The Ashton
Corona Hills, CA 510 1995 5 to 40 years
Portofino
Chino Hills, CA 91 1996 5 to 40 years
Parkview Terrace Club
Redlands, CA 286 1996 5 to 40 years
Redlands Lawn and Tennis
Club Redlands, CA 50 1996 5 to 40 years
--------------------------------------------------------------------------------------------------
Subtotal Acquisitions 3,742
Corporate Office
Scottsdale, AZ 312 1994 5 to 8 years
--------------------------------------------------------------------------------------------------
Total $38,331
==================================================================================================
</TABLE>
(1) Projects are currently in the early planning stage and preliminary site
work.
(2) The Gates Project represents the costs associated with the Company's
investment in constructing security gate systems at all its apartment
communities.
29
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
A summary of activity for real estate investments and accumulated depreciation
is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
(Amounts in thousands)
Balance at beginning of period $587,183 $399,987 $ 292,513
Acquisitions 88,648 77,895 5,849
Improvements, including construction costs 85,719 109,301 66,604
Elimination of accumulated depreciation
at date of acquisition - - (38,360) (1)
Fair value adjustment - - 73,381
--------- --------- ----------
Balance at close of period $761,550 $587,183 $ 399,987
========== ========= ==========
Accumulated depreciation
Balance at beginning of period $ 17,511 $ 3,749 $ 32,065
Depreciation 20,885 13,762 10,333
Accumulated depreciation on disposals (65) - (289)
Elimination of accumulated depreciation
at date of acquisition - - (38,360)
--------- --------- ----------
Balance at close of period $ 38,331 $ 17,511 $ 3,749
========= ========= ==========
</TABLE>
Amount represents decrease in basis due to acquiring real estate at net
book value at the time of the Offering.
30
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
UNAUDITED FINANCIAL STATEMENTS
AS OF JUNE 30, 1997
31
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for number of shares)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Real Estate:
Land................................................. $130,490 $121,915
Buildings and improvements........................... 598,421 543,839
Furniture and fixtures............................... 31,728 29,567
Construction-in-progress............................. 43,265 66,229
-------- --------
803,904 761,550
Less accumulated depreciation........................ (48,925) (38,331)
-------- --------
754,979 723,219
Cash and cash equivalents.............................. 1,051 2,568
Restricted cash........................................ 8,518 1,622
Accounts and notes receivable.......................... 2,886 3,500
Mortgage notes receivable.............................. 15,120 --
Deferred costs, net of accumulated amortization
of $1,555 and $1,265 at June 30, 1997 and
December 31, 1996, respectively....................... 4,489 3,838
Other assets........................................... 1,906 1,587
-------- --------
Total assets........................................... $788,949 $736,334
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and notes payable............................. $ 445,441 $436,172
Accounts payable and other liabilities................. 10,106 7,833
Dividends payable...................................... 8,235 -
Accrued interest....................................... 2,860 1,417
Accrued property taxes................................. 3,241 2,912
Resident security deposits............................. 2,408 1,818
Prepaid rent........................................... 870 585
-------- --------
Total liabilities...................................... 473,161 450,737
Minority interest...................................... 54,610 56,592
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, issued and outstanding - none.......... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 20,334,743 and 18,366,902 issued
and outstanding at June 30, 1997 and
December 31, 1996, respectively.................... 204 184
Additional paid-in capital............................ 292,253 253,425
Unamortized employee restricted stock compensation.... (1,104) (465)
Distributions in excess of net income................. (30,175) (24,139)
-------- --------
Total stockholders' equity............................. 261,178 229,005
-------- --------
Total liabilities and stockholders' equity............. $788,949 $736,334
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
32
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for number of shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental............................................... $ 27,713 $ 22,078 $ 54,865 $ 44,214
Third party management fees.......................... 120 664 230 951
Interest and other................................... 1,770 1,364 3,529 3,120
------------- ------------- ------------- -------------
Total revenues..................................... 29,603 24,106 58,624 48,285
Expenses:
Repairs and maintenance.............................. 2,637 2,719 5,578 5,275
Property operating................................... 4,237 2,865 8,437 5,548
Advertising.......................................... 542 599 956 1,032
Real estate taxes.................................... 2,079 1,615 4,198 3,264
Property management.................................. 633 824 1,540 1,708
General and administrative........................... 356 463 867 960
Interest............................................. 8,013 5,469 15,402 10,893
Depreciation and amortization........................ 6,459 4,870 12,637 9,640
------------- ------------- ------------- -------------
Total expenses......................................... 24,956 19,424 49,615 38,320
------------- ------------- ------------- -------------
Income before minority interest, gain on sale of
real estate assets and extraordinary item............ 4,647 4,682 9,009 9,965
Gain on sale of real estate assets..................... 5,253 -- 5,253 --
Minority interest...................................... (1,828) (1,027) (2,664) (2,239)
------------- ------------- ------------- -------------
Income before extraordinary items...................... 8,072 3,655 11,598 7,726
Extraordinary item-
loss on early extinguishment of debt
net of minority interest of $300.................... -- -- (1,200) --
------------- ------------- ------------- -------------
Net income............................................. $ 8,072 $ 3,655 $ 10,398 $ 7,726
============= ============= ============= =============
Earnings per share before extraordinary item........... $ 0.40 $ 0.22 $ 0.59 $ 0.47
============= ============= ============= =============
Earnings per share..................................... $ 0.40 $ 0.22 $ 0.52 $ 0.47
============= ============= ============= =============
Weighted average shares outstanding.................... 20,257,173 16,933,771 19,809,734 16,535,454
============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements
33
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except for number of shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Unamortized
Employee
Additional Restricted Distributions
Number of Common Paid-in Stock in Excess of
Shares Stock Capital Compensation Net Income Total
---------- ------ --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity, December 31, 1996............ 18,366,902 $184 $253,425 $ (465) $(24,139) $229,005
Net income....................................... - - - - 10,398 10,398
Dividends on common stock
($0.81 per share).............................. - - - - (16,434) (16,434)
Proceeds of third offering, net of underwriting
discount and offering costs of $406............ 1,800,000 18 35,397 - - 35,415
Conversion of units to common stock.............. 126,387 2 2,480 - - 2,482
Exercise of stock options........................ 7,500 - 207 - - 207
Issuance of restricted stock..................... 36,130 - 744 (744) - -
Forfeiture of restricted stock................... (2,176) - - - - -
Amortization of deferred compensation............ - - - 105 - 105
---------- ---- -------- ------- -------- --------
Stockholders' equity, June 30 1997................. 20,334,743 $204 $292,253 $(1,104) $(30,175) $261,178
========== ==== ======== ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
34
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended June 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income.............................................................. $ 10,398 $ 7,726
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................................... 13,183 9,960
Amortization of deferred comp......................................... 81 350
Minority interest..................................................... 2,364 2,239
Net gain on sale of real estate assets................................ (5,253) -
Write-off of development and acquisition costs........................ 402 39
Write-off of deferred loan costs...................................... 294 -
Decrease (increase) in assets:
Restricted cash....................................................... (6,896) (437)
Accounts and notes receivable......................................... 614 (441)
Other assets.......................................................... (319) 206
(Decrease) increase in liabilities:
Accounts payable and other liabilities................................ 2,273 (883)
Accrued interest...................................................... 1,443 (64)
Accrued property taxes................................................ 329 901
Resident security deposits............................................ 590 2
Prepaid rent.......................................................... 285 (12)
--------- ---------
Net cash provided by operating activities............................... 19,788 19,586
Cash flows from investing activities
Purchase of real estate assets.......................................... (42,354) (60,643)
Sale of real estate assets.............................................. 6,012 -
--------- ---------
Net cash used in investing activities................................... (36,342) (60,643)
Cash flows from financing activities
Proceeds from Third Public Offering, net of expenses.................... 35,415 -
Proceeds from Second Public Offering, net of expenses................... - 41,107
Proceeds from exercise of options....................................... 207 160
Proceeds from mortgage notes and revolving
credit facility........................................................ 184,306 176,221
Principal payments on mortgage notes.................................... (193,355) (161,887)
Payment for loan costs.................................................. (1,473) (315)
Dividends paid.......................................................... (8,199) (12,424)
Minority interest distributions......................................... (1,864) (3,651)
--------- ---------
Net cash provided by financing activities............................... 15,037 39,211
--------- ---------
Net decrease in cash and cash equivalents............................... (1,517) (1,846)
Cash and cash equivalents, beginning of period.......................... 2,568 3,634
--------- ---------
Cash and cash equivalents, end of period................................ $ 1,051 $ 1,788
========= =========
Supplemental information
Cash paid during the period for interest................................ $ 13,457 $ 10,645
========= =========
Supplemental disclosure of non-cash activity
Assumption of debt related to the acquisition of
apartment communities.................................................. $ 18,318 $ -
========= =========
Origination of carryback mortgage notes arising from sale of
apartment communities................................................ $ 15,120 $ -
========= =========
Issuance of stock under restricted stock incentive plan................. $ 24 $ -
========= =========
Conversion of units to common stock..................................... $ 2,482 $ 888
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
35
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Amounts in thousands, except for number of shares or units and per share
amounts)
(Unaudited)
1. Organization and Formation of the Company
Evans Withycombe Residential, Inc. (the "Company") is one of the largest
developers and managers of upscale apartment communities in Arizona and is
expanding its operations into selected sub-markets in Southern California. The
Company owns and manages 52 stabilized multifamily apartment communities
containing 14,723 units, of which 45 stabilized multifamily apartment
communities are located in Phoenix and Tucson, Arizona, containing a total of
12,325 units and seven stabilized multifamily apartment communities are located
in the Southern California market containing a total of 2,398 units. The
Company is also in the process of developing or expanding three multifamily
apartment communities comprising 720 units in its Phoenix market. The Company
is fully integrated with expertise in development, acquisitions, construction
and management of apartment communities. The Company had approximately 600
employees at June 30, 1997.
The Company was incorporated on May 24, 1994 to develop, acquire, own and manage
upscale multifamily apartment communities. On August 17, 1994, the Company
completed an Initial Public Offering and engaged in various formation
transactions designed to transfer ownership of the communities and other assets
of the predecessor company to Evans Withycombe Residential, L. P. (the
"Operating Partnership") or Evans Withycombe Finance Partnership, L.P. (the
"Financing Partnership"). The Company is the sole general partner of and owned
a 81.46 percent and 77.08 percent interest in the Operating Partnership at June
30, 1997 and 1996, respectively. The Company also holds a noncontrolling
interest in Evans Withycombe Management, Inc. (the "Management Company").
In the second quarter of 1996, the Company completed the Second Public Offering.
The net proceeds of $40,891 from the sale of 2,088,889 shares of common stock
from the Second Public Offering were used to repay a portion of the $150 million
unsecured Revolving Credit Facility (Revolving Credit Facility).
In the first quarter of 1997, the Company completed the Third Public Offering.
The net proceeds of $35,415 from the sale of 1,800,000 shares of common stock
from the Third Public Offering were used to repay a portion of the Revolving
Credit Facility.
The Company elected to be taxed as a real estate investment trust ("REIT") for
Federal income tax purposes. A corporate REIT is a legal entity which holds
real estate interests and, through payments of dividends to stockholders, is
permitted to reduce or avoid the payment of federal income taxes at the
corporate level.
2. Basis of Presentation
The accompanying consolidated financial statements of Evans Withycombe
Residential, Inc. include the consolidated accounts of the Company, the
Operating Partnership, the Financing Partnership and the Management Company.
The accompanying unaudited consolidated financial statements have been presented
by the Company's management in accordance with generally accepted accounting
principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission (SEC). Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All significant intercompany
accounts and transactions have been eliminated in consolidation. In the opinion
of management, all adjustments (consisting of normally recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for the six month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
36
<PAGE>
These consolidated financial statements should be read in conjunction with the
Company's December 31, 1996 audited consolidated financial statements and
accompanying notes in the Evans Withycombe Residential, Inc. Annual Report on
Form 10-K/A.
3. Summary of Significant Accounting Policies
Real Estate Assets and Depreciation
The Company records its real estate assets in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed of". SFAS No. 121
requires that long-lived assets such as real estate assets, be reviewed whenever
events or changes in circumstances indicate that the book value of the asset may
not be recoverable. If the sum of the estimated future net cash flows
(undiscounted and without interest charges) from an asset to be held and used is
less than the book value of the asset, an impairment loss must be recognized in
the amount of the difference between book value and fair value as opposed to the
difference between book value and net realizable value under the previous
accounting standard. For long-term assets like apartment communities, the
determination of whether there is an impairment loss is dependent primarily on
the Company's estimates on occupancy, rent and expense increases, which involves
numerous assumptions and judgments as to future events over a period of many
years. At June 30, 1997 the Company does not hold any assets that meet the
impairment criteria of SFAS No. 121.
Costs related directly to the acquisition and improvement of real estate are
capitalized. Interest costs incurred during construction of a new property are
capitalized until completion of construction on a building-by-building basis.
Interest capitalized was $493 and $970 and $744 and $1,464, for the three and
the six months ended June 30, 1997 and 1996, respectively.
Ordinary repairs, maintenance and costs incurred in connection with resident
turnover such as unit cleaning, painting, and carpet cleaning are expensed as
incurred; major replacements and betterments are capitalized and depreciated
over their estimated useful lives. Depreciation is computed on a straight-line
basis over the expected useful lives of depreciable property, which ranges from
10 to 40 years for buildings and improvements and five to eight years for
furnishings and equipment.
The Company reports developments and lease-up properties as construction-in-
progress until construction on the apartment community has been completed and
the apartment community has reached stabilized occupancy.
The Company also reports land relating to construction-in-progress as land on
its balance sheet. Land associated with construction-in-progress was $10,802
and $12,060 at June 30, 1997 and December 31, 1996, respectively.
Revenue Recognition
Rental income attributable to residential leases is recorded when due from
residents. Leases are for periods of up to one year, with rental payments due
monthly.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments with
original maturities of three months or less, primarily consisting of demand
deposits in banks.
Restricted Cash
Restricted cash includes restricted deposits held by third party intermediaries
for the purpose of completing an IRS Section 1031 tax free exchange, sinking
fund accounts related to tax exempt bonds, property taxes and escrow accounts.
37
<PAGE>
Deferred Costs
Costs incurred in obtaining long-term financing are deferred. These costs are
amortized on the effective interest method over the terms of the related debt
agreements.
Income Taxes
The Company has made an election to be taxed as a REIT and accordingly, no
federal or state income taxes have been provided in the accompanying
consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Earnings Per Share
Earnings per share has been computed by dividing net income for the three and
the six months ended June 30, 1997 and 1996, respectively, by the weighted
average number of shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods presented. Under
the new requirements for calculating basic earnings per share, the dilutive
effect of stock options will be excluded. The impact of SFAS No. 128 is not
expected to be material.
4. Mortgage Notes Receivable
The Company's mortgage notes receivable consist of the following:
<TABLE>
<S> <C>
$7.9 million mortgage note receivable at a fixed interest
rate of 9.5 percent, secured by a first mortgage lien on
Deer Creek Village Apartments, matures November 1, 1997.
(Paid off on July 23, 1997.) $ 7,932
$7.2 million mortgage note receivable at a fixed interest
rate of 8.0 percent secured by a first mortgage lien on
The Pines Apartments, matures November 1, 1997. 7,188
-------
$15,120
=======
</TABLE>
38
<PAGE>
5. Mortgage and Notes Payable
The Company's mortgage notes and notes payable consists of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Mortgage note payable at a fixed interest rate of 8.0 percent, monthly $ - $ 5,380
principal and interest payments. The unpaid principal balance was repaid on
January 9, 1997.
Mortgage note payable at a fixed interest rate of 8.0 percent, monthly - 4,340
principal and interest payments. The unpaid principal balance was repaid on
January 9, 1997.
Mortgage note payable at a fixed interest rate of 8.0 percent, monthly - 8,951
principal and interest payments. The unpaid principal balance was repaid on
January 9, 1997.
Mortgage note payable at a fixed interest rate of 8.28 percent, monthly - 6,225
principal and interest payments. The unpaid principal balance was repaid on
January 31, 1997.
Mortgage note payable at a fixed interest rate of 9.95 percent, monthly 12,000 12,065
principal and interest payments through September 15, 1997, remaining
balance due September 15, 1997. The unpaid principal balance was repaid on
July 15, 1997.
Mortgage note payable at a fixed interest rate of 9.3 percent, monthly 3,166 3,182
principal and interest payments through September 15, 1997, remaining
balance due September 15, 1997. The unpaid principal balance was repaid on
July 15, 1997.
Mortgage note payable at fixed interest rates ranging from 6.25 percent to 18,252 -
9.0 percent, monthly principal and interest payments through August 17,
2004, remaining balance due August 17, 2004. Interest rate increases 0.25
percent annually each September. Secured by a first mortgage lien on one
apartment community. The mortgage note can be repaid at any time at the
Company's option without prepayment penalty.
$50 million securitized debt at a fixed interest rate of 7.17 percent, 49,250 49,509
monthly principal and interest payments through January 1, 2006, remaining
balance due January 1, 2006. Secured by first mortgage liens on 5
communities.
Securitized debt at a fixed stated interest rate of 7.98 percent, with an 130,563 130,520
effective interest rate of 8.05 percent, monthly interest payments only
through August 1, 2001. Secured by first mortgage liens on 21 communities.
The face amount of $131 million is due August 1, 2001. The balance is net
of unamortized discount of $437 and $480 at June 30, 1997 and December 31,
1996, respectively.
$17.3 million tax exempt bonds with a floating interest rate based on the tax 17,300 17,300
exempt note rate set by the remarketing agent, or at the option of the
Company can convert to a fixed rate as determined by the remarketing agent.
Secured by a $17.5 million direct pay letter of credit, interest payments
only, matures December 1, 2007 (Effective interest rate of 5.20 percent at
June 30, 1997).
$22.6 million tax exempt bonds with a floating interest rate based on the tax 22,650 22,650
exempt note rate set by the remarketing agent, interest payments only.
Secured by a $22.8 million direct pay letter of credit, matures February 1,
2016. (Effective interest rate of 5.56 percent at June 30, 1997).
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ --------------
<S> <C> <C>
$24.05 million tax exempt bonds with a floating interest rate based on the $ 24,050 $ 24,050
tax exempt note rate set by the remarketing agent, interest payments only.
Secured by a $24.4 million direct pay letter of credit, matures August 1,
2005. (Effective interest rate of 5.34 percent at June 30, 1997).
$150 million unsecured Revolving Credit Facility with floating interest rate 44,000 152,000
based on LIBOR plus 1.15 percent or at the option of the Company at prime
rate, interest payments only. Matures September 24, 1999 (Effective
interest rate of 7.23 percent at June 30, 1997).
$75 million senior unsecured notes with a fixed coupon rate of 7.50 percent. 74,595 -
Semiannual interest only payments due April 15 and October 15 commencing
October 15, 1997. Face amount of $75 million is due April 15, 2004. The
balance is net of an unamortized discount of $405 at June 30, 1997. The
effective interest rate inclusive of the benefit of a treasury lock
transaction is 7.18 percent.
$50 million senior unsecured notes with a fixed coupon rate of 7.625 percent. 49,615 -
Semiannual interest only payments due April 15 and October 15 commencing
October 15, 1997. Face amount of $50 million is due April 15, 2007. The
balance is net of an unamortized discount of $385 at June 30, 1997. The
effective interest rate inclusive of the benefit of a treasury lock
transaction is 7.36 percent. --------- ---------
$ 445,441 $ 436,172
========= =========
</TABLE>
Scheduled principal payments on debt, assuming that the Company exercises its
options to extend the maturity date on the Revolving Credit Facility, are as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Mortgage Mortgage Senior Revolving
Notes Loan Unsecured Tax-Exempt Credit
Payable Certificate Notes Bonds Facility Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 $15,487 $ - $ - $ - $ - $ 15,487
1998 784 - - - - 784
1999 831 - - - 44,000 44,831
2000 882 - - - - 882
2001 500 130,563 - - - 131,063
Thereafter 64,184 - 124,210 64,000 - 252,394
-------------------------------------------------------------------------------
Total $82,668 $130,563 $124,210 $64,000 $44,000 $445,441
===============================================================================
</TABLE>
On June 13, 1997, the Company amended its existing $225 million Revolving Credit
Facility with a bank group to decrease the commitment amount from $225 million
to $150 million and decrease the interest rate from LIBOR plus 1.50 percent to
LIBOR plus 1.15 percent.
The $150 million Revolving Credit Facility provides funding for working capital,
construction activities and acquisitions.
The Company has three direct pay letters of credit of $17,500, $22,800 and
$24,400 which serve as a credit enhancement for the tax exempt bonds. The
letters of credit are secured by a first mortgage on four apartment communities.
40
<PAGE>
In January 1997, the Company extinguished the debt on four mortgages with unpaid
principal balances of approximately $25,000 with proceeds from the Revolving
Credit Facility. As a result, the Company incurred a loss from the early
extinguishment of debt of approximately $1,200, net of minority interest of
$300.
6. Distributions
On July 15, 1997, the Company paid a distribution of $0.405 per share ($8,235)
to shareholders and $0.405 per unit ($1,864) to unitholders of record as of June
30, 1997.
7. Management Fees
The Company performs management services for certain unaffiliated communities.
Management fees received from managed communities were $119 and $664 for the
three months ended June 30, 1997 and 1996 and $230 and $951 for the six months
ended June 30, 1997 and 1996, respectively. The Second Quarter 1996 balance
includes a one time non-recurring $500 termination fee received from the sale of
management contracts.
8. Stock Incentive Plan
Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Proforma information regarding net income and earnings per share is required by
SFAS No. 123 and is provided by the Company in its annual report.
Initially 1,830,000 shares of the Company's common stock were reserved for
issuance under the plan. Information with respect to stock options granted
during the six months ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise Price
Shares Per Share
------ ---------
<S> <C> <C>
Options outstanding at December 31, 1996 908,850 $20.63
Exercised (7,500) 20.00
Granted 241,500 20.49
Forfeited (32,225) 20.84
--------- ------
Options outstanding at June 30, 1997 1,110,625 $20.66
========= ======
Options exercisable:
December 31, 1996 357,700 $19.98
June 30, 1997 521,125 $20.46
</TABLE>
Options to purchase 719,375 and 901,650 shares of common stock were available
for grant under the plan at June 30, 1997 and December 31, 1996, respectively.
Executive Stock Incentive Plan
Prior to the Initial Public Offering, the Company's predecessor Evans
Withycombe, Inc. had in place an Executive Incentive Deferred Compensation Plan
(the "Executive Plan"). Pursuant to the Executive Plan, certain executives of
Evans Withycombe, Inc. (the "Participants") were granted an aggregate of 98,500
shares of restricted stock from the Company one year following the Initial
Public Offering if they remained employees of the Company during such
41
<PAGE>
period. One-third of the shares vest on each of the second, third and fourth
anniversaries of the Initial Public Offering based on an offering price per
share of $20. The expense is being amortized ratably over the periods in which
the shares vest and an expense of $30 and $180 and $60 and $350 for the three
and six months ended June 30, 1997 and 1996, respectively, is included in
general and administrative expense. Information with respect to the executive
restricted stock incentive plan is as follows:
<TABLE>
<CAPTION>
Shares
======
<S> <C>
Restricted stock, net of forfeitures, at December 31, 1996, 74,346
Forfeited (1,174)
------
Restricted stock at June 30, 1997 73,172
======
Number of shares vested at June 30, 1997 27,600
</TABLE>
Restricted Stock Program
The Company has awarded 45,220 shares, net of forfeitures, of restricted stock
to certain employees of the Company under its 1994 Stock Incentive Plan. The
restricted stock vests ratably over periods ranging from one to seven years from
the date of the award and are based on the price of the stock at the award date
which ranges from $19.13 to $22.25. The related expense will be amortized
ratably over the periods in which the shares vest and an expense of $27 and $11
and $45 and $20, for the three and six months ended June 30, 1997 and 1996,
respectively, is included in general and administrative expense.
9. Minority Interest
Minority interest at June 30, 1997 is comprised of the following:
<TABLE>
<CAPTION>
Number
of Units Dollars
--------- -------
<S> <C> <C>
Balance at December 31, 1996 4,677,810 $56,592
Conversion of units to common stock (126,387) (2,482)
Allocation of net income - 2,664
Allocation of extraordinary item -
loss from early extinguishment of debt - (300)
Distributions paid - (1,864)
--------- -------
Balance at June 30, 1997 4,551,423 $54,610
========= =======
</TABLE>
The Units can be redeemed for cash or shares of common stock of the Company on a
one-for-one basis at the Company's option. Minority interest of unitholders in
the Operating Partnership is calculated based on the weighted average of shares
of common stock and Units outstanding during the period.
42
<PAGE>
PROPERTIES
Disposition Activity
During the second quarter of 1997, the Company sold two properties, Deer Creek
Village and the The Pines, containing 502 apartment units. The aggregate sales
price was approximately $22.4 million resulting in a gain from the sale of
approximately $5.2 million. The Company received cash of approximately $7.3
million and two carryback mortgage notes of approximately $15.1 million. The
mortgage notes are secured by a first deed of trust on the two properties and
mature in November 1997. The buyer may repay the two mortgage notes at any time
without prepayment penalties.
Apartment Communities
The following sets forth certain information regarding the current apartment
communities at June 30, 1997. All of the communities are owned 100 percent in
fee by the Company.
<TABLE>
<CAPTION>
Year
Developed
Number of Developed/ or
Apartment Communities City Apartments Acquired Acquired
- --------------------- ---- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Same Store
Arizona
- -------
Phoenix:
Acacia Creek Scottsdale 508 Acquired 1995
Bayside at the Islands Gilbert 272 Developed 1988
Country Brook Chandler 276 Acq/Dev 1991/1993
Gateway Villas Phoenix 180 Developed 1995
Greenwood Village Tempe 270 Acquired 1993
Heritage Point Mesa 148 Acquired 1994
La Mariposa Mesa 222 Acquired 1990
La Valencia Mesa 361 Acquired 1990
Little Cottonwoods Tempe 379 Acq/Acq/Dev 1989/89/90
Los Arboles Chandler 232 Developed 1985
Miramonte Scottsdale 151 Developed 1983
Morningside Scottsdale 160 Acquired 1992
Mountain Park Ranch Phoenix 240 Developed 1995
Park Meadow Gilbert 156 Acquired 1992
Preserve at Squaw Peak Phoenix 108 Acquired 1991
Promontory Pointe Phoenix 304 Acquired 1988
Rancho Murietta Tempe 292 Acquired 1995
Scottsdale Courtyards Scottsdale 274 Developed 1993
Scottsdale Meadows Scottsdale 168 Developed 1984
Shadow Brook Phoenix 224 Acquired 1993
Shores at Andersen Springs Chandler 299 Developed 1989/1993
Silver Creek Phoenix 174 Acquired 1991
Sonoran Phoenix 429 Developed 1995
Sun Creek Glendale 175 Acquired 1993
Superstition Vista Mesa 316 Acquired 1995
The Enclave Tempe 204 Developed 1995
The Heritage Phoenix 204 Developed 1995
The Meadows Mesa 306 Acquired 1987
The Palms Phoenix 132 Developed 1990
Towne Square Chandler 468 Acq/Dev 1992/1995
Villa Encanto Phoenix 382 Developed 1983
Village at Lakewood Phoenix 240 Developed 1988
------
8,254
Tucson:
Harrison Park Tucson 172 Acquired 1991
La Reserve Oro Valley 240 Developed 1988
Orange Grove Village Tucson 256 Acquired 1991
Suntree Village Oro Valley 424 Acquired 1992
The Arboretum Tucson 496 Acq/Dev 1992/1995
Village at Tanque Verde Tucson 217 Acq/Dev 1990/1994
------
1,805
California:
The Ashton Corona Hills 492 Acquired 1995
------
492
------
Total Same Store 10,551
======
Arizona
- -------
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Year
Developed
Number of Developed/ or
Apartment Communities City Apartments Acquired Acquired
- -------------------------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Phoenix:
Country Brook Expansion Phase III Chandler 120 Developed 1995/96
Ingleside Phoenix 120 Developed 1995/96
Ladera Phoenix 248 Developed 1995/96
Mirador Phoenix 316 Developed 1995/96
Park Meadow Expansion Phase II Gilbert 68 Developed 1995/96
Towne Square Expansion Phase III Chandler 116 Developed 1995/96
------
988
Tucson:
The Legends Tucson 312 Developed 1995/96
Orange Grove Expansion Phase II Tucson 144 Developed 1995/96
------
456
------
Total Communities Stabilized 1,444
Less than Two Years ======
Developments and Lease-Up Properties
Arizona
- -------
Phoenix:
The Hawthorne (1) Phoenix 276 Developed 1995/96
The Retreat Phase I Glendale 240 Developed 1996/97
Vista Grove Mesa 224 Developed 1996/97
The Isle at Arrowhead Ranch (2) Glendale 256 Developed 1996
Promontory Pointe Expansion Phase II (1) Phoenix 120 Developed 1995/96
------
1,116
Tucson:
Bear Canyon (3) Tucson 238 Developed 1995/96
Harrison Park Expansion Phase II (3) Tucson 188 Developed 1995/96
------
426
------
Total Developments and
Lease-Up Properties 1,542
======
Acquisitions
California
- ----------
Canyon Crest Views Riverside 178 Acquired 1996
Canyon Ridge San Diego 162 Acquired 1997
Marquessa Corona Hills 336 Acquired 1997
Portofino Chino Hills 176 Acquired 1996
Parkview Terrace Club Redlands 558 Acquired 1996
Redlands Lawn & Tennis Club Redlands 496 Acquired 1996
------
1,906
------
Total 15,443
======
Dispositions
Arizona
- -------
Deer Creek Village Phoenix 308 Acquired 1991
The Pines Mesa 194 Acquired 1992
------
502
======
</TABLE>
(1) Community reached stabilized occupancy in the first quarter 1997
(2) Community is in lease-up
(3) Community reached stabilized occupancy in the second quarter 1997
44
<PAGE>
C. Exhibits
<TABLE>
<C> <S>
4.1 Second Amended and Restated Revolving Credit Agreement dated as
of September 9, 1997 among ERP Operating Limited Partnership,
the Banks listed therein, and Morgan Guaranty Trust Company of
New York, as Lead Agent
23 Consent of Ernst & Young LLP
</TABLE>
45
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITY RESIDENTIAL PROPERTIES TRUST
Date: September 10, 1997 By: /s/ Bruce C. Strohm
-------------------------------------
Bruce C. Strohm, Secretary, Executive
Vice President and General Counsel
46
<PAGE>
===============================================================================
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of September 9, 1997
among
ERP OPERATING LIMITED PARTNERSHIP,
THE BANKS LISTED HEREIN,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Lead Agent,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Co-Lead Agent,
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agent,
U.S. BANK NATIONAL ASSOCIATION f/k/a/ and d/b/a
FIRST BANK NATIONAL ASSOCIATION,
as Co-Agent,
and
NATIONSBANK OF TEXAS, N.A.,
as Co-Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
<C> <C> <S> <C>
SECTION 1.1 Definitions.................................... 2
1.2 Accounting Terms and Determinations............ 31
1.3 Types of Borrowings............................ 32
ARTICLE II
THE CREDITS
SECTION 2.1 Commitments to Lend............................ 32
2.2 Notice of Borrowing............................ 33
2.3 Money Market Borrowings........................ 34
2.4 Notice to Banks; Funding of Loans.............. 40
2.5 Notes.......................................... 41
2.6 Method of Electing Interest Rates.............. 43
2.7 Interest Rates................................. 44
2.8 Fees........................................... 47
2.9 Maturity Date.................................. 48
2.10 Mandatory Prepayment........................... 48
2.11 Optional Prepayments........................... 50
2.12 General Provisions as to Payments.............. 51
2.13 Funding Losses................................. 52
2.14 Computation of Interest and Fees............... 53
2.15 Use of Proceeds................................ 53
ARTICLE III
CONDITIONS
SECTION 3.1 Closing........................................ 58
3.2 Borrowings..................................... 60
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Existence and Power............................ 62
4.2 Power and Authority............................ 62
4.3 No Violation................................... 63
4.4 Financial Information.......................... 63
4.5 Litigation..................................... 64
4.6 Compliance with ERISA.......................... 64
4.7 Environmental Matters.......................... 64
4.8 Taxes.......................................... 65
4.9 Full Disclosure................................ 65
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <C> <S> <C>
4.10 Solvency....................................... 65
4.11 Use of Proceeds; Margin Regulations............ 65
4.12 Governmental Approvals......................... 66
4.13 Investment Company Act; Public Utility
Holding Company Act........................... 66
4.14 Principal Offices.............................. 66
4.15 REIT Status.................................... 66
4.16 Patents, Trademarks, etc....................... 66
4.17 Ownership of Property.......................... 67
4.18 No Default..................................... 67
4.19 Licenses, etc.................................. 67
4.20 Compliance With Law............................ 67
4.21 No Burdensome Restrictions..................... 67
4.22 Brokers' Fees.................................. 68
4.23 Labor Matters.................................. 68
4.24 Insurance...................................... 68
4.25 Organizational Documents....................... 68
4.26 Qualifying Unencumbered Properties............. 68
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
SECTION 5.1 Information.................................... 69
5.2 Payment of Obligations......................... 73
5.3 Maintenance of Property; Insurance; Leases..... 73
5.4 Conduct of Business and Maintenance of
Existence..................................... 73
5.5 Compliance with Laws........................... 74
5.6 Inspection of Property, Books and Records...... 74
5.7 Existence...................................... 74
5.8 Financial Covenants............................ 77
5.9 Restriction on Fundamental Changes............. 77
5.10 Changes in Business............................ 78
5.11 Margin Stock................................... 78
5.12 Hedging Requirements........................... 78
5.13 EQR Status..................................... 79
ARTICLE VI
DEFAULTS
SECTION 6.1 Events of Default.............................. 80
6.2 Rights and Remedies............................ 83
6.3 Notice of Default.............................. 84
</TABLE>
ARTICLE VII
THE AGENTS
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <C> <S> <C>
SECTION 7.1 Appointment and Authorization................. 87
7.2 Agency and Affiliates......................... 88
7.3 Action by Lead Agent and Co-Lead Agent........ 88
7.4 Consultation with Experts..................... 88
7.5 Liability of Lead Agent and Co-Lead Agent..... 88
7.6 Indemnification............................... 89
7.7 Credit Decision............................... 89
7.8 Successor Lead Agent or Co-Lead Agent......... 90
7.9 Consents and Approvals........................ 91
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1 Basis for Determining Interest Rate
Inadequate or Unfair......................... 91
8.2 Illegality..................................... 92
8.3 Increased Cost and Reduced Return.............. 93
8.4 Taxes.......................................... 96
8.5 Base Rate Loans Substituted for Affected
Euro-Dollar Loans............................ 98
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices........................................ 99
9.2 No Waivers..................................... 100
9.3 Expenses; Indemnification...................... 100
9.4 Sharing of Set-Offs............................ 102
9.5 Amendments and Waivers......................... 103
9.6 Successors and Assigns......................... 103
9.7 Collateral..................................... 107
9.8 Governing Law; Submission to Jurisdiction...... 108
9.9 Counterparts; Integration; Effectiveness....... 108
9.10 Waiver of Jury Trial........................... 108
9.11 Survival....................................... 108
9.12 Domicile of Loans.............................. 108
9.13 Limitation of Liability........................ 108
9.14 Recourse Obligation............................ 103
9.15 Confidentiality................................ 103
9.16 Bank's Failure to Fund......................... 103
9.17 No Bankruptcy Proceedings...................... 117
</TABLE>
Schedule 4.6 - ERISA Plans
Schedule 4.17 - Real Property
Schedule 5.13(c)(i) - EQR Investments
Schedule 5.13(c)(2) - EQR Property
Exhibit A-1 - Form of Designated Lender Note
Exhibit A-2 - Form of Note
iii
<PAGE>
Page
----
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quote
Exhibit D - Form of Money Market Quote
Exhibit E - Transfer Supplement
Exhibit F - Qualifying Unencumbered Properties
Exhibit G - Designation Agreement
iv
<PAGE>
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Agreement") dated as of September 9, 1997 among ERP OPERATING LIMITED
PARTNERSHIP (the "Borrower"), the BANKS listed on the signature pages hereof,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Lead Agent, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Lead Agent, THE FIRST NATIONAL
BANK OF CHICAGO, as Co-Agent, U.S. BANK NATIONAL ASSOCIATION f/k/a and d/b/a
FIRST BANK NATIONAL ASSOCIATION, as Co-Agent, and NATIONSBANK OF TEXAS, N.A., as
Co-Agent.
W I T N E S S E T H
-------------------
WHEREAS, Borrower, Morgan Guaranty Trust Company of New York, as Lead
Agent, Bank of America National Trust and Savings Association(successor-by-
merger to Bank of America Illinois), as Co-Lead Agent, and the banks entered
into that certain Revolving Credit Agreement, dated as of November 15, 1996 (the
"Original Credit Agreement"); and
WHEREAS, Borrower, Morgan Guaranty Trust Company of New York, as Lead
Agent, Bank of America National Trust and Savings Association, as Co-Lead Agent,
The First National Bank of Chicago, as Co-Agent, First Bank National
Association, as Co-Agent, Nationsbank of Texas, N.A., as Co-Agent, and the banks
party thereto, amended and restated the Original Credit Agreement in its
entirety, as of December 9, 1996 (the "Existing Credit Agreement"); and
WHEREAS, the parties hereto have agreed to amend and restate the terms and
conditions contained in the Existing Credit Agreement in their entirety as
hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
I. The Existing Credit Agreement is hereby modified so that all of the
terms and conditions of the aforesaid Existing Credit Agreement shall be
restated in
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their entirety as set forth herein, and the Borrower agrees to comply with and
be subject to all of the terms, covenants and conditions of this Agreement.
II. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and assigns, and shall be deemed
to be effective as of the date hereof.
III. Any reference in the Notes, any other Loan Document or any other
document executed in connection with this Agreement to the Existing Credit
Agreement shall be deemed to refer to this Agreement.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 23.
"Accommodation Obligations" as applied to any Person, means any obligation,
contingent or otherwise, of that Person in respect of which that Person is
liable for any Indebtedness or other obligation or liability of another Person,
including without limitation and without duplication (i) any such Indebtedness,
obligation or liability directly or indirectly guaranteed, endorsed (otherwise
than for collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of which that
Person is otherwise directly or indirectly liable, including Contractual
Obligations (contingent or otherwise) arising through any agreement to purchase,
repurchase or otherwise acquire such Indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make payment other than for value received and (ii)
any obligation of such Person arising through such Person's status as a general
partner of a general or limited partnership with respect to any
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Indebtedness, obligation or liability of such general or limited partnership.
"Adjusted Asset Value" means, with respect to any Person or Property, (i)
for any Property for which an acquisition or disposition has not occurred in the
Fiscal Quarter most recently ended by the Borrower, EQR and their Consolidated
Subsidiaries or Investment Affiliates, the product of four (4) and a fraction,
the numerator of which is EBITDA for such Fiscal Quarter attributable to any
such Property owned by the Borrower, EQR or any such Consolidated Subsidiary, or
in the case of any such Property owned by an Investment Affiliate, the
Borrower's Share of EBITDA, in a manner reasonably acceptable to Lead Agent for
the Fiscal Quarter most recently ended, and the denominator of which is the FMV
Cap Rate, plus (ii) for any Property which has been acquired by the Borrower,
EQR and their Consolidated Subsidiaries or Investment Affiliates in the Fiscal
Quarter most recently ended, the Net Price of the Property paid by Borrower, EQR
or the Consolidated Subsidiary, or the Borrower's or EQR's pro rata share of the
Net Price of the Property paid by the Investment Affiliate for such Property.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.7(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Lead Agent and
submitted to the Lead Agent (with a copy to the Borrower and the Co-Lead Agent)
duly completed by such Bank.
"Agreement" shall mean this Second Amended and Restated Revolving Credit
Agreement as the same may from time to time hereafter be modified, supplemented
or amended.
"Applicable Interest Rate" means (i) with respect to any Fixed Rate
Indebtedness, the fixed interest rate applicable to such Fixed Rate
Indebtedness at the time in question, and (ii) with respect to any Floating
Rate Indebtedness, either (x) the rate at which the interest rate applicable to
such Floating Rate Indebtedness is actually capped (or fixed pursuant to an
interest rate hedging device), at the time of calculation, if Borrower has
entered into an interest rate cap agreement or other interest rate hedging
device with respect thereto or (y) if Borrower has not entered into an
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interest rate cap agreement or other interest rate hedging device with respect
to such Floating Rate Indebtedness, the greater of (A) the rate at which the
interest rate applicable to such Floating Rate Indebtedness could be fixed for
the remaining term of such Floating Rate Indebtedness, at the time of
calculation, by Borrower's entering into any unsecured interest rate hedging
device either not requiring an upfront payment or if requiring an upfront
payment, such upfront payment shall be amortized over the term of such device
and included in the calculation of the interest rate (or, if such rate is
incapable of being fixed by entering into an unsecured interest rate hedging
device at the time of calculation, a fixed rate equivalent reasonably determined
by Lead Agent) or (B) the floating rate applicable to such Floating Rate
Indebtedness at the time in question.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office, and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Applicable Margin" means, with respect to each Loan, the respective
percentages per annum determined, at any time, based on the range into which
Borrower's Credit Rating then falls, in accordance with the table set forth
below. Any change in Borrower's Credit Rating causing it to move to a different
range on the table shall effect an immediate change in the Applicable Margin.
In the event that Borrower receives two (2) Credit Ratings that are not
equivalent, the Applicable Margin shall be determined by the lower of such two
(2) Credit Ratings. In the event that Borrower receives more than two (2)
Credit Ratings, and such ratings are not equivalent, the Applicable Margin shall
be determined by the lower of the two (2) highest ratings, provided that each of
said two (2) highest ratings shall be Investment Grade Ratings and at least one
of which shall be an Investment Grade Rating from S&P or Moody's. In the event
that each of said two (2) highest ratings shall not be Investment Grade Ratings
or at least one shall not be an Investment Grade Rating from S&P or Moody's,
then the Applicable Margin shall be determined by the lowest of the ratings. In
the event that only one of the Rating Agencies shall have set Borrower's Credit
Rating, then the Applicable Margin shall be based on such rating only.
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<TABLE>
<CAPTION>
Range of Applicable
Borrower's Margin for Applicable
Credit Rating Base Rate Margin for Euro
(S&P/Moody's Loans Dollar Loans
Ratings) (% per annum) (% per annum)
- ------------- ------------- ---------------
<S> <C> <C>
Non-Investment Grade 0.0 1.125
BBB-/Baa3 0.0 0.950
BBB/Baa2 0.0 0.750
BBB+/Baa1 0.0 0.550
A-/A3 0.0 0.450
A/A2 0.0 0.350
A+/A1 0.0 0.250
</TABLE>
"Approved Bank" shall mean banks which have (i)(a) a minimum net worth
of $500,000,000 and/or (b) total assets of $10,000,000,000, and (ii) a minimum
long term debt rating of (a) BBB+ or higher by S&P, and (b) Baa1 or higher by
Moody's.
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective
successors and each Designated Lender; provided, however, that the term "Bank"
shall exclude each Designated Lender when used in reference to a Committed Loan,
the Commitments or terms relating to the Committed Loans and the Commitments and
shall further exclude each Designated Lender for all other purposes hereunder
except that any Designated Lender which funds a Money Market Loan shall, subject
to Section 9.6(d), have the rights (including the rights given to a Bank
contained in Section 9.3 and otherwise in Article 9) and obligations of a Bank
associated with holding such Money Market Loan.
"Bankruptcy Code" shall mean Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
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"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 0.5% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Borrowing or pursuant to
Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means ERP Operating Limited Partnership, an Illinois
limited partnership.
"Borrower's Share" means Borrower's or EQR's share of the liabilities
or assets, as the case may be, of an Investment Affiliate or Consolidated
Subsidiary based upon Borrower's or EQR's percentage ownership of such
Investment Affiliate or Consolidated Subsidiary, as the case may be.
"Borrowing" has the meaning set forth in Section 1.3.
"Capital Leases" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cap Rate" means the Treasury Rate plus 2.8%.
"Capital Reserve" shall mean, for any period, $62.50 for each Fiscal
Quarter to occur during such period.
"Cash and Cash Equivalents" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without limitation,
treasury bills, notes and bonds, (iii) interest bearing or discounted
obligations of Federal agencies and Government sponsored entities or pools of
such instruments offered by Approved Banks and dealers, including without
limitation, Federal Home Loan Mortgage Corporation participation sale
certificates, Government National Mortgage Association modified pass through
certificates, Federal National Mortgage Association bonds and notes, and
Federal Farm Credit System securities, (iv) time
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deposits, Domestic and Eurodollar certificates of deposit, bankers acceptances,
commercial paper rated at least A-1 by S&P and P-1 by Moody's and/or guaranteed
by an Aa rating by Moody's, a AA rating by S&P or better rated credit, floating
rate notes, other money market instruments and letters of credit each issued by
Approved Banks (provided that the same shall cease to be a "Cash or Cash
Equivalent" if at any time any such bank shall cease to be an Approved Bank),
(v) obligations of domestic corporations, including, without limitation,
commercial paper, bonds, debentures and loan participations, each of which is
rated at least AA by S&P and/or Aa2 by Moody's and/or guaranteed by an Aa rating
by Moody's, a AA rating by S&P or better rated credit, (vi) obligations issued
by states and local governments or their agencies, rated at least MIG-1 by
Moody's and/or SP-1 by S&P and/or guaranteed by an irrevocable letter of credit
of an Approved Bank (provided that the same shall cease to be a "Cash or Cash
Equivalent" if at any time any such bank shall cease to be an Approved Bank),
(vii) repurchase agreements with major banks and primary government security
dealers fully secured by the U.S. Government or agency collateral equal to or
exceeding the principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA rating given by
S&P or Aa2 rating given by Moody's or better rated credit.
"Closing Date" means the date on or after the Effective Date on which
the conditions set forth in Section 3.1 shall have been satisfied to the
satisfaction of the Lead Agent and the Co-Lead Agent.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"Co-Lead Agent" shall mean Bank of America National Trust and Savings
Association in its capacity as Co-Lead Agent hereunder, and its permitted
successors in such capacity in accordance with the terms of this Agreement.
"Committed Borrowing" has the meaning set forth in Section 1.3.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.1,
as well as Loans required to be made by a Bank pursuant to Section 2.16 to
reimburse a
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Fronting Bank for a Letter of Credit that has been drawn down; provided that, if
any such loan or loans (or portions thereof) are combined or subdivided pursuant
to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to
the combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof (and, for each Bank
which is an Assignee, the amount set forth in the Transfer Supplement entered
into pursuant to Section 9.6(c) as the Assignee's Commitment), as such amount
may be reduced from time to time pursuant to Section 2.11(e) or in connection
with an assignment to an Assignee.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity which is consolidated with Borrower or EQR in accordance with GAAP.
"Consolidated Tangible Net Worth" means at any date the consolidated
partners' capital plus the value of preference units of the Borrower and its
Consolidated Subsidiaries (determined on a book basis), less their consolidated
Intangible Assets, all determined as of such date. For purposes of this
definition "Intangible Assets" means with respect to any such intangible assets,
the amount (to the extent reflected in determining such consolidated
stockholders' equity) of (i) all write-ups (other than write-ups resulting from
foreign currency transactions and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business)
subsequent to June 30, 1997 in the book value of any asset (other than Real
Property Assets) owned by the Borrower or a Consolidated Subsidiary and (ii)
goodwill, patents, trademarks, service marks, trade names, anticipated future
benefit of tax loss carry forwards, copyrights, organization or developmental
expenses and other intangible assets.
"Contingent Obligation" as to any Person means, without duplication,
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation required
to be disclosed in the footnotes to such Person's financial statements,
guaranteeing partially or in whole any Non-Recourse Indebtedness, lease,
dividend or other obligation, exclusive of contractual indemnities (including,
without limitation, any indemnity or price-adjustment provision
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relating to the purchase or sale of securities or other assets) and guarantees
of non-monetary obligations (other than guarantees of completion) which have not
yet been called on or quantified, of such Person or of any other Person. The
amount of any Contingent Obligation described in clause (ii) shall be deemed to
be (a) with respect to a guaranty of interest or interest and principal, or
operating income guaranty, the Net Present Value of the sum of all payments
required to be made thereunder (which in the case of an operating income
guaranty shall be deemed to be equal to the debt service for the note secured
thereby), calculated at the Applicable Interest Rate, through (i) in the case
of an interest or interest and principal guaranty, the stated date of maturity
of the obligation (and commencing on the date interest could first be payable
thereunder), or (ii) in the case of an operating income guaranty, the date
through which such guaranty will remain in effect, and (b) with respect to all
guarantees not covered by the preceding clause (a), an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
guaranty is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as recorded on the balance sheet and on the footnotes to the
most recent financial statements of Borrower required to be delivered pursuant
to Section 4.4 hereof. Notwithstanding anything contained herein to the
contrary, guarantees of completion shall not be deemed to be Contingent
Obligations unless and until a claim for payment or performance has been made
thereunder, at which time any such guaranty of completion shall be deemed to be
a Contingent Obligation in an amount equal to any such claim. Subject to the
preceding sentence, (i) in the case of a joint and several guaranty given by
such Person and another Person (but only to the extent such guaranty is
recourse, directly or indirectly to Borrower), the amount of the guaranty shall
be deemed to be 100% thereof unless and only to the extent that such other
Person has delivered Cash or Cash Equivalents to secure all or any part of such
Person's guaranteed obligations and (ii) in the case of a guaranty (whether or
not joint and several) of an obligation otherwise constituting Indebtedness of
such Person, the amount of such guaranty shall be deemed to be only that amount
in excess of the amount of the obligation constituting Indebtedness of such
Person. Notwithstanding anything contained herein to the contrary, "Contingent
Obligations" shall be deemed not to include guarantees of Unused Commitments or
of construction loans to the extent the same have not been drawn. All matters
constituting
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"Contingent Obligations" shall be calculated without duplication.
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject (including without limitation any
restrictive covenant affecting such Person or any of its properties).
"Convertible Securities" means evidences of shares of stock, limited
or general partnership interests or other ownership interests, warrants,
options, or other rights or securities which are convertible into or
exchangeable for, with or without payment of additional consideration, shares of
common stock of EQR or partnership interests of Borrower, as the case may be,
either immediately or upon the arrival of a specified date or the happening of a
specified event.
"Credit Rating" means the rating assigned by the Rating Agencies to
Borrower's senior unsecured long term indebtedness.
"Debt Restructuring" means a restatement of, or material change in,
the amortization or other financial terms of any Indebtedness of EQR, the
Borrower or any Consolidated Subsidiary or Investment Affiliate.
"Debt Service" means, for any period, Interest Expense for such period
plus scheduled principal amortization (excluding any individual scheduled
principal payment which exceeds 25% of the original principal amount of an
issuance of Indebtedness) for such period on all Indebtedness of EQR
(calculated as provided in Section 1.2), on a consolidated basis, plus
Borrower's Share of scheduled principal amortization for such period on all
Indebtedness of Investment Affiliates for which there is no recourse to EQR or
Borrower (or any Property thereof), plus, without duplication, EQR's and
Borrower's actual or potential liability for principal amortization for such
period on all Indebtedness of Investment Affiliates that is recourse to EQR or
Borrower (or any Property thereof).
"Default" means any condition or event which with the giving of notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
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"Default Rate" has the meaning set forth in Section 2.6(d).
"Designated Lender" means a special purpose corporation that (i) shall
have become a party to this Agreement pursuant to Section 9.6(d), and (ii) is
not otherwise a Bank.
"Designated Lender Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A-1 hereto, evidencing the obligation of
the Borrower to repay Money Market Loans made by Designated Lenders, and
"Designated Lender Note" means any one of such promissory notes issued under
Section 9.6(d) hereof.
"Designating Lender" shall have the meaning set forth in Section
9.6(d) hereof.
"Designation Agreement" means a designation agreement in substantially
the form of Exhibit G attached hereto, entered into by a Bank and a Designated
Lender and accepted by the Lead Agent.
"Development Activity" means (a) the development and construction of
multiple apartment complexes by the Borrower or any of its Subsidiaries
excluding Unimproved Assets, (b) the financing by the Borrower, EQR or any
Subsidiaries of either or both of any such development or construction or (c)
the incurrence by the Borrower, EQR or any Subsidiaries of either or both of any
Contingent Obligations in connection with such development or construction
(other than purchase contracts for Real Property Assets which are not payable
until completion of development or construction), valued at the cost of such
projects under development and construction.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address in the United States set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Borrower and the Lead Agent.
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"EBITDA" means, for any period (i) Net Income for such period, plus
(ii) depreciation and amortization expense and other non-cash items deducted in
the calculation of Net Income for such period, plus (iii) Interest Expense
deducted in the calculation of Net Income for such period, plus, (iv) Taxes
deducted in the calculation of Net Income for such period, plus (v) Borrower's
Share of distributed earnings of Investment Affiliates for such period, minus
(vi) the gains (and plus the losses) from extraordinary items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of Net
Income, for such period, minus (vii) Borrower's Share of accrued income and
losses of Investment Affiliates for such period minus (viii) earnings of
Subsidiaries for such period distributed to third parties, all of the foregoing
without duplication.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 9.9.
"Environmental Affiliate" means any partnership, joint venture, trust
or corporation in which an equity interest is owned by the Borrower and/or EQR,
either directly or indirectly, and, as a result of the ownership of such equity
interest, the Borrower and/or EQR may have recourse liability for Environmental
Claims against such partnership, joint venture or corporation (or the property
thereof).
"Environmental Approvals" means any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" means, with respect to any Person, any notice,
claim, demand or similar communication (written or oral) by any other Person
alleging potential liability of such Person for investigatory costs, cleanup
costs, governmental response costs, natural resources damage, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, in each case (with respect to both (i) and (ii) above) as
to which there is a reasonable possibility of an adverse determination with
respect thereto and which, if adversely determined, would have a Material
Adverse Effect on the Borrower.
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"Environmental Laws" means any and all federal, state, and local statutes,
laws, judicial decisions, regulations, ordinances, rules, judgments, orders,
decrees, plans, injunctions, permits, concessions, grants, licenses, agreements
and other governmental restrictions relating to the environment, the effect of
the environment on human health or to emissions, discharges or releases of
Materials of Environmental Concern into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern or the
clean up or other remediation thereof.
"EQR" means Equity Residential Properties Trust, a Maryland real estate
investment trust, the sole general partner of the Borrower.
"EQR Guaranty" means the Amended and Restated Guaranty of Payment, dated as
of the date hereof, executed by EQR in favor of Lead Agent, Co-Lead Agent and
the Banks.
"EQR 1996 Form 10-K" means EQR's annual report on Form 10-K for 1996, as
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Code.
"Euro-Dollar Borrowing" has the meaning set forth in Section 1.3.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Euro-
Dollar
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Lending Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Lead Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a Euro-
Dollar Loan in accordance with the applicable Notice of Borrowing.
"Euro-Dollar Reference Bank" means the principal London offices of the Lead
Agent.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.7(b).
"Event of Default" has the meaning set forth in Section 6.1.
"Facility Fee" has the meaning set forth in Section 2.8(a).
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Lead Agent on such day on such
transactions as determined by the Lead Agent.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System as constituted from time to time.
"FFO" means "funds from operations," defined to mean, for any period, Net
Income before Borrower's Share of the Net Income or loss of any Investment
Affiliate, plus any and all cash distributions received by Borrower representing
Borrower's Share of the Net Income (plus Borrower's Share of depreciation and
amortization expenses of Investment Affiliates) of any Investment Affiliate,
plus depreciation and amortization expense for such period and excluding gains
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(or losses) from Debt Restructurings and sales or other dispositions of Property
of the Borrower, EQR or any Consolidated Subsidiary or any Investment Affiliate
of either or both of them.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower and EQR which shall be the
twelve (12) month period ending on the last day of December in each year.
"Fixed Charges" for any Fiscal Quarter period means the sum of (i) Debt
Service for such period, (ii) the product of the average number of apartment
units owned (directly or beneficially) by Borrower, EQR, or any wholly-owned
Subsidiary of either or both during such period and the Capital Reserve for such
Period, (iii) Borrower's Share of the aggregate sum of the product of the
average number of apartment units owned (directly or beneficially) by each
Consolidated Subsidiary (other than wholly-owned Subsidiaries of Borrower and/or
EQR) and Investment Affiliate during such period and the Capital Reserve for
such period, (iv) dividends on preferred units payable by Borrower for such
period, and (v) distributions made by the Borrower during such period to EQR for
the purpose of paying dividends on preferred shares in EQR.
"Fixed Rate Borrowing" has the meaning set forth in Section 1.3.
"Fixed Rate Indebtedness" means all Indebtedness which accrues interest at
a fixed rate.
"Floating Rate Indebtedness" means all Indebtedness which is not Fixed Rate
Indebtedness and which is not a Contingent Obligation or an Unused Commitment.
"FMV Cap Rate" means 9%.
"Fronting Bank" shall mean Morgan, Bank of America National Trust and
Savings Association, or such other Bank which Borrower is notified by the Lead
Agent is willing to be a Fronting Bank and which is designated by Borrower in
its Notice of Borrowing as the Bank which shall issue a Letter of Credit with
respect to such Notice of Borrowing.
"GAAP" means generally accepted accounting principles recognized as such in
the opinions and pronouncements
15
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of the Accounting Principles Board and the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
"Gross Asset Value" means, with respect to any Person or Property, Adjusted
Asset Value plus, in the case of any Person, the value of any Cash or Cash
Equivalent owned by such Person and not subject to any Lien.
"Group of Loans" means, at any time, a group of Loans consisting of (i) all
Committed Loans which are Base Rate Loans at such time, or (ii) all Euro-Dollar
Loans having the same Interest Period at such time; provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Section 8.2 or 8.5, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it had
not been so converted or made.
"Indebtedness" as applied to any Person (and without duplication), means
(a) all indebtedness, obligations or other liabilities of such Person for
borrowed money, (b) all indebtedness, obligations or other liabilities of such
Person evidenced by Securities or other similar instruments, (c) all Contingent
Obligations of such Person, (d) all reimbursement obligations and other
liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account or other similar instruments for
which a contingent liability exists, (e) all obligations of such Person to pay
the deferred purchase price of Property or services, (f) all obligations in
respect of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of such
Person, (h) all indebtedness, obligations or other liabilities (other than
interest expense liability) in respect of Interest Rate Contracts and foreign
currency exchange agreements (other than Interest Rate Contracts purchased to
hedge Indebtedness), (i) ERISA obligations currently due and payable and (j) all
other items which, in accordance with GAAP, would be included as liabilities on
the liability side of the balance sheet of such Person.
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<PAGE>
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Initial Closing Date" means November 15, 1996.
"Interest Expense" means, for any period and without duplication, total
interest expense, whether paid, accrued or capitalized (including the interest
component of Capital Leases but excluding interest expense covered by an
interest reserve established under a loan facility) of EQR, on a consolidated
basis, including without limitation all commissions, discounts and other fees
and charges owed with respect to drawn letters of credit, amortized costs of
Interest Rate Contracts incurred on or after the Closing Date and the Facility
Fees payable to the Banks in accordance with Section 2.8, plus Borrower's Share
of accrued, paid or capitalized interest with respect to any Indebtedness of
Investment Affiliates for which there is no recourse to EQR or Borrower, plus,
without duplication, EQR's and Borrower's actual or potential liability for
accrued, paid or capitalized interest with respect to Indebtedness of
Investment Affiliates that is recourse to EQR or Borrower calculated for all
Fixed Rate Indebtedness, at the actual interest rate in effect with respect to
all Indebtedness outstanding as of the last day of such Fiscal Quarter and in
the case of all Floating Rate Indebtedness, the greater of (i) (A) the Treasury
Rate plus 1.75% for taxable Indebtedness and (B) 7.0% for tax-exempt
Indebtedness, (ii) the actual rate of interest in effect with respect to such
Floating Rate Indebtedness outstanding for which no Interest Rate Contract is in
effect as of the last day of such quarter and (iii) if an Interest Rate Contract
is in effect with respect to such Floating Rate Indebtedness, the strike rate
payable under such Interest Rate Contract, all determined on an annualized
basis.
"Interest Period" means: (1) with respect to each Euro-Dollar Borrowing,
the period commencing on the date of such Borrowing specified in the Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending 30, 60, 90, or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing or Notice of Interest Rate Election;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest
17
<PAGE>
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) if any Interest Period includes a date on which a payment of
principal of the Loans is required to be made under Section 2.10 but does
not end on such date, then (i) the principal amount (if any) of each Euro-
Dollar Loan required to be repaid on such date shall have an Interest
Period ending on such date (it being understood that the foregoing shall
not be deemed to relieve the Borrower of any obligation to pay any amounts
otherwise required pursuant to Section 2.13 in connection with such
prepayment) and (ii) the remainder (if any) of each such Euro-Dollar Loan
shall have an Interest Period determined as set forth above.
(2) with respect to each Base Rate Borrowing and solely for determining when
interest is payable on any Base Rate Borrowing, the period commencing on the
date of such Borrowing specified in the Notice of Borrowing or on the date
specified (or deemed specified) in the applicable Notice of Interest Rate
Election and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b)(i) below) which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a payment of
principal of the Loans is required to be made under Section 2.10 but does
not end on such date, then (i) the principal amount (if any) of each Base
Rate Loan required to be repaid on such date shall have an Interest Period
ending on such date and (ii) the remainder (if any) of each such Base Rate
Loan shall have an Interest Period determined as set forth above.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date of borrowing specified in the
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<PAGE>
applicable Money Market Quote Request and ending such number of months
thereafter as the Borrower may elect in accordance with Section 2.3; provided
that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Maturity
Date shall end on the Maturity Date.
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date of borrowing specified in the applicable Money Market Quote Request
and ending such number of days thereafter (but not less than 14 days or more
than 180 days) as the Borrower may elect in accordance with Section 2.3;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Maturity
Date shall end on the Maturity Date.
"Interest Rate Contracts" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.
"Interest Rate Hedges" has the meaning set forth in Section 5.12.
"Investment Affiliate" means any Person in whom EQR or Borrower holds
an equity interest, directly or indirectly, whose financial results are not
consolidated
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<PAGE>
under GAAP with the financial results of EQR or Borrower on the consolidated
financial statements of EQR and Borrower.
"Investment Grade Rating" means a rating for a Person's senior long-
term unsecured debt, or if no such rating has been issued, a "shadow" rating, of
BBB- or better from S&P, and a rating or "shadow" rating of Baa3 or better from
Moody's. Any such "shadow" rating shall be evidenced by a letter from the
applicable Rating Agency or by such other evidence as may be reasonably
acceptable to the Lead Agent (as to any such other evidence, the Lead Agent
shall present the same to, and discuss the same with, the Banks).
"Investment Mortgages" means mortgages securing indebtedness directly
or indirectly owed to Borrower, EQR or Subsidiaries of either or both, including
certificates of interest in real estate mortgage investment conduits.
"Invitation for Money Market Quotes" has the meaning set forth in
Section 2.3(c).
"Lead Agent" shall mean Morgan Guaranty Trust Company of New York in
its capacity as Lead Agent hereunder, and its permitted successors in such
capacity in accordance with the terms of this Agreement.
"Letter(s) of Credit" has the meaning provided in Section 2.2(b).
"Letter of Credit Collateral" has the meaning provided in Section 6.4.
"Letter of Credit Collateral Account" has the meaning provided in
Section 6.4.
"Letter of Credit Documents" has the meaning provided in Section 2.16.
"Letter of Credit Usage" means at any time the sum of (i) the
aggregate maximum amount available to be drawn under the Letters of Credit then
outstanding, assuming compliance with all requirements for drawing referred to
therein, and (ii) the aggregate amount of the Borrower's unpaid obligations
under this Agreement in respect of the Letters of Credit.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.3.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement, in each case that has the effect of creating a
security interest, in respect of such asset. For the purposes of this
Agreement, the Borrower, EQR or any Subsidiary of either or both shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan" means a Base Rate Loan, a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Base Rate Loans, Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes, the EQR Guaranty,
the Letter(s) of Credit, and the Letter of Credit Documents.
"London Interbank Offered Rate" has the meaning set forth in Section
2.7(b).
"Margin Stock" shall have the meaning provided such term in Regulation
U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" means an effect resulting from any
circumstance or event or series of circumstances or events, of whatever nature
(but excluding general economic conditions), which does or could reasonably be
expected to, materially and adversely (i) effect the business, operations,
properties, assets or financial condition of the Borrower and its Consolidated
Subsidiaries taken as a whole, (ii) impair the ability of the Borrower and its
Consolidated Subsidiaries, taken as a whole, to perform their respective
obligations under the Loan Documents, or (iii) cause a Default under Sections
5.8, 5.9 or 5.13.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
"Materials of Environmental Concern" means and includes pollutants,
contaminants, hazardous wastes, toxic and hazardous substances, asbestos, lead,
petroleum and petroleum by-products.
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<PAGE>
"Maturity Date" shall mean the date when all of the Obligations
hereunder shall be due and payable which shall be November 15, 1999, unless
accelerated pursuant to the terms hereof.
"Money Market Absolute Rate" has the meaning set forth in Section
2.3(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Borrowing" has the meaning set forth in Section 1.3.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time to time by notice
to the Borrower and the Lead Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Article VIII).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.3(d)(2).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.3.
"Moody's" means Moody's Investors Services, Inc. or any successor
thereto.
"Morgan" means Morgan Guaranty Trust Company of New York, in its
individual capacity.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group
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<PAGE>
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions, including for these purposes any
Person which ceased to be a member of the ERISA Group during such five year
period.
"Multifamily Residential Property Mortgages" means Investment
Mortgages issued by any Person engaged primarily in the business of developing,
owning, and managing multifamily residential property.
"Multifamily Residential Property Partnership Interests" means
partnership or joint venture interests issued by any Person engaged primarily in
the business of developing, owning, and managing multifamily residential
property.
"Net Income" means, for any period, the net earnings (or loss) after
Taxes of EQR, on a consolidated basis, for such period calculated in conformity
with GAAP.
"Net Offering Proceeds" means all cash or other assets received by EQR
or Borrower as a result of the sale of common shares of beneficial interest,
preferred shares of beneficial interest, partnership interests, limited
liability company interests, Convertible Securities or other ownership or equity
interests in EQR or Borrower less customary costs and discounts of issuance paid
by EQR or Borrower, as the case may be.
"Net Operating Income" means, for any period with respect to any
Property owned (directly or beneficially) by Borrower, EQR or their wholly-owned
Subsidiaries, the net operating income of such Property (attributed to such
Property in a manner reasonably acceptable to Lead Agent) for such period (i)
determined in accordance with GAAP, (ii) determined in a manner which is
consistent with the past practices of EQR and Borrower, and (iii) inclusive of
an allocation of reasonable management fees and administrative costs to each
Property consistent with the past practices of EQR and Borrower, except that,
for purposes of determining Net Operating Income, income shall not (a) include
security or other deposits, lease termination or other similar charges,
delinquent rent recoveries, unless previously reflected in reserves, or any
other items deemed by Lead Agent to be of a non-recurring nature or (b) be
reduced by depreciation or amortization.
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<PAGE>
"Net Price" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, plus (ii) the principal amount of any
note received or other deferred payment to be made in connection with such
purchase or sale (except as described in clause (iv) below), plus (iii) the
value of any other considerations delivered in connection with such purchase or
sale (including, without limitation, shares of beneficial interest in EQR and OP
Units or Preferred OP Units (as defined in Borrower's partnership agreement))
(as reasonably determined by Lead Agent), minus (only in the case of a sale)
(iv) the value of any consideration deposited into escrow or subject to
disbursement or claim upon the occurrence of any event, minus (only in the case
of a sale) (v) the value of any consideration required to be paid to any Person
other than the Borrower and its Subsidiaries owning a beneficial interest in
such Property, minus (vi) reasonable costs of sale and taxes paid or payable in
connection with such purchase or sale.
"Net Present Value" shall mean, as to a specified or ascertainable
dollar amount, the present value, as of the date of calculation of any such
amount using a discount rate equal to the Base Rate in effect as of the date of
such calculation.
"Non-Multifamily Residential Property" means Property which is not (i)
used for lease, operation or use as a multifamily residential property, (ii)
Unimproved Assets, (iii) Securities, (iv) Multifamily Residential Property
Mortgages, or (v) Multifamily Residential Property Partnership Interests.
"Non-Recourse Indebtedness" means Indebtedness with respect to which
recourse for payment is limited to (i) specific assets related to a particular
Property or group of Properties encumbered by a Lien securing such Indebtedness
or (ii) any Subsidiary or Investment Affiliate (provided that if a Subsidiary or
Investment Affiliate is a partnership, there is no recourse to Borrower or EQR
as a general partner of such partnership); provided, however, that personal
recourse of Borrower or EQR for any such Indebtedness for fraud,
misrepresentation, misapplication of cash, waste, environmental claims and
liabilities and other circumstances customarily excluded by institutional
lenders from exculpation provisions and/or included in separate indemnification
agreements in non-recourse financing of real
24
<PAGE>
estate shall not, by itself, prevent such Indebtedness from being characterized
as Non-Recourse Indebtedness.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibits A-1 and A-2 hereto, evidencing the obligation of the Borrower
to repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Borrowing (as defined in
Section 2.4).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.6.
"Obligations" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Borrower, from time to time
owing to Lead Agent, Co-Lead Agent or any Bank under or in connection with this
Agreement or any other Loan Document.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Period Fraction" means with respect to any period of time, a
fraction, the numerator of which is the actual number of days in such period,
and the denominator of which is three hundred and sixty (360).
"Permitted Holdings" means Unimproved Assets, Development Activity,
Securities, Non-Multifamily Residential Property and Investment Mortgages, but
only to the extent not prohibited in Section 5.8.
"Permitted Liens" means:
a. Liens for Taxes, assessments or other governmental charges not yet
due and payable or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently
25
<PAGE>
conducted in accordance with the terms hereof;
b. statutory liens of carriers, warehouse men, mechanics, materialmen
and other similar liens imposed by law, which are incurred in the ordinary
course of business for sums not more than sixty (60) days delinquent or
which are being contested in good faith in accordance with the terms
hereof;
c. deposits made in the ordinary course of business to secure
liabilities to insurance carriers;
d. Liens for purchase money obligations for equipment; provided that
(i) the Indebtedness se cured by any such Lien does not exceed the purchase
price of such equipment, (ii) any such Lien encumbers only the asset so
purchased and the proceeds upon sale, disposition, loss or destruction
thereof, and (iii) such Lien, after giving effect to the Indebtedness
secured thereby, does not give rise to an Event of Default;
e. easements, rights-of-way, zoning restrictions, other similar
charges or encumbrances and all other items listed on Schedule B to the
owner's title insurance policies, except in connection with any
Indebtedness, for any of the Real Property Assets, so long as the foregoing
do not interfere in any material respect with the use or ordinary conduct
of the business of the owner and do not diminish in any material respect
the value of the Property to which it is attached or for which it is
listed;
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<PAGE>
f. Liens and judgments which have been or will be bonded or released
of record within thirty (30) days after the date such Lien or judgment is
entered or filed against EQR, Borrower, or any Subsidiary;
g. Liens on Property of the Borrower, EQR or the Subsidiaries of
either or both (other than Qualifying Unencumbered Property) securing
Indebtedness which may be incurred or remain outstanding without resulting
in an Event of Default hereunder; and
h. Liens in favor of the Borrower against any asset of any wholly-
owned Subsidiary of the Borrower and/or EQR.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by the Lead
Agent in New York City from time to time as its Prime Rate.
"Property" means, with respect to any Person, any real or personal
property, building, facility, structure, equipment or unit, or other asset owned
by such Person.
"Property Income" means, when used with respect to any Real Property
Asset, annual contractual rents (other than prepaid rents and revenues and
security deposits except to the extent applied in satisfaction of tenants'
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<PAGE>
obligations for rent), in effect as of the last day of a quarter in accordance
with the applicable leases, but provided that if any tenant is more than 60 days
in arrears in the payment of base or fixed rent as of the last day of a quarter,
the annual contractual rents payable pursuant to such tenant's lease shall not
constitute "Property Income".
"Qualifying Unencumbered Property" means any Property from time to
time which (i) is an operating multifamily residential property wholly-owned
(directly or beneficially) by Borrower and/or EQR, (ii) is not subject (nor are
any equity interests in such Property subject) to a Lien which secures
Indebtedness of any Person other than Permitted Liens, (iii) is not subject (nor
are any equity interests in such Property subject) to any covenant, condition,
or other restriction which prohibits or limits the creation or assumption of any
Lien upon such Property (it being understood that covenants similar to those set
forth in Section 5.8 hereof shall not be deemed to constitute any such
prohibition or limitation). In addition, in the case of any Property that is
owned by a Subsidiary of Borrower and/or EQR, if such Subsidiary shall commence
any proceeding under any bankruptcy, insolvency or similar law, or any such
involuntary case shall be commenced against it and shall remain undismissed and
unstayed for a period of 90 days, then, simultaneously with the occurrence of
such conditions, such Property shall no longer constitute a Qualifying
Unencumbered Property.
"QRS Corporation" means those qualified EQR subsidiaries wholly owned
by EQR.
"Rating Agencies" means, collectively, S&P, Moody's, Fitch Investors
Services, L.P. and Duff & Phelps Credit Rating Co.
"Real Property Assets" means as of any time, the real property assets
(including interests in participating mortgages in which the Borrower's interest
therein is characterized as equity according to GAAP) owned directly or
indirectly by the Borrower, EQR and the Consolidated Subsidiaries either or both
at such time.
"Recourse Debt" shall mean Indebtedness that is not Non-Recourse
Indebtedness.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
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"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"Secured Debt" means Indebtedness of EQR, on a consolidated basis, and
without duplication, Borrower's Share of any Indebtedness of any Investment
Affiliate, the payment of which is secured by a Lien on any Property owned or
leased by EQR, Borrower, or any Subsidiary or Investment Affiliate of either or
both.
"Securities" means any stock, partnership interests (other than
Multifamily Residential Property Partnership Interests), shares, shares of
beneficial interest, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as "securities," or
any certificates of interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire any of the foregoing, but shall not include any evidence of
the obligations.
"Solvent" means, with respect to any Person, that the fair saleable
value of such Person's assets exceeds the Indebtedness of such Person.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower and/or EQR.
"Taxes" means all federal, state, local and foreign income and gross
receipts taxes.
"Term" has the meaning set forth in Section 2.9.
"Termination Event" shall mean (i) a "reportable event, as such term
is described in Section 4043 of ERISA (other than a "reportable event" not
subject to the
29
<PAGE>
provision for 30-day notice to the PBGC), or an event described in Section
4062(e) of ERISA, (ii) the withdrawal by any member of the ERISA Group from a
Multiemployer Plan during a plan year in which it is a "substantial employer
(as defined in Section 4001(a)(2) of ERISA), or the incurrence of liability by
any member of the ERISA Group under Section 4064 of ERISA upon the termination
of a Multiemployer Plan, (iii) the filing of a notice of intent to terminate any
Plan under Section 4041 of ERISA, other than in a standard termination within
the meaning of Section 4041 of ERISA, or the treatment of a Plan amendment as a
distress termination under Section 4041 of ERISA, (iv) the institution by the
PBGC of proceedings to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or cause a trustee to be appointed
to administer, any Plan or (v) any other event or condition that might
reasonably constitute grounds for the termination of, or the appointment of a
trustee to administer, any Plan or the imposition of any liability or
encumbrance or Lien on the Real Property Assets or any member of the ERISA Group
under ERISA.
"Total Liabilities" means, as of the date of determination and without
duplication, all Indebtedness of EQR (calculated as provided in Section 1.2), on
a consolidated basis, plus Borrower's Share of all Indebtedness of Investment
Affiliates for which there is no recourse to EQR or Borrower (or any Property
thereof) plus the actual or potential liability of EQR, Borrower or any
Subsidiary for any Indebtedness of Investment Affiliates that is recourse to EQR
or Borrower (or Property thereof) plus accounts payable incurred in the ordinary
course of business.
"Treasury Rate" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a ten year
maturity, as such yield is reported in Federal Reserve Statistical Release
H.15--Selected Interest Rates, published most recently prior to the date the
applicable Treasury Rate is being determined. Such yield shall be determined by
straight line linear interpolation between the yields reported in Release H.15,
if necessary. In the event Release H.15 is no longer published, the Lead Agent
shall select, in its reasonable discretion, an alternate basis for the
determination of Treasury yield for U.S. Treasury Constant Maturity Series with
ten year maturities.
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"Unencumbered Asset Value" means (i) a fraction, the numerator of
which is the product of four (4) and the aggregate Unencumbered Net Operating
Income for the most recently ended Fiscal Quarter which is attributable (in a
manner reasonably acceptable to Lead Agent) to Qualifying Unencumbered
Properties wholly-owned (directly or beneficially) by the Borrower and/or EQR
(exclusive of Unimproved Assets) for the entire Fiscal Quarter and the
denominator of which is the FMV Cap Rate plus (ii) for all Qualifying
Unencumbered Properties wholly-owned (directly or beneficially) by Borrower
and/or EQR which have been acquired (directly or indirectly) by the Borrower
and/or EQR the Fiscal Quarter most recently ended, the aggregate Net Price of
the Qualifying Unencumbered Properties paid by Borrower or its affiliates for
such Qualifying Unencumbered Properties.
"Unencumbered Net Operating Income" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by the
Borrower and/or EQR and/or any wholly-owned Subsidiary of either or both during
the applicable period, Net Operating Income from each such Qualifying
Unencumbered Property minus an amount equal to the product of the average number
of apartment units in such Qualifying Unencumbered Property during such period
and the Capital Reserve for such period.
"Unimproved Assets" means Real Property Assets upon which no material
improvements have been completed which completion is evidenced by a certificate
of occupancy or its equivalent.
"United States" means the United States of America, including the
fifty states and the District of Columbia.
"Unsecured Debt" means Indebtedness of Borrower and EQR and any
wholly-owned Subsidiary of either or both, which is not Secured Debt.
"Unsecured Interest Expense" means Interest Expense, other than
Interest Expense payable in respect of Secured Debt and other than Interest
Expense payable in respect of the Indebtedness of any Person other than
Borrower, EQR or any wholly-owned Subsidiary of either or both.
"Unused Commitments" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction loan)
which any third party is
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obligated to advance to Borrower or another Person or otherwise pursuant to any
loan document, written instrument or otherwise.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP
applied on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Lead Agent; provided that for purposes of references to the financial
results and information of "EQR, on a consolidated basis," EQR shall be deemed
to own one hundred percent (100%) of the partnership interests in Borrower; and
provided further that, if the Borrower notifies the Lead Agent that the Borrower
wishes to amend any covenant in Article V to eliminate the effect of any change
in GAAP on the operation of such covenant (or if the Lead Agent notifies the
Borrower that the Required Banks wish to amend Article V for such purpose), then
the Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
reasonably satisfactory to the Borrower and the Required Banks.
SECTION 1.3. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article 2 on the same date, all of which Loans are of the same type (subject to
Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period. Borrowings are classified for purposes of this Agreement
either by reference to the pricing of Loans comprising such Borrowing (e.g., a
"Fixed Rate Borrowing" is a Euro-Dollar Borrowing or a Money Market Borrowing
(excluding any such Borrowing consisting of Money Market LIBOR Loans bearing
interest at the Base Rate pursuant to Article VIII), and a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the
provisions of Article 2 under which participation therein is determined (i.e., a
"Committed Borrowing" is a Borrowing under Section 2.1 in which all Banks
participate in proportion to their Commitments, while a "Money Market Borrowing"
is a Borrowing under Section 2.3
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in which a Bank's share is determined on the basis of its bid in accordance
therewith).
ARTICLE II
THE CREDITS
SECTION 2.1. Commitments to Lend. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
and participate in Letters of Credit issued by the Fronting Bank on behalf of
the Borrower pursuant to this Article from time to time during the term hereof
in amounts such that the aggregate principal amount of Committed Loans by such
Bank at any one time outstanding together with such Bank's pro rata share of the
Letter of Credit Usage shall not exceed the amount of its Commitment. Each
Borrowing outstanding under this Section 2.1 shall be in an aggregate principal
amount of $3,000,000, or an integral multiple of $100,000 in excess thereof
(except that any such Borrowing may be in the aggregate amount available in
accordance with Section 3.2(b), or in any amount required to reimburse the
Fronting Bank for any drawing under any Letter of Credit) and, other than with
respect to Money Market Loans, shall be made from the several Banks ratably in
proportion to their respective Commitments. Subject to the limitations set forth
herein, any amounts repaid may be reborrowed.
SECTION 2.2. Notice of Borrowing. (a) The Borrower shall give
Lead Agent notice not later than 10:00 a.m. (New York City time) (x) one
Domestic Business Day before each Base Rate Borrowing, or (y) three Euro-Dollar
Business Days before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the definition
of Interest Period.
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(b) Borrower shall give the Lead Agent, and the designated Fronting
Bank, written notice in the event that it desires to have Letters of Credit
(each, a "Letter of Credit") issued hereunder no later than 10:00 a.m., New York
City time, at least four (4) Domestic Business Days prior to the date of such
issuance. Each such notice shall specify (i) the designated Fronting Bank, (ii)
the aggregate amount of the requested Letters of Credit, (iii) the individual
amount of each requested Letter of Credit and the number of Letters of Credit to
be issued, (iv) the date of such issuance (which shall be a Domestic Business
Day), (v) the name and address of the beneficiary, (vi) the expiration date of
the Letter of Credit (which in no event shall be later than the Maturity Date or
twelve (12) months after the issuance of such Letter of Credit, whichever is
earlier), (vii) the purpose and circumstances for which such Letter of Credit is
being issued and (viii) the terms upon which each such Letter of Credit may be
drawn down (which terms shall not leave any discretion to Fronting Bank). Each
such notice may be revoked telephonically by the Borrower to the applicable
Fronting Bank and the Lead Agent any time prior to the date of issuance of the
Letter of Credit by the applicable Fronting Bank, provided such revocation is
confirmed in writing by the Borrower to the Fronting Bank and the Lead Agent
within one (1) Domestic Business Day by facsimile. No later than 10:00 a.m., New
York City time, on the date that is four (4) Domestic Business Days prior to the
date of issuance, the Borrower shall specify a precise description of the
documents and the verbatim text of any certificate to be presented by the
beneficiary of such Letter of Credit, which if presented by such beneficiary
prior to the expiration date of the Letter of Credit would require the Fronting
Bank to make a payment under the Letter of Credit; provided, that Fronting Bank
may, in its reasonable judgment, require changes in any such documents and
certificates only in conformity with changes in customary and commercially
reasonable practice or law and, provided further, that no Letter of Credit shall
require payment against a conforming draft to be made thereunder on the third
Domestic Business Day following the date that such draft is presented if such
presentation is made later than 10:00 A.M. New York City time (except that if
the beneficiary of any Letter of Credit requests at the time of the issuance of
its Letter of Credit that payment be made on the same Domestic Business Day
against a conforming draft, such beneficiary shall be entitled to such a same
day draw, provided such draft is presented to the applicable Fronting Bank no
later than 10:00 A.M. New York City time and provided further the Borrower shall
have requested to the Fronting Bank and the Lead
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Agent that such beneficiary shall be entitled to a same day draw). In
determining whether to pay on such Letter of Credit, the Fronting Bank shall be
responsible only to determine that the documents and certificates required to be
delivered under the Letter of Credit have been delivered and that they comply on
their face with the requirements of that Letter of Credit.
SECTION 2.3. Money Market Borrowings.
(a) The Money Market Option. From time to time during the Term, and
provided that at such time the Borrower maintains an Investment Grade Rating,
the Borrower may, as set forth in this Section 2.3, request the Banks during the
Term to make offers to make Money Market Loans to the Borrower, not to exceed,
at such time, the lesser of (i) $250,000,000 in the aggregate outstanding, and
(ii) the aggregate Commitments less all Loans and Letter of Credit Usage then
outstanding. Subject to the provisions of this Agreement, the Borrower may repay
any outstanding Money Market Loan on any day which is both a Domestic Business
Day and a Euro-Dollar Business Day and any amounts so repaid may be reborrowed,
up to the amount available under this Section 2.3 at the time of such Borrowing,
until the Domestic Business Day next preceding the Maturity Date. The Banks may,
but shall have no obligation to, make such offers and the Borrower may, but
shall have no obligation to, accept any such offers in the manner set forth in
this Section 2.3.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received not later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the Borrower and the Lead Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
1. the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR
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Auction or a Domestic Business Day in the case of an Absolute Rate Auction,
2. the aggregate amount of such Borrowing, which shall be $3,000,000
or a larger multiple of $100,000,
3. the duration of the Interest Period applicable thereto (which shall
not be less than 14 days or more than 180 days), subject to the provisions
of the definition of Interest Period, and
4. whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Lead Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Lead Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. 1. Each Bank may submit
a Money Market Quote containing an offer or offers to make Money Market Loans in
response to any Invitation for Money Market Quotes. Each Money Market Quote must
comply with the requirements of this subsection (d) and must be submitted to the
Lead Agent by telex or facsimile transmission at its offices specified in or
pursuant to Section 9.1 not later than (x) 2:00 P.M. (New York City time) on the
fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the
case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Lead Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be
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effective); provided that Money Market Quotes submitted by the Lead Agent (or
any affiliate of the Lead Agent) in the capacity of a Bank may be submitted, and
may only be submitted, if the Lead Agent or such affiliate notifies the Borrower
of the terms of the offer or offers contained therein not later than (x) one
hour prior to the deadline for the other Banks, in the case of a LIBOR Auction
or (y) 15 minutes prior to the deadline for the other Banks, in the case of an
Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so
made shall be irrevocable except with the written consent of the Lead Agent
given on the instructions of the Borrower. Such Money Market Loans may be funded
by such Bank's Designated Lender (if any) as provided in Section 9.6(d), however
such Bank shall not be required to specify in its Money Market Quote whether
such Money Market Loans will be funded by such Designated Lender.
2. Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(a) the proposed date of Borrowing,
(b) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $3,000,000 or a larger
multiple of $100,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(c) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(d) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(e) the identity of the quoting Bank.
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A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
3. Any Money Market Quote shall be disregarded if it:
(a) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(2) above;
(b) contains qualifying, conditional or similar language (except for
an aggregate limitation as provided in subsection (d)(2)(b) above);
(c) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or
(d) arrives after the time set forth in subsection (d)(1).
(e) Notice to Borrower. The Lead Agent shall promptly (and in any
event within one (1) Domestic Business Day after receipt thereof) notify the
Borrower in writing of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the Lead
Agent unless such subsequent Money Market Quote is submitted solely to correct a
manifest error in such former Money Market Quote or modifies the terms of such
previous Money Market Quote to provide terms more favorable to Borrower. The
Lead Agent's notice to the Borrower shall specify (A) the aggregate principal
amount of Money Market Loans for which offers have been received for each
Interest Period specified in the related Money Market Quote Request, (B) the
respective principal amounts and Money Market Margins or Money Market Absolute
Rates, as the case may be, so offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for which offers in any single
Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New
York City time) on (x) the third
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Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of
a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Lead Agent shall have mutually agreed and shall have notified
to the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective), the Borrower shall notify the Lead Agent of its acceptance or non-
acceptance of the offers so notified to it pursuant to subsection (e). In the
case of acceptance, such notice (a "Notice of Money Market Borrowing") shall
specify the aggregate principal amount of offers for each Interest Period that
are accepted. The Borrower may accept any Money Market Quote in whole or in
part; provided that:
1. the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
2. the principal amount of each Money Market Borrowing must be
$3,000,000 or a larger multiple of $100,000;
3. acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be;
and
4. the Borrower may not accept any offer that is described in
subsection (d)(3) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Lead Agent among such Banks as nearly as possible (in multiples
of $100,000, as the Lead Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. The Lead Agent shall promptly (and
in any event within one (1) Domestic Business Day after such offers are
accepted) notify the Borrower and each such Bank in writing of any such
allocation of Money Market Loans. Determinations by the Lead Agent of the
allocation of Money Market Loans shall be conclusive in the absence of manifest
error.
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(h) Notification by Lead Agent. Upon receipt of the Borrower's Notice
of Money Market Borrowing in accordance with Section 2.3(f) hereof, the Lead
Agent shall, on the date such Notice of Money Market Borrowing is received by
the Lead Agent, promptly notify each Bank of the principal amount of the Money
Market Borrowing accepted by the Borrower and of such Bank's share (if any) of
such Money Market Borrowing and such Notice of Money Market Borrowing shall not
thereafter be revocable by the Borrower. A Bank who is notified that it has been
selected to make a Money Market Loan may designate its Designated Lender (if
any) to fund such Money Market Loan on its behalf, as described in Section
9.6(d). Any Designated Lender which funds a Money Market Loan shall on and after
the time of such funding become the obligee under such Money Market Loan and be
entitled to receive payment thereof when due. No Bank shall be relieved of its
obligation to fund a Money Market Loan, and no Designated Lender shall assume
such obligation, prior to the time the applicable Money Market Loan is funded.
(i) Notwithstanding anything to the contrary contained herein, each
Bank shall be required to fund its pro rata share of Committed Loans in
accordance with Section 2.1 hereof despite the fact that any Bank's Commitment
may have been or may be exceeded as a result of such Bank's making of Money
Market Loans.
SECTION 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a notice from Borrower in accordance with Section
2.2 hereof (each such notice being a "Notice of Borrowing"), the Lead Agent
shall, on the date such Notice of Borrowing is received by the Lead Agent,
promptly notify Co-Lead Agent and each Bank of the contents thereof and of such
Bank's share of such Borrowing, of the interest rate determined pursuant thereto
and the Interest Period(s) (if different from those requested by the Borrower)
and such Notice of Borrowing shall not thereafter be revocable by the Borrower,
unless Borrower shall pay any applicable expenses pursuant to Section 2.13.
(b) Not later than 1:00 p.m. (New York City time) on the date of each
Borrowing as indicated in the Notice of Borrowing, each Bank shall (except as
provided in subsection (c) of this Section) make available its share of such
Borrowing in Federal funds immediately available in New York City, to the Lead
Agent at its address referred to in Section 9.1. If the Borrower has requested
the issuance of a Letter of Credit, no later than 12:00 Noon (New York City
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time) on the date of such issuance as indicated in the notice delivered pursuant
to Section 2.2(b), the Fronting Bank shall issue such Letter of Credit in the
amount so requested and deliver the same to the Borrower with a copy thereof to
the Lead Agent. Immediately upon the issuance of each Letter of Credit by the
Fronting Bank, such Fronting Bank shall be deemed to have sold and transferred
to each other Bank, and each such other Bank shall be deemed, and hereby agrees,
to have irrevocably and unconditionally purchased and received from the Fronting
Bank, without recourse or warranty, an undivided interest and a participation in
such Letter of Credit, any drawing thereunder, and the obligations of the
Borrower hereunder with respect thereto, and any security therefor or guaranty
pertaining thereto, in an amount equal to such Bank's ratable share thereof
(based upon the ratio its Commitment bears to the aggregate of all Commitments).
Upon any change in any of the Commitments in accordance herewith, there shall be
an automatic adjustment to such participations to reflect such changed shares.
The Fronting Bank shall have the primary obligation to fund any and all draws
made with respect to such Letter of Credit notwithstanding any failure of a
participating Bank to fund its ratable share of any such draw. The Lead Agent
will instruct the Fronting Bank to make such Letter of Credit available to the
Borrower and the Fronting Bank shall make such Letter of Credit available to the
Borrower at the Borrower's aforesaid address or at such address in the United
States as Borrower shall request on the date of the Borrowing.
(c) Unless the Lead Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the Lead
Agent such Bank's share of such Borrowing, the Lead Agent may assume that such
Bank has made such share available to the Lead Agent on the date of such
Borrowing in accordance with subsection (b) of this Section 2.4 and the Lead
Agent may, in reliance upon such assumption, but shall not be obligated to, make
available to the Borrower on such date a corresponding amount on behalf of such
Bank. If and to the extent that such Bank shall not have so made such share
available to the Lead Agent, such Bank and the Borrower severally agree to repay
to the Lead Agent forthwith on demand, and in the case of the Borrower one (1)
Domestic Business Day after demand, such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Lead Agent, at (i) in
the case of the Borrower, a rate per annum equal to the interest rate
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applicable thereto pursuant to Section 2.7 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Lead Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement.
SECTION 2.5. Notes.
(a) The Loans of each Bank shall be evidenced by a single Note payable
to the order of such Bank for the account of its Applicable Lending Office.
(b) Each Bank may, by notice to the Borrower, the Lead Agent and the
Co-Lead Agent, request that its Loans of a particular type (including Money
Market Loans) be evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Any additional costs incurred
by the Lead Agent, the Borrower or the Banks in connection with preparing such a
Note shall be at the sole cost and expense of the Bank requesting such Note. In
the event any Loans evidenced by such a Note are paid in full prior to the
Maturity Date, any such Bank shall return such Note to Borrower. Each such Note
shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
type. Upon the execution and delivery of any such Note, any existing Note
payable to such Bank shall be replaced or modified accordingly. Each reference
in this Agreement to the "Note" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.1(a), the
Lead Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, type and maturity of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto, and may,
if such Bank so elects in connection with any transfer or enforcement of its
Note, endorse on the appropriate schedule appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding; provided
that the failure of any Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Notes. Each
Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and
to attach to and make a part of its Note a continuation of any such schedule as
and when required.
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(d) The Committed Loans shall mature, and the principal amount thereof
shall be due and payable, on the Maturity Date.
(e) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the earlier to occur of (i) last day
of the Interest Period applicable to such Borrowing or (ii) the Maturity Date.
(f) There shall be no more than ten (10) Euro-Dollar Groups of Loans
outstanding at any one time.
SECTION 2.6. Method of Electing Interest Rates. (a) The Loans included
in each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the
Borrower may from time to time elect to change or continue the type of interest
rate borne by each Group of Loans (subject in each case to the provisions of
Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert all or any portion of such Loans to Euro-Dollar Loans as of any Euro-
Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert all or any portion of such Loans to Base Rate Loans and/or elect to
continue all or any portion of such Loans as Euro-Dollar Loans for an additional
Interest Period or additional Interest Periods, in each case effective on the
last day of the then current Interest Period applicable to such Loans, or on
such other date designated by Borrower in the Notice of Interest Rate Election
provided Borrower shall pay any losses pursuant to Section 2.13.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Lead Agent at least three (3) Euro-Dollar Business Days
before the conversion or continuation selected in such notice is to be
effective. A Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the Loans comprising
such Group, (ii) the portion to which such Notice applies, and the remaining
portion to which it does not
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apply, are each $500,000 or any larger multiple of $100,000, (iii) there shall
be no more than ten (10) Euro-Dollar Groups of Loans outstanding at any time,
(iv) no Committed Loan may be continued as, or converted into, a Euro-Dollar
Loan when any Event of Default has occurred and is continuing, and (v) no
Interest Period shall extend beyond the Maturity Date.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the
initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Lead Agent shall notify the Co-
Lead Agent and each Bank the same day as it receives such Notice of Interest
Rate Election of the contents thereof, the interest rates determined pursuant
thereto and the Interest Periods (if different from those requested by the
Borrower) and such notice shall not thereafter be revocable by the Borrower. If
the Borrower fails to deliver a timely Notice of Interest Rate Election to the
Lead Agent for any Group of Euro-Dollar Loans, such Loans shall be converted
into Base Rate Loans on the last day of the then current Interest Period
applicable thereto.
(d) If the Borrower shall fail to pay any principal of or interest on
any Money Market Loan when due, such Money Market Loan shall bear interest,
payable on
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demand, for each day until paid at a rate per annum equal to the Base Rate until
such failure shall become an Event of Default and thereafter at a rate per annum
equal to the sum of 4% plus the Base Rate for such day.
SECTION 2.7. Interest Rates.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until the
date it is repaid or converted into a Euro-Dollar Loan pursuant to Section 2.6
or at the Maturity Date, at a rate per annum equal to the Base Rate plus the
Applicable Margin for Base Rate Loans for such day. Such interest shall be
payable for each Interest Period on the last day thereof.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for Euro-
Dollar Loans for such day plus the Adjusted London Interbank Offered Rate
applicable to such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than one month, at intervals of one month after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the London
Interbank Offered Rate applicable during such Interest Period by (ii) 1.00 minus
the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
the Euro-Dollar Reference Bank in the London interbank market at approximately
11:00 a.m. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Borrowing or Group of Loans or portion thereof to be converted
into or continued as Euro-Dollar Loans to which such Interest Period is to apply
and for a period of time comparable to such Interest Period.
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"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D, as Regulation D may be amended, modified or supplemented, for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(c) Subject to Section 8.1, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.7(b) as if the related Money Market LIBOR Borrowing were a Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making
such Loan in accordance with Section 2.3. Each Money Market Absolute Rate Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Bank making such Loan in accordance with
Section 2.3. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than one month, at
intervals of one month after the first day thereof. Any overdue principal of or
interest on any Money Market Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Base Rate until such
failure shall become an Event of Default and thereafter at a rate per annum
equal to the sum of 4% plus the Base Rate for such day.
(d) In the event that, and for so long as, any Event of Default shall
have occurred and be continuing, the outstanding principal amount of the Loans,
and, to the extent permitted by applicable law, overdue interest in respect of
all Loans, shall bear interest at the annual rate equal to the sum of the Base
Rate and four percent (4%) (the "Default Rate").
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(e) The Lead Agent shall determine each interest rate applicable to
the Loans hereunder. The Lead Agent shall give prompt notice to the Borrower
and the Banks of each rate of interest so determined, and its determination
thereof shall be conclusive in the absence of demonstrable error.
(f) The Euro-Dollar Reference Bank agrees to use its best efforts to
furnish quotations to the Lead Agent as contemplated by this Section.
SECTION 2.8. Fees.
(a) Facility Fee. The Borrower shall pay to the Lead Agent for the
account of the Banks ratably in proportion to their respective Commitments a
facility fee (the "Facility Fee") on the aggregate Commitments at the respective
percentages per annum based upon the range into which the Borrower's Credit
Rating then falls, in accordance with the following table. The facility fee
shall be payable in arrears on each January 1, April 1, July 1 and October 1
during the Term.
<TABLE>
<S> <C>
Non-Investment
Grade Rating 0.375%
BBB-/Baa3 0.300%
BBB/Baa2 0.200%
BBB+/Baa1 0.150%
A-/A3 0.150%
A/A2 0.150%
A+/A1 0.150%
</TABLE>
Any change in the Borrower's Credit Rating causing it to move into a different
range on the table shall effect an immediate change in the applicable percentage
per annum. In the event that the Borrower receives two (2) Credit Ratings and
such ratings are split between a higher and a lower range on the table, the
applicable percentage per annum shall be based upon the lower of such two (2)
Credit Ratings. In the event that Borrower receives more than two (2) Credit
Ratings, and such ratings are not equivalent, the applicable percentage per
annum shall be determined by the lower of the two (2) highest ratings, provided
that each of said two (2) highest ratings shall be Investment Grade Ratings and
at least one of which shall be an Investment Grade Rating from S&P or Moody's.
In the event that each of said two (2) highest ratings shall not be Investment
Grade Ratings or at least one shall not be an Investment Grade Rating from S&P
or Moody's, then the applicable percentage
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per annum shall be determined by the lowest of the ratings. In the event that
only one (1) Rating Agency has set the Borrower's Credit Rating, then the
applicable percentage per annum shall be based on such single rating.
(b) Letter of Credit Fee. During the Term, the Borrower shall pay to
the Lead Agent, for the account of the Banks in proportion to their interests in
respective undrawn issued Letters of Credit, a fee (a "Letter of Credit Fee") in
an amount, provided that no Event of Default shall have occurred and be
continuing, equal to a rate per annum equal to the then percentage per annum of
the Applicable Margin with respect to Euro-Dollar Loans, less .15%, on the daily
average of such issued and undrawn Letters of Credit, which fee shall be
payable, in arrears, on each January 1, April 1, July 1 and October 1 during the
Term. From the occurrence, and during the continuance, of an Event of Default,
such fee shall be increased to be equal to four percent (4%) per annum on the
daily average of such issued and undrawn Letters of Credit.
(c) Fronting Bank Fee. The Borrower shall pay any Fronting Bank, for
its own account, a fee (a "Fronting Bank Fee") at a rate per annum equal to .15%
of the issued and undrawn amount of such Letter of Credit, which fee shall be in
addition to and not in lieu of, the Letter of Credit Fee. The Fronting Bank Fee
shall be payable in arrears on each January 1, April 1, July 1 and October 1
during the Term.
(d) Fees Non-Refundable. All fees set forth in this Section 2.8 shall
be deemed to have been earned on the date payment is due in accordance with the
provisions hereof and shall be non-refundable. The obligation of the Borrower
to pay such fees in accordance with the provisions hereof shall be binding upon
the Borrower and shall inure to the benefit of the Lead Agent, the Co-Lead Agent
and the Banks regardless of whether any Loans are actually made.
SECTION 2.9. Maturity Date.
The term (the "Term") of the Commitments (and each Bank's obligations
to make Loans and to participate in Letters of Credit hereunder) shall terminate
and expire, and the Borrower shall return or cause there to be returned all
Letters of Credit to the Fronting Bank, on the Maturity Date. Upon the date of
the termination of the Term, any Loans then outstanding (together with accrued
interest
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thereon and all other Obligations) shall be due and payable on such date.
SECTION 2.10. Mandatory Prepayments.
(a) If at any time the Borrower, EQR or any Consolidated Subsidiary
of either or both sells, transfers, assigns or conveys any Real Property Asset
which shall cause the Borrower in any fiscal year period commencing after the
Closing Date, to have sold, transferred or conveyed property or assets which
constitute in the aggregate more than 30% of the Gross Asset Value of the
Borrower, EQR and any Consolidated Subsidiary of either or both on the date of
such transfer, then at the request of Lead Agent, Borrower shall pay to the Lead
Agent, for the account of the Banks, within thirty (30) days after the date of
such request, an amount equal to the Net Proceeds of such transfer (but in no
event more than the outstanding balance of the Loans). Borrower shall make such
prepayment together with interest accrued to the date of the prepayment on the
principal amount prepaid. In connection with the prepayment of a Euro-Dollar
Loan prior to the maturity thereof, the Borrower shall also pay any applicable
expenses pursuant to Section 2.13. Each such prepayment shall be applied to
prepay ratably the Loans of the Banks. Amounts prepaid pursuant to this Section
2.10 may not be reborrowed. As used in this Section 2.10, the term "Net
Proceeds" shall mean all amounts received by Borrower, EQR and the Consolidated
Subsidiaries of either or both in connection with such sale, transfer,
assignment or conveyance after payment of all expenses to be made by Borrower
and any Consolidated Subsidiaries in connection with such sale, transfer,
assignment or conveyance (including, without limitation, payment of then
existing Liens or encumbrances on such Real Property Asset, brokerage
commissions, title and survey costs or transfer taxes).
(b) If at any time the Borrower or EQR, directly or indirectly shall
purchase or hold any interest in any Investment Affiliates which, taken singly
or in the aggregate, exceeds ten percent (10%) of the Gross Asset Value of the
Borrower, EQR and the Consolidated Subsidiaries of either or both then, at the
request of Lead Agent, Borrower shall pay to the Lead Agent, for the account of
the Banks, within thirty (30) days after the date of such request, an amount
equal to the outstanding balance of all Borrowings hereunder (except as to any
Fixed Rate Borrowings for which such repayments shall be made at the end of the
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Interest Period applicable to such Fixed Rate Borrowing), and Borrower shall not
be entitled to request any further Borrowings under this Agreement until such
time as the interest in any Investment Affiliates of Borrower or EQR (directly
or indirectly) shall not, taken singly or in the aggregate, exceed ten percent
(10%) of the Gross Asset Value of the Borrower, EQR and the Consolidated
Subsidiaries of either or both. Borrower shall make such prepayment together
with interest accrued to the date of the prepayment on the principal amount
prepaid.
SECTION 2.11. Optional Prepayments.
(a) The Borrower may, upon at least one (1) Domestic Business Day's
notice to the Lead Agent, prepay any Group of Base Rate Loans (or any Money
Market Borrowing bearing interest at the Base Rate pursuant to Section 8.1), in
whole at any time, or from time to time in part in amounts aggregating One
Million Dollars ($1,000,000) or any larger multiple of One Hundred Thousand
Dollars ($100,000), by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Group or Borrowing.
(b) The Borrower may, upon at least one (1) Euro-Dollar Business
Days' notice to the Lead Agent, prepay any Euro-Dollar Loan as of the last day
of the Interest Period applicable thereto. Except as provided in Article 8 and
except with respect to any Euro-Dollar Loan which has been converted to a Base
Rate Loan pursuant to Section 8.2, 8.3 or 8.4 hereof, the Borrower may not
prepay all or any portion of the principal amount of any Euro-Dollar Loan prior
to the end of the Interest Period applicable thereto unless the Borrower shall
also pay any applicable expenses pursuant to Section 2.13. Any such prepayment
shall be upon at least three (3) Euro-Dollar Business Days notice to the Lead
Agent. Each such optional prepayment shall be in the amounts set forth in
Section 2.11(a) above and shall be applied to prepay ratably the Loans of the
Banks included in any Group of Euro-Dollar Loans, except that any Euro-Dollar
Loan which has been converted to a Base Rate Loan pursuant to Section 8.2, 8.3
or 8.4 hereof may be prepaid without ratable payment of the other Loans in such
Group of Loans which have not been so converted.
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(c) The Borrower may, upon at least one (1) Domestic Business Day's
notice to the Lead Agent (by 11:00 a.m New York time on such Domestic Business
Day), reimburse the Lead Agent for the benefit of the Fronting Bank for the
amount of any drawing under a Letter of Credit in whole or in part in any
amount.
(d) The Borrower may at any time return any undrawn Letter of Credit
to the Fronting Bank in whole, but not in part, and the Fronting Bank within a
reasonable period of time shall give the Lead Agent and each of the Banks notice
of such return.
(e) The Borrower may at any time and from time to time cancel all or
any part of the Commitments by the delivery to the Lead Agent of a notice of
cancellation within the applicable time periods set forth in Sections 2.11(a)
and (b) if there are Loans then outstanding or, if there are no Loans
outstanding at such time as to which the Commitments with respect thereto are
being cancelled, upon at least one (1) Domestic Business Day's notice to the
Lead Agent, whereupon, in either event, all or such portion of the Commitments,
as applicable, shall terminate as to the Banks, pro rata on the date set forth
in such notice of cancellation, and, if there are any Loans then outstanding,
Borrower shall prepay, as applicable, all or such portion of Loans outstanding
on such date in accordance with the requirements of Section 2.11(a) and (b). In
no event shall the Borrower be permitted to cancel Commitments for which a
Letter of Credit has been issued and is outstanding unless the Borrower returns
(or causes to be returned) such Letter of Credit to the Fronting Bank. Borrower
shall be permitted to designate in its notice of cancellation which Loans, if
any, are to be prepaid.
(f) Any amounts so prepaid pursuant to Section 2.11 (a), (b), (c) or
(d) may be reborrowed. In the event Borrower elects to cancel all or any portion
of the Commitments pursuant to Section 2.11(e) hereof, such amounts may not be
reborrowed.
(g) The Borrower may not prepay any portion of a Money Market Loan
except with the prior consent of the Bank or Designated Lender holding such
Money Market Loan.
SECTION 2.12. General Provisions as to Payments.
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(a) The Borrower shall make each payment of interest on the Loans and
of fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in Federal or other funds immediately available in New York City, to
the Lead Agent at its address referred to in Section 9.1. The Lead Agent will
promptly (and if received prior to 12:00 noon, on the same Domestic Business
Day, if received after 12:00 noon on the immediately following Domestic Business
Day) distribute to each Bank its ratable share (or applicable share with respect
to Money Market Loans) of each such payment received by the Lead Agent for the
account of the Banks. If and to the extent that the Lead Agent shall receive any
such payment for the account of the Banks on or before 12:00 Noon (New York City
time) on any Domestic Business Day, and Lead Agent shall not have distributed to
any Bank its applicable share of such payment on such Domestic Business Day,
Lead Agent shall distribute such amount to such Bank together with interest
thereon, for each day from the date such amount should have been distributed to
such Bank until the date Lead Agent distributes such amount to such Bank, at the
Federal Funds Rate. Whenever any payment of principal of, or interest on the
Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-
Dollar Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. Whenever any payment of principal
of, or interest on, the Money Market Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Lead Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Lead Agent may assume that the
Borrower has made such payment in full to the Lead Agent on such date and the
Lead Agent may, in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such Bank. If
and to the extent that the Borrower shall not have
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<PAGE>
so made such payment, each Bank shall repay to the Lead Agent forthwith on
demand such amount distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Lead Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or Money Market LIBOR Loan
(pursuant to Article II, VI or VIII or otherwise) on any day other than the last
day of the Interest Period applicable thereto, or if the Borrower fails to
borrow any Euro-Dollar Loans or Money Market LIBOR Loans after notice has been
given to any Bank in accordance with Section 2.4(a), or if Borrower shall
deliver a Notice of Interest Rate Election specifying that a Euro-Dollar Loan
shall be converted on a date other than the first (lst) day of the then current
Interest Period applicable thereto, the Borrower shall reimburse each Bank
within 15 days after certification of such Bank of such loss or expense (which
shall be delivered by each such Bank to Lead Agent for delivery to Borrower) for
any resulting loss or expense incurred by it (or by an existing Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow,
provided that such Bank shall have delivered to Lead Agent and Lead Agent shall
have delivered to the Borrower a certification as to the amount of such loss or
expense, which certification shall set forth in reasonable detail the basis for
and calculation of such loss or expense and shall be conclusive in the absence
of demonstrable error.
SECTION 2.14. Computation of Interest and Fees. All interest and fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
SECTION 2.15. Use of Proceeds. The Borrower shall use the proceeds of
the Loans for general corporate purposes, including, without limitation, the
acquisition of real property to be used in the Borrower's existing business and
for general working capital needs of the Borrower.
SECTION 2.16. Letters of Credit. (a) Subject to the terms contained in
this Agreement and the other Loan Documents, upon the receipt of a notice in
accordance with
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Section 2.2(b) requesting the issuance of a Letter of Credit, the Fronting Bank
shall issue a Letter of Credit or Letters of Credit in such form as is
reasonably acceptable to the Borrower (subject to the provisions of Section
2.2(b)) in an amount or amounts equal to the amount or amounts requested by the
Borrower.
(b) Each Letter of Credit shall be issued in the minimum amount of
Five Million Dollars ($5,000,000).
(c) The Letter of Credit Usage shall be no more than Fifty Million
Dollars ($50,000,000) at any one time.
(d) There shall be no more than ten (10) Letters of Credit
outstanding at any one time.
(e) In the event of any request for a drawing under any Letter of
Credit by the beneficiary thereunder, the Fronting Bank shall notify the
Borrower and the Lead Agent (and the Lead Agent shall notify each Bank thereof)
on or before the date on which the Fronting Bank intends to honor such drawing,
and, except as provided in this subsection (e), the Borrower shall reimburse
the Fronting Bank, in immediately available funds, on the same day on which such
drawing is honored in an amount equal to the amount of such drawing.
Notwithstanding anything contained herein to the contrary, however, unless the
Borrower shall have notified the Lead Agent, and the Fronting Bank prior to
11:00 a.m. (New York time) on the Domestic Business Day immediately prior to the
date of such drawing that the Borrower intends to reimburse the Fronting Bank
for the amount of such drawing with funds other than the proceeds of the Loans,
the Borrower shall be deemed to have timely given a Notice of Borrowing pursuant
to Section 2.2 to the Lead Agent, requesting a Borrowing of Base Rate Loans on
the date on which such drawing is honored and in an amount equal to the amount
of such drawing. Each Bank (other than the Fronting Bank) shall, in accordance
with Section 2.3(b), make available its pro rata share of such Borrowing to the
Lead Agent, the proceeds of which shall be applied directly by the Lead Agent to
reimburse the Fronting Bank for the amount of such draw. In the event that any
such Bank fails to make available to the Fronting Bank the amount of such
Bank's participation on the date of a drawing, the Fronting Bank shall be
entitled to recover such amount on demand from such Bank together with interest
at the Federal Funds Rate commencing on the date such drawing is honored, and
the provisions of Section 9.16 shall otherwise apply to such failure.
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(f) If, after the date hereof, any change in any law or regulation or
in the interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against letters of credit issued by, or assets held by, or deposits in or for
the account of, or participations in any letter of credit, upon any Bank
(including the Fronting Bank) or (ii) impose on any Bank any other condition
regarding this Agreement or such Bank (including the Fronting Bank) as it
pertains to the Letters of Credit or any participation therein and the result of
any event referred to in the preceding clause (i) or (ii) shall be to increase,
by an amount deemed by the Fronting Bank or such Bank to be material, the cost
to the Fronting Bank or any Bank of issuing or maintaining any Letter of Credit
or participating therein, then the Borrower shall pay to the Fronting Bank or
such Bank, within 15 days after written demand by such Bank (with a copy to the
Lead Agent), which demand shall be accompanied by a certificate showing, in
reasonable detail, the calculation of such amount or amounts, such additional
amounts as shall be required to compensate the Fronting Bank or such Bank for
such increased costs or reduction in amounts received or receivable hereunder.
Each Bank will promptly notify the Borrower, the Lead Agent and the Co-Lead
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section 2.16 and
will designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the reasonable judgment of such Bank, be otherwise disadvantageous to such
Bank. If such Bank shall fail to notify Borrower of any such event within 90
days following the end of the month during which such event occurred, then
Borrower's liability for any amounts described in this Section incurred by such
Bank as a result of such event shall be limited to those attributable to the
period occurring subsequent to the ninetieth (90th) day prior to the date upon
which such Bank actually notified Borrower of the occurrence of such event. A
certificate of any Bank claiming compensation under this Section 2.16 and
setting forth a reasonably detailed calculation of the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
demonstrable error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
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(g) The Borrower hereby agrees to protect, indemnify, pay and save
the Fronting Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees and disbursements) which the Fronting Bank may incur or be
subject to as a result of (i) the issuance of the Letters of Credit, other than
to the extent of the bad faith, gross negligence or wilful misconduct of the
Fronting Bank or (ii) the failure of the Fronting Bank to honor a drawing under
any Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (collectively, "Governmental Acts"), other than to the
extent of the bad faith, gross negligence or wilful misconduct of the Fronting
Bank. As between the Borrower and the Fronting Bank, the Borrower assumes all
risks of the acts and omissions of any beneficiary with respect to its use, or
misuses of, the Letters of Credit issued by the Fronting Bank. In furtherance
and not in limitation of the foregoing, the Fronting Bank shall not be
responsible (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for and issuance of such Letters of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or insufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit, other than as a
result of the bad faith, gross negligence or wilful misconduct of the Fronting
Bank; (iv) for errors, omissions, interruptions or delays in transmission or
delivery of any message, by mail, cable, telegraph, telex, facsimile
transmission, or otherwise; (v) for errors in interpretation of any technical
terms; (vi) for any loss or delay in the transmission or otherwise of any
documents required in order to make a drawing under any such Letter of Credit or
of the proceeds thereof; (vii) for the misapplication by the beneficiary of any
such Letter of Credit of the proceeds of such Letter of Credit; and (viii) for
any consequence arising from causes beyond the control of the Fronting Bank,
including any Government Acts, in each case other than to the extent of the bad
faith, gross negligence or willful misconduct of the Fronting Bank. None of the
above shall affect, impair or prevent the vesting of the Fronting Bank's
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rights and powers hereunder. In furtherance and extension and not in limitation
of the specific provisions hereinabove set forth, any action taken or omitted by
the Fronting Bank under or in connection with the Letters of Credit issued by it
or the related certificates, if taken or omitted in good faith, shall not put
the Fronting Bank under any resulting liability to the Borrower; provided that,
notwithstanding anything in the foregoing to the contrary, the Fronting Bank
will be liable to the Borrower for any damages suffered by the Borrower or its
Subsidiaries as a result of the Fronting Bank's grossly negligent or wilful
failure to pay under any Letter of Credit after the presentation to it of a
sight draft and certificates strictly in compliance with the terms and
conditions of the Letter of Credit.
(h) If the Fronting Bank or the Lead Agent is required at any time,
pursuant to any bankruptcy, insolvency, liquidation or reorganization law or
otherwise, to return to the Borrower any reimbursement by the Borrower of any
drawing under any Letter of Credit, each Bank shall pay to the Fronting Bank or
the Lead Agent, as the case may be, its pro rata share of such payment, but
without interest thereon unless the Fronting Bank or the Lead Agent is required
to pay interest on such amounts to the person recovering such payment, in which
case with interest thereon, computed at the same rate, and on the same basis, as
the interest that the Fronting Bank or the Lead Agent is required to pay.
SECTION 2.17. Letter of Credit Usage Absolute. The obligations of the
Borrower under this Agreement in respect of any Letter of Credit shall be
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement (as the same may be amended from time to time) and
any Letter of Credit Documents (as hereinafter defined) under all
circumstances, including, without limitation, to the extent permitted by law,
the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or any
other agreement or instrument relating thereto (collectively, the "Letter of
Credit Documents") or any Loan Document;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the obligations of the Borrower in respect of the Letters
of Credit or any other amendment or waiver of or any consent by the Borrower to
departure from all or any of the Letter of Credit Documents or any Loan
Document; provided, that the Fronting Bank
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shall not consent to any such change or amendment unless previously consented to
in writing by the Borrower;
(c) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the obligations of the Borrower in respect of the Letters of
Credit;
(d) the existence of any claim, set-off, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of a
Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Lead Agent, the Fronting Bank or any Bank (other
than a defense based on the bad faith, gross negligence or wilful misconduct of
the Lead Agent, the Fronting Bank or such Bank) or any other Person, whether in
connection with the Loan Documents, the transactions contemplated hereby or by
the Letters of Credit Documents or any unrelated transaction;
(e) any draft or any other document presented under or in connection with
any Letter of Credit or other Loan Document proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; provided, that payment by the Fronting Bank under
such Letter of Credit against presentation of such draft or document shall not
have been the result of the bad faith, gross negligence or wilful misconduct of
the Fronting Bank;
(f) payment by the Fronting Bank against presentation of a draft or
certificate that does not strictly comply with the terms of the Letter of
Credit; provided, that such payment shall not have been the result of the bad
faith, gross negligence or wilful misconduct of the Fronting Bank; and
(g) any other circumstance or happening whatsoever other than the payment
in full of all obligations hereunder in respect of any Letter of Credit or any
agreement or instrument relating to any Letter of Credit, whether or not similar
to any of the foregoing, that might otherwise constitute a defense available
to, or a discharge of, the Borrower; provided, that such other circumstance or
happening shall not have been the result of bad faith, gross negligence or
wilful misconduct of the Fronting Bank.
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ARTICLE III
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur on the date
when each of the following conditions is satisfied (or waived by the Lead Agent
and the Banks), each document to be dated the Closing Date unless otherwise
indicated:
(a) the Borrower shall have executed and delivered to the Lead Agent
a Note for the account of each Bank dated on or before the Closing Date
complying with the provisions of Section 2.4;
(b) the Borrower, the Lead Agent and Co-Lead Agent and each of the
Banks shall have executed and delivered to the Borrower, the Lead Agent and Co-
Lead Agent a duly executed original of this Agreement;
(c) EQR shall have executed and delivered to the Lead Agent and Co-
Lead Agent a duly executed original of the EQR Guaranty;
(d) the Lead Agent shall have received an opinion of Rosenberg &
Liebentritt, P.C., counsel for the Borrower, acceptable to the Lead Agent, the
Co-Lead Agent, the Banks and their counsel;
(e) the Lead Agent shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, acceptable to the Lead Agent, the Co-Lead Agent, the
Banks and their counsel;
(f) the Lead Agent shall have received all documents the Lead Agent
may reasonably request relating to the existence of the Borrower and EQR, the
authority for and the validity of this Agreement and the other Loan Documents,
and any other matters relevant hereto, all in form and substance satisfactory to
the Lead Agent. Such documentation shall include, without limitation, the
agreement of limited partnership of the Borrower, as well as the certificate of
limited partnership of the Borrower, both as amended, modified or supplemented
to the Closing Date, certified to be true, correct and complete by a senior
officer of the Borrower as of a date not more than ten (10) days prior to the
Closing Date, together with a certificate of existence as to the Borrower from
the Secretary of State
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(or the equivalent thereof) of Illinois, to be dated not more than thirty (30)
days prior to the Closing Date, as well as the declaration of trust of EQR, as
amended, modified or supplemented to the Closing Date, certified to be true,
correct and complete by a senior officer of EQR as of a date not more than ten
(10) days prior to the Closing Date, together with a good standing certificate
as to EQR from the Secretary of State (or the equivalent thereof) of Maryland,
to be dated not more than thirty (30) days prior to the Closing Date;
(g) the Lead Agent shall have received all certificates, agreements
and other documents and papers referred to in this Section 3.1 and the Notice of
Borrowing referred to in Section 3.2, if applicable, unless otherwise specified,
in sufficient counterparts, satisfactory in form and substance to the Lead Agent
and Co-Lead Agent in their sole discretion;
(h) the Borrower shall have taken all actions required to authorize
the execution and delivery of this Agreement and the other Loan Documents and
the performance thereof by the Borrower;
(i) the Lead Agent and Co-Lead Agent shall be satisfied that neither
the Borrower, EQR nor any Consolidated Subsidiary is subject to any present or
contingent environmental liability which could have a Material Adverse Effect;
(j) the Lead Agent shall have received, for its and any other Bank's
account, all fees due and payable pursuant to Section 2.8 hereof on or before
the Closing Date, and the fees and expenses accrued through the Closing Date of
Skadden, Arps, Slate, Meagher & Flom LLP;
(k) the Lead Agent shall have received copies of all consents,
licenses and approvals, if any, required in connection with the execution,
delivery and performance by the Borrower, EQR and the applicable Consolidated
Subsidiaries, and the validity and enforceability, of the Loan Documents, or in
connection with any of the transactions contemplated thereby, and such
consents, licenses and approvals shall be in full force and effect;
(l) the Lead Agent shall have received the audited financial
statements of the Borrower and its Consolidated Subsidiaries and of EQR for the
fiscal year ending December 31, 1996; and
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(m) no Default or Event of Default shall have occurred.
SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan
or to participate in any Letter of Credit issued by the Fronting Bank and the
obligation of the Fronting Bank to issue a Letter of Credit on the occasion of
any Borrowing is subject to the satisfaction of the following conditions:
(a) receipt by the Lead Agent of a Notice of Borrowing as required
by Section 2.2 or a Notice of Money Market Borrowing as required by Section 2.3
or a request to cause a Fronting Bank to issue a Letter of Credit pursuant to
Section 2.16;
(b) immediately after such Borrowing, the aggregate outstanding
principal amount of the Loans plus the Letter of Credit Usage will not exceed
the aggregate amount of the Commitments;
(c) immediately before and after such Borrowing or issuance of any
Letter of Credit, no Default or Event of Default shall have occurred and be
continuing both before and after giving effect to the making of such Loans or
the issuance of such Letter of Credit;
(d) the representations and warranties of the Borrower contained in
this Agreement (other than representations and warranties which expressly speak
as of a different date) shall be true and correct in all material respects on
and as of the date of such Borrowing both before and after giving effect to the
making of such Loans;
(e) no law or regulation shall have been adopted, no order, judgment
or decree of any governmental authority shall have been issued, and no
litigation shall be pending, which does or seeks to enjoin, prohibit or
restrain, the making or repayment of the Loans, the issuance of any Letter of
Credit or the consummation of the transactions contemplated by this Agreement;
and
(f) no event, act or condition shall have occurred after the Closing
Date which, in the reasonable judgment of the Lead Agent, Co-Lead Agent or the
Required Banks, as the case may be, has had or is likely to have a Material
Adverse Effect;
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Each Borrowing hereunder or acceptance of a Letter of Credit issued hereunder
shall be deemed to be a representation and warranty by the Borrower on the date
of such Borrowing as to the facts specified in clauses (b), (c), (d), (e), and
(f) (to the extent that Borrower is or should have been aware of any Material
Adverse Effect) of this Section, except as otherwise disclosed in writing by
Borrower to the Banks. Notwithstanding anything to the contrary, no Borrowing
shall be permitted if such Borrowing would cause Borrower to fail to be in
compliance with any of the covenants contained in this Agreement or in any of
the other Loan Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lead Agent, Co-Lead Agent and each of the other
Banks which is or may become a party to this Agreement to make the Loans, the
Borrower makes the following representations and warranties as of the Closing
Date. Such representations and warranties shall survive the effectiveness of
this Agreement, the execution and delivery of the other Loan Documents and the
making of the Loans.
SECTION 4.1. Existence and Power. The Borrower is a limited
partnership, duly formed and validly existing as a limited partnership under the
laws of the State of Illinois and has all powers and all material governmental
licenses, authorizations, consents and approvals required to own its property
and assets and carry on its business as now conducted or as it presently
proposes to conduct and has been duly qualified and is in good standing in every
jurisdiction in which the failure to be so qualified and/or in good standing is
likely to have a Material Adverse Effect. EQR is a real estate investment
trust, duly formed, validly existing and in good standing as a real estate
investment trust under the laws of the State of Maryland and has all powers and
all material governmental licenses, authorizations, consents and approvals
required to own its property and assets and carry on its business as now
conducted or as it presently proposes to conduct and has been duly qualified and
is in good standing in every jurisdiction in which the failure to be so
qualified and/or in good standing is likely to have a Material Adverse Effect.
SECTION 4.2. Power and Authority. The Borrower has the partnership
power and authority to execute, deliver and carry out the terms and provisions
of each of the Loan Documents to which it is a party and has taken all necessary
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partnership action, if any, to authorize the execution and delivery on behalf of
the Borrower and the performance by the Borrower of such Loan Documents. The
Borrower has duly executed and delivered each Loan Document to which it is a
party in accordance with the terms of this Agreement, and each such Loan
Document constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable insolvency, bankruptcy or other laws affecting creditors
rights generally, or general principles of equity, whether such enforceability
is considered in a proceeding in equity or at law. EQR has the power and
authority to execute, deliver and carry out the terms and provisions of each of
the Loan Documents on behalf of the Borrower to which the Borrower is a party
and has taken all necessary action to authorize the execution and delivery on
behalf of the Borrower and the performance by the Borrower of such Loan
Documents.
SECTION 4.3. No Violation. Neither the execution, delivery or
performance by or on behalf of the Borrower of the Loan Documents to which it is
a party, nor compliance by the Borrower with the terms and provisions thereof
nor the consummation of the transactions contemplated by the Loan Documents, (i)
will materially contravene any applicable provision of any law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will materially conflict with or result in any breach of,
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower or
any of its Consolidated Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, or other agreement or other instrument to which the
Borrower (or of any partnership of which the Borrower is a partner) or any of
its Consolidated Subsidiaries is a party or by which it or any of its property
or assets is bound or to which it is subject, or (iii) will cause a material
default by the Borrower under any organizational document of any Person in which
the Borrower has an interest, or cause a material default under the Borrower's
agreement or certificate of limited partnership, the consequences of which
conflict, breach or default would have a Material Adverse Effect, or result in
or require the creation or imposition of any Lien whatsoever upon any Property
(except as contemplated herein).
SECTION 4.4. Financial Information.
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(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, dated as of December 31, 1996, and the related
consolidated statements of Borrower's financial position for the fiscal year
then ended, reported on by Ernst & Young LLP, a copy of which has been delivered
to each of the Banks, fairly present, in conformity with GAAP, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such fiscal
year.
(b) The consolidated balance sheet of EQR, dated as of December 31,
1996, and the related consolidated statements of EQR's financial position for
the fiscal year then ended, reported on by Ernst & Young LLP and set forth in
the EQR 1996 Form 10-K, a copy of which has been delivered to each of the Banks,
fairly present, in conformity with GAAP, the consolidated financial position of
EQR and its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such fiscal year.
(c) Since June 30, 1997, (i) except as may have been disclosed in
writing to the Banks, nothing has occurred having a Material Adverse Effect, and
(ii) except as previously disclosed to the Banks, neither the Borrower nor EQR
has incurred any material indebtedness or guaranty on or before the Closing
Date.
SECTION 4.5. Litigation. Except as previously disclosed by the
Borrower in writing to the Banks, there is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
(i) the Borrower, EQR or any of their Consolidated Subsidiaries, (ii) the Loan
Documents or any of the transactions contemplated by the Loan Documents or
(iii) any of their assets, before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility of an
adverse decision which could, individually, or in the aggregate have a Material
Adverse Effect or which in any manner draws into question the validity of this
Agreement or the other Loan Documents.
SECTION 4.6. Compliance with ERISA. (a) Except as set forth on
Schedule 4.6 attached hereto, neither Borrower nor EQR is a member of any Plan
or Multiemployer Plan or any other Benefit Arrangement.
(b) The transactions contemplated by the Loan Documents will not
constitute a nonexempt prohibited
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transaction (as such term is defined in Section 4975 of the Code or Section 406
of ERISA) that could subject the Lead Agent, Co-Lead Agent or the Banks to any
tax or penalty or prohibited transactions imposed under Section 4975 of the Code
or Section 502(i) of ERISA.
SECTION 4.7. Environmental Matters. The Borrower and EQR each
conducts reviews of the effect of Environmental Laws on the business, operations
and properties of the Borrower, EQR and Consolidated Subsidiaries of either or
both when necessary in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
owned, any capital or operating expenditures required to achieve or maintain
compliance with environmental protection standards imposed by law or as a
condition of any license, permit or contract, any related constraints on
operating activities, and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of this
review, the Borrower and EQR each has reasonably concluded that such associated
liabilities and costs, including the costs of compliance with Environmental
Laws, are unlikely to have a Material Adverse Effect on the Borrower, EQR and
their Consolidated Subsidiaries.
SECTION 4.8. Taxes. United States Federal income tax returns of the
Borrower, EQR and their Consolidated Subsidiaries have been prepared and filed
through the fiscal year ended December 31, 1995. The Borrower, EQR and their
Consolidated Subsidiaries have filed all United States Federal income tax
returns and all other material tax re turns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower, EQR or any Consolidated Subsidiary, except
such taxes, if any, as are reserved against in accordance with GAAP, such taxes
as are being contested in good faith by appropriate proceedings or such taxes,
the failure to make payment of which when due and payable will not have, in the
aggregate, a Material Adverse Effect. The charges, accruals and reserves on the
books of the Borrower, EQR and their Consolidated Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.
SECTION 4.9. Full Disclosure. All information heretofore furnished
by the Borrower to the Lead Agent, Co-Lead Agent or any Bank for purposes of or
in connection with
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this Agreement or any transaction contemplated hereby or thereby is true and
accurate in all material respects on the date as of which such information is
stated or certified. The Borrower has disclosed to the Lead Agent, in writing
any and all facts which have or may have (to the extent the Borrower can now
reasonably foresee) a Material Adverse Effect.
SECTION 4.10. Solvency. On the Closing Date and after giving effect
to the transactions contemplated by the Loan Documents occurring on the Closing
Date, the Borrower will be Solvent.
SECTION 4.11. Use of Proceeds; Margin Regulations. All proceeds of
the Loans will be used by the Borrower only in accordance with the provisions
hereof. No part of the proceeds of any Loan will be used by the Borrower to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock in any manner that might violate the
provisions of Regulations G, T, U or X of the Federal Reserve Board. Neither the
making of any Loan nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve Board.
SECTION 4.12. Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
the execution, delivery and performance of any Loan Document or the consummation
of any of the transactions contemplated thereby other than those that have
already been duly made or obtained and remain in full force and effect or those
which, if not made or obtained, would not have a Material Adverse Effect;
SECTION 4.13. Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower, EQR nor any Consolidated Subsidiary is (x) an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amend ed, (y) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (z)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
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SECTION 4.14. Principal Offices. As of the Closing Date, the
principal office, chief executive office and principal place of business of the
Borrower is Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606.
SECTION 4.15. REIT Status. For the fiscal year ended December 31,
1996, EQR qualified and EQR intends to continue to qualify as a real estate
investment trust under the Code.
SECTION 4.16. Patents, Trademarks, etc. The Borrower has obtained
and holds in full force and effect all patents, trademarks, servicemarks, trade
names, copyrights and other such rights, free from burdensome restrictions,
which are necessary for the operation of its business as
presently conducted, the impairment of which is likely to have a Material
Adverse Effect.
SECTION 4.17. Ownership of Property. Schedule 4.17 attached hereto
and made a part hereof sets forth all the real property owned or ground leased
by the Borrower, EQR and Persons in which the Borrower and/or EQR, directly or
indirectly, owns an interest as of the Closing Date. As of the Closing Date,
the Borrower, EQR and such Persons have good and insurable fee simple title (or
leasehold title if so designated on Schedule 4.17) to all of such real property,
subject to Permitted Liens. As of the date of this Agreement, there are no
mortgages, deeds of trust, indentures, debt instruments or other agreements
creating a Lien against any of the Real Property Assets except as disclosed on
Schedule 4.17.
SECTION 4.18. No Default. No Event of Default or, to the best of the
Borrower's knowledge, Default exists under or with respect to any Loan Document
and the Borrower is not in default in any material respect beyond any applicable
grace period under or with respect to any other material agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound in any respect, the existence of which default is likely to
result in a Material Adverse Effect.
SECTION 4.19. Licenses, etc. The Borrower has obtained and does hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other consents and approvals which are necessary for the operation of its
businesses as presently conducted, the
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absence of which is likely to have a Material Adverse Effect.
SECTION 4.20. Compliance With Law. To the Borrower's knowledge, the
Borrower and each of the Real Property Assets are in compliance with all laws,
rules, regulations, orders, judgments, writs and decrees, including, without
limitation, all building and zoning ordinances and codes, the failure to comply
with which is likely to have a Material Adverse Effect.
SECTION 4.21. No Burdensome Restrictions. Except as may have been
disclosed by the Borrower in writing to the Banks, Borrower is not a party to
any agreement or instrument or subject to any other obligation or any charter or
corporate or partnership restriction, as the case may be, which, individually or
in the aggregate, is likely to have a Material Adverse Effect.
SECTION 4.22. Brokers' Fees. The Borrower has not dealt with any
broker or finder with respect to the transactions contemplated by this Agreement
or otherwise in connection with this Agreement, and the Borrower has not done
any act, had any negotiations or conversation, or made any agreements or
promises which will in any way create or give rise to any obligation or
liability for the payment by the Borrower of any brokerage fee, charge,
commission or other compensation to any party with respect to the transactions
contemplated by the Loan Documents, other than the fees payable to the Lead
Agent, the Co-Lead Agent and the Banks.
SECTION 4.23. Labor Matters. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrower and
the Borrower has not suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
SECTION 4.24. Insurance. The Borrower and/or EQR currently maintains
insurance at 100% replacement cost insurance coverage (subject to customary
deductibles) in respect of each of the Real Property Assets, as well as
commercial general liability insurance (including "builders' risk" where
applicable) against claims for personal, and bodily injury and/or death, to one
or more persons, or property damage, as well as workers' compensation insurance,
in each case with respect to liability and casualty insurance with insurers
having an A.M. Best policyholders'
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rating of not less than A-VII in amounts that prudent owner of assets such as
the Real Property Assets would maintain.
SECTION 4.25. Organizational Documents. The documents delivered
pursuant to Section 3.1(f) constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifications
thereof) of the Borrower and EQR. The Borrower represents that it has delivered
to the Lead Agent true, correct and complete copies of each of the documents set
forth in this Section 4.25.
SECTION 4.26 Qualifying Unencumbered Properties. As of the date
hereof, each Property listed on Exhibit F as a Qualifying Unencumbered Property
(i) is an operating multifamily residential property wholly-owned (directly or
beneficially) by Borrower and/or EQR or a wholly-owned Subsidiary of either or
both, (ii) is not subject (nor are any equity interests in such Property
subject) to a Lien which secures Indebtedness of any Person, other than
Permitted Liens, and (iii) is not subject (nor are any equity interests in such
Property subject) to any covenant, condition, or other restriction which
prohibits or limits the creation or assumption of any Lien upon such Property.
All of the information set forth on Exhibit F is true and correct in all
material respects.
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank has any
Commitment hereunder or any Obligations remain unpaid:
SECTION 5.1. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within five (5) Domestic
Business Days after the same is required to be filed with the Securities and
Exchange Commission (but in no event later than 125 days after the end of each
fiscal year of the Borrower) a consolidated balance sheet of the Borrower, EQR
and their Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of Borrower's and EQR's operations and
consolidated statements of Borrower's and EQR's cash flow for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on in a
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manner acceptable to the Securities and Exchange Commission on Borrower's and
EQR's Form 10K and reported on by Ernst & Young LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within five (5) Domestic
Business Days after the same is required to be filed with the Securities and
Exchange Commission (but in no event later than 80 days after the end of each of
the first three quarters of each fiscal year of the Borrower and EQR), (i) a
consolidated balance sheet of the Borrower, EQR and their Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of Borrower's and EQR's operations and consolidated statements of
Borrower's and EQR's cash flow for such quarter and for the portion of the
Borrower's or EQR's fiscal year ended at the end of such quarter, all reported
on in the form provided to the Securities and Exchange Commission on Borrower's
and EQR's Form 10Q, and (ii) and such other information reasonably requested by
the Lead Agent and Co-Lead Agent or any Bank;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Section 5.8 on the date of
such financial statements; (ii) certifying (x) that such financial statements
fairly present the financial condition and the results of operations of the
Borrower on the dates and for the periods indicated, on the basis of GAAP, with
respect to the Borrower subject, in the case of interim financial statements, to
normally recurring year-end adjustments, and (y) that such officer has reviewed
the terms of the Loan Documents and has made, or caused to be made under his or
her supervision, a review in reasonable detail of the business and condition of
the Borrower during the period beginning on the date through which the last such
review was made pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant to this Section 5.1(c), the Closing Date) and ending on a
date not more than ten (10) Domestic Business Days prior to the date of such
delivery and that (1) on the basis of such financial statements and such review
of the Loan Documents, no Event of Default existed under Section 6.1(b) with re
spect to Sections 5.8 and 5.9 at or as of the date of said financial statements,
and (2) on the basis of such review of the Loan Documents and the business and
condition of the
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Borrower, to the best knowledge of such officer, as of the last day of the
period covered by such certificate no Default or Event of Default under any
other provision of Section 6.1 occurred and is continuing or, if any such
Default or Event of Default has occurred and is continuing, specifying the
nature and extent thereof and, the action the Borrower proposes to take in
respect thereof and (3) no event has occurred and is continuing which would give
rise to a mandatory prepayment pursuant to Section 2.10 hereof. Such certificate
shall set forth the calculations required to establish the matters described in
clauses (1) and (3) above;
(d) (i) within five (5) Domestic Business Days after any officer of
the Borrower obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer, the chief accounting
officer, controller, or other executive officer of the Borrower setting forth
the details thereof and the action which the Borrower is taking or proposes to
take with respect thereto; and (ii) promptly and in any event within five (5)
Domestic Business Days after the Borrower obtains knowledge thereof, notice of
(x) any litigation or governmental proceeding pending or threatened against the
Borrower or the Real Property Assets as to which there is a reasonable
possibility of an adverse determination and which, if adversely determined, is
likely to individually or in the aggregate, result in a Material Adverse Effect,
(y) any other event, act or condition which is likely to result in a Material
Adverse Effect, and (z) any event giving rise to a mandatory prepayment pursuant
to Section 2.10;
(e) promptly upon the mailing thereof to the shareholders of EQR
generally, copies of all financial statements, reports and proxy statements so
mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) (other than the exhibits thereto, which exhibits will be provided
upon request therefor by any Bank) which EQR shall have filed with the
Securities and Exchange Commission;
(g) Promptly and in any event within thirty (30) days, if and when any
member of the ERISA Group (i) gives or is required to give notice to the PBGC of
any "reportable event" (as defined in Section 4043 of ERISA) with respect to
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any Plan which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA or
notice that any Multiemployer Plan is in reorganization, is insolvent or has
been terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or contribution
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, and in the case of clauses (i) through (vii) above, which event could
result in a Material Adverse Effect, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth details as
to such occurrence and action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take;
(h) promptly and in any event within ten (10) days after the Borrower
obtains actual knowledge of any of the following events, a certificate of the
Borrower, executed by an officer of the Borrower, specifying the nature of such
condition, and the Borrower's or, if the Borrower has actual knowledge thereof,
the Environmental Affiliate's proposed initial response thereto: (i) the receipt
by the Borrower, or, if the Borrower has actual knowledge thereof, any of the
Environmental Affiliates of any communication (written or oral), whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Borrower, or, if the Borrower has actual knowledge thereof, any of the
Environmental Affiliates, is not in compliance with applicable Environmental
Laws, and such noncompliance is likely to have a Material Adverse Effect, (ii)
the Borrower shall obtain actual knowledge that there exists any Environmental
Claim pending
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against the Borrower or any Environmental Affiliate and such Environmental Claim
is likely to have a Material Adverse Effect or (iii) the Borrower obtains actual
knowledge of any release, emission, discharge or disposal of any Material of
Environmental Concern that is likely to form the basis of any Environmental
Claim against the Borrower or any Environmental Affiliate which in any such
event is likely to have a Material Adverse Effect;
(i) promptly and in any event within five (5) Domestic Business Days
after receipt of any material notices or correspondence from any company or
agent for any company providing insurance coverage to the Borrower relating to
any loss which is likely to result in a Material Adverse Effect, copies of such
notices and correspondence; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower, EQR and their Subsidiaries as
the Lead Agent, at the request of any Bank, may reasonably request in writing.
SECTION 5.2. Payment of Obligations. The Borrower, EQR and their
Consolidated Subsidiaries will pay and discharge, at or before maturity, all its
respective material obligations and liabilities including, without limitation,
any obligation pursuant to any agreement by which it or any of its properties is
bound, in each case where the failure to so pay or discharge such obligations or
liabilities is likely to result in a Material Adverse Effect, and will maintain
in accordance with GAAP, appropriate reserves for the accrual of any of the
same.
SECTION 5.3. Maintenance of Property; Insurance; Leases.
(a) The Borrower and/or EQR will keep, and will cause each
Consolidated Subsidiary to keep, all property useful and necessary in its
business, including without limitation the Real Property Assets (for so long as
it constitutes Real Property Assets), in good repair, working order and
condition, ordinary wear and tear excepted, in each case where the failure to so
maintain and repair will have a Material Adverse Effect.
(b) The Borrower and/or EQR shall maintain, or cause to be maintained,
insurance comparable to that described in Section 4.24 hereof with insurers
meeting the qualifications described therein, which insurance shall in any event
not provide for less coverage than insurance customarily carried by owners of
properties similar to, and
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in the same locations as, the Real Property Assets. The Borrower and/or EQR will
deliver to the Lead Agent upon the reasonable request of the Lead Agent from
time to time (i) full information as to the insurance carried, (ii) within five
(5) days of receipt of notice from any insurer a copy of any notice of
cancellation or material change in coverage from that existing on the date of
this Agreement and (iii) forthwith, notice of any cancellation or nonrenewal of
coverage by the Borrower and/or EQR.
SECTION 5.4. Conduct of Business and Maintenance of Existence. The
Borrower and EQR will continue to engage in business of the same general type as
now conducted by the Borrower and EQR, and each will preserve, renew and keep in
full force and effect, its partnership and trust existence and its respective
rights, privileges and franchises necessary for the normal conduct of business
unless the failure to maintain such rights and franchises does not have a
Material Adverse Effect.
SECTION 5.5. Compliance with Laws. The Borrower and EQR will and will
cause their Subsidiaries to comply in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, and all zoning
and building codes with respect to the Real Property Assets and ERISA and the
rules and regulations thereunder and all federal securities laws) except where
the necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to do so will not have a Material Adverse
Effect or expose Lead Agent, Co-Lead Agent or Banks to any material liability
therefor.
SECTION 5.6. Inspection of Property, Books and Records. The Borrower
and EQR each will keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities in conformity with GAAP, modified as required by
this Agreement and applicable law; and will permit representatives of any Bank
at such Bank's expense to visit and inspect any of its properties, including
without limitation the Real Property Assets, to examine and make abstracts from
any of its books and records and to discuss its affairs, finances and accounts
with its officers and independent public accountants, all at such reasonable
times during normal business hours, upon reasonable prior notice and as often as
may reasonably be desired. Lead Agent shall coordinate any such visit or
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inspection to arrange for review by any Bank requesting any such visit or
inspection.
SECTION 5.7. Existence. The Borrower shall do or cause to be done,
all things necessary to preserve and keep in full force and effect its, EQR's
and their Consolidated Subsidiaries' existence and its patents, trademarks,
servicemarks, tradenames, copyrights, franchises, licenses, permits,
certificates, authorizations, qualifications, accreditation, easements, rights
of way and other rights, consents and approvals the nonexistence of which is
likely to have a Material Adverse Effect.
SECTION 5.8. Financial Covenants.
(a) Total Liabilities to Gross Asset Value. Borrower shall not
permit the ratio of Total Liabilities to Gross Asset Value of Borrower and EQR
to exceed 0.50:1 at any time.
(b) Secured Debt to Gross Asset Value. Borrower shall not permit the
ratio of Secured Debt to Gross Asset Value of Borrower and EQR to exceed 0.30:1
at any time.
(c) Unencumbered Pool. Borrower shall not permit the ratio of the
Unencumbered Asset Value to outstanding Unsecured Debt to be less than 2.5:1 at
any time.
(d) EBITDA to Fixed Charges Ratio. Borrower shall not permit the
ratio of EBITDA for the then most recently completed Fiscal Quarter to Fixed
Charges for the then most recently completed Fiscal Quarter to be less than
1.8:1.
(e) Unencumbered Net Operating Income to Unse cured Interest Expense.
Borrower shall not permit the ratio of Unencumbered Net Operating Income for the
then most recently completed Fiscal Quarter to Unsecured Interest Expense for
the then most recently completed Fiscal Quarter to be less than 2.25:1.
(f) Dividends. The Borrower will not, as determined on an aggregate
annual basis, pay any partnership distributions in excess of 90% of the
Borrower's FFO for such year. During the continuance of a monetary Event of
Default, Borrower shall only pay partnership distributions that are necessary to
enable EQR to make those dividends necessary to maintain EQR's status as a real
estate investment trust.
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(g) Minimum Consolidated Tangible Net Worth. The Consolidated
Tangible Net Worth of the Borrower and its Consolidated Subsidiaries will at no
time be less than $2,000,000,000 plus ninety percent (90%) of all Net Offering
Proceeds received by EQR or Borrower after the date hereof.
(h) Unimproved Assets. The Borrower and EQR shall not purchase or
continue to hold any Unimproved Assets to the extent that the undepreciated book
value of all such Unimproved Assets, taken singly or in the aggregate, exceeds
ten percent (10%) of the Gross Asset Value of Borrower and EQR.
(i) Development Activity. The Borrower, EQR and their Subsidiaries
will not engage in any Development Activity other than Development Activity in
which the Borrower, EQR and their Subsidiaries do not have a total aggregate
investment at any time exceeding an amount equal to five percent (5%) of the
Gross Asset Value of Borrower and EQR.
(j) Permitted Holdings. Borrower's and EQR's primary business will
be the ownership, operation and development of multifamily residential property
and any other business activities of Borrower, EQR and Subsidiaries of either or
both will remain incidental thereto. Notwithstanding the foregoing, Borrower,
EQR and Subsidiaries of either or both may acquire or maintain the following
Permitted Holdings if and so long as (i) the aggregate value of Permitted
Holdings, together with the Permitted Holdings described in subsections (h) and
(i) above, whether held directly or indirectly (but without duplication) by
Borrower, EQR and/or their Subsidiaries, does not exceed, at any time, twenty
five percent (25%) of Gross Asset Value of Borrower and EQR as a whole and (ii)
the value of each such Permitted Holding, whether held directly or indirectly by
Borrower, EQR or the Subsidiaries of either or both, does not exceed, at any
time, the following percentages of Gross Asset Value of Borrower and EQR:
<TABLE>
<CAPTION>
Maximum Percentage
Permitted Holdings of Gross Asset Value
- ------------------ --------------------
<S> <C>
Non-Multifamily Residential Property
(other than Cash or Cash Equivalents) 10%
Securities 5%
Multifamily Residential Property
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Mortgages (other than Mortgages in
favor of the Borrower) 10%
Multifamily Residential Property
Partnership Interests 10%
(other than interests in any Person
wholly-owned by EQR and/or Borrower,
EQR's partnership interest in the
Borrower or Borrower's or EQR's partner-
ship interests in Evans Withycombe Residen-
tial, L.P. a Delaware limited partnership
("Evans Withycombe"), or Borrower's or
EQR's indirect interest in any Person
wholly-owned directly or indirectly by
Evans Withycombe and/or EQR)
</TABLE>
For purposes of calculating the foregoing percentages the value of each category
shall be calculated in the manner that Gross Asset Value is determined;
provided, however, that the Gross Asset Value for Securities shall be equal to
the lesser of (a) the acquisition cost thereof or (b) the current market value
thereof (such market value to be determined in a manner reasonably acceptable to
Lead Agent).
(k) Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter.
SECTION 5.9. Restriction on Fundamental Changes. (a) Neither the
Borrower nor EQR shall enter into any merger or consolidation, unless (i) the
Borrower or EQR is the surviving entity, (ii) the entity which is merged into
Borrower or EQR is predominantly in the commercial real estate business, (iii)
the creditworthiness of the surviving entity's long term unsecured debt or
implied senior debt, as applicable, is not lower than Borrower's or EQR's
creditworthiness two months immediately preceding such merger, and (iv) in the
case of any merger where the then fair market value of the assets of the entity
which is merged into the Borrower or EQR is twenty-five percent (25%) or more of
the Borrower's or EQR's then Gross Asset Value following such merger, the Lead
Agent and Co-Lead Agent consent thereto in writing, which consent shall not be
unreasonably withheld, conditioned or delayed. Neither the Borrower nor EQR
shall liquidate, wind-up or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or otherwise dispose
of, in one transaction or series of transactions, all or substantially all of
its business or property, whether now or hereafter acquired. Nothing in this
Section
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shall be deemed to prohibit the sale or leasing of portions of the Real Property
Assets in the ordinary course of business.
(b) The Borrower shall not amend its agreement of limited partnership
or other organizational documents in any manner that would have a Material
Adverse Effect without the Lead Agent's and Co-Lead Agent's consent, which shall
not be unreasonably withheld. EQR shall not amend its declaration of trust, by-
laws, or other organizational documents in any manner that would have a Material
Adverse Effect without the Lead Agent's and Co-Lead Agent's consent, which shall
not be unreasonably withheld.
(c) The Borrower shall deliver to Lead Agent copies of all amendments
to its agreement of limited partnership or to EQR's declaration of trust, by-
laws, or other organizational documents no less than ten (10) days after the
effective date of any such amendment.
SECTION 5.10. Changes in Business. (a) Except for Permitted
Holdings, neither the Borrower nor EQR shall enter into any business which is
substantially different from that conducted by the Borrower or EQR on the
Closing Date after giving effect to the transactions contemplated by the Loan
Documents. The Borrower shall carry on its business operations through the
Borrower and its Subsidiaries.
(b) Except for Permitted Holdings, Borrower shall not engage in any
line of business other than ownership, operation and development of multifamily
residential property and the provision of services incidental thereto, whether
directly or through its Subsidiaries and Investment Affiliates.
SECTION 5.11. Margin Stock. None of the proceeds of the Loan will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any Margin Stock in any manner that might
violate the provisions of Regulations G, T, U or X of the Federal Reserve Board.
SECTION 5.12. Hedging Requirements. Within five (5) Domestic
Business Days after the last day of each calendar quarter, commencing September
30, 1997, the Borrower shall have in effect "Interest Rate Hedges" on Borrower's
Indebtedness so that such Indebtedness, together with all Fixed Rate
Indebtedness of Borrower, shall
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constitute at least fifty percent (50%) of the then aggregate Indebtedness of
the Borrower. "Interest Rate Hedges" shall mean interest rate exchange, collar,
cap, swap, adjustable strike cap, adjustable strike corridor or similar
agreements, each of which (i) shall have a minimum term of two (2) years, or, in
the case of loans pursuant to which interest shall accrue at a rate other than a
fixed rate, a term equal to the term of such floating rate loan (to the extent
the term of such floating rate loan is less than two (2) years), (ii) shall have
the effect of capping the interest rates covered thereby at a rate equal to or
lower than the Cap Rate at the time of purchase or execution, and (iii) shall be
with an Approved Bank as the counterparty. It is acknowledged and agreed that
the Borrower shall have no obligation to replace any Interest Rate Hedge even if
the counterparty thereto shall cease to be an Approved Bank. The Borrower shall
submit evidence of its compliance with Interest Rate Hedges to the Lead Agent
together with the certificate required to be delivered by the Borrower pursuant
to Section 5.1(c).
SECTION 5.13. EQR Status.
(a) Status. EQR shall at all times (i) remain a publicly traded
company listed on the New York Stock Exchange, and (ii) maintain its status as a
self-directed and self-administered real estate investment trust under the Code.
(b) Indebtedness. EQR shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(1) the Obligations; and
(2) Indebtedness which, after giving effect thereto, may be
incurred or may remain outstanding without giving rise to an Event of
Default or Default under any provision of this Article V.
(c) Restriction on Fundamental Changes.
(1) Except for Permitted Holdings, EQR shall not have an
Investment in any Person other than Borrower, common stock of QRS
Corporations, and the interests identified on Schedule 5.13(c)(1) as being
owned by EQR.
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(2) Except for Permitted Holdings, EQR shall not acquire an
interest in any Property other than Securities issued by Borrower, common
stock of QRS Corporations, and the interests identified on Schedule
5.13(c)(2).
(d) Environmental Liabilities. Neither EQR nor any of its
Subsidiaries shall become subject to any Environmental Claim which has a
Material Adverse Effect, including any arising out of or related to (i) the
release or threatened release of any Material of Environmental
Concern into the environment, or any remedial action in response thereto, or
(ii) any violation of any Environmental Laws. Notwithstanding the foregoing
provision, EQR shall have the right to contest in good faith any claim of
violation of an Environmental Law by appropriate legal proceedings and shall be
entitled to postpone compliance with the obligation being contested as long as
(i) no Event of Default shall have occurred and be continuing, (ii) EQR shall
have given Lead Agent prior written notice of the commencement of such contest,
(iii) noncompliance with such Environmental Law shall not subject EQR or such
Subsidiary to any criminal penalty or subject Lead Agent, Co-Lead Agent or any
Bank to pay any civil penalty or to prosecution for a crime, and (iv) no portion
of any Property material to Borrower or its condition or prospects shall be in
substantial danger of being sold, forfeited or lost, by reason of such contest
or the continued existence of the matter being contested.
(e) Disposal of Partnership Interests. EQR will not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise encumber or
dispose of any of its partnership interests in Borrower, except for the
reduction of EQR's interest in the Borrower arising from Borrower's issuance of
partnership interests in the Borrower or the retirement of preference units by
Borrower.
ARTICLE VI
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
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(a) the Borrower shall fail to pay when due any principal of any
Loan, or the Borrower shall fail to pay when due interest on any Loan or any
fees or any other amount payable hereunder and the same shall continue for a
period of five (5) days after the same becomes due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.8, Section 5.9(a) or (b), or Sections 5.10 to 5.13,
inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a),
(b), (e), (f), (g), (h), (j), (n) or (o) of this Section 6.1) for 30 days after
written notice thereof has been given to the Borrower by the Lead Agent, or if
such default is of such a nature that it cannot with reasonable effort be
completely remedied within said period of thirty (30) days such additional
period of time as may be reasonably necessary to cure same, provided Borrower
commences such cure within said thirty (30) day period and diligently prosecutes
same, until completion, but in no event shall such extended period exceed ninety
(90) days;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made) and the defect
causing such representation or warranty to be incorrect when made (or deemed
made) is not removed within thirty (30) days after written notice thereof from
Lead Agent to Borrower;
(e) the Borrower, EQR, any Subsidiary or any Investment Affiliate
shall default in the payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) of any amount owing in respect
of any Recourse Debt (other than the Obligations) for which the aggregate
outstanding principal amount exceeds $10,000,000 and such default shall continue
beyond the giving of any required notice and the expiration of any applicable
grace period and such default has not been waived, in writing, by the holder of
any such Debt; or the Borrower, EQR, any Subsidiary or any Investment Affiliate
shall default in the performance or observance of any obligation or condition
with respect to any such Recourse Debt or any other event shall occur or
condition exist beyond the giving of any required notice and the expiration of
any applicable grace period, if the effect of such de-
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fault, event or condition is to accelerate the maturity of any such indebtedness
or to permit (without any further requirement of notice or lapse of time) the
holder or holders thereof, or any trustee or agent for such holders, to
accelerate the maturity of any such indebtedness;
(f) the Borrower or EQR shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Borrower or EQR seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 90 days; or an order for
relief shall be entered against the Borrower or EQR under the federal bankruptcy
laws as now or hereafter in effect;
(h) one or more final, non-appealable judgments or decrees in an
aggregate amount of Twenty Million Dollars ($20,000,000) or more shall be
entered by a court or courts of competent jurisdiction against the Borrower, EQR
or its Consolidated Subsidiaries (other than any judgment as to which, and only
to the extent, a reputable insurance company has acknowledged coverage of such
claim in writing) and (i) any such judgments or decrees shall not be stayed,
discharged, paid, bonded or vacated within thirty (30) days or (ii) enforcement
proceedings shall be commenced by any creditor on any such judgments or decrees;
(i) there shall be a change in the majority of the Board of Trustees
of EQR during any twelve (12) month period, excluding any change in directors
resulting from (x) the death or disability of any director, or (y) satisfaction
of any requirement for the majority of the
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members of the board of directors or trustees of EQR to qualify under applicable
law as independent trustees or (z) the replacement of any trustee who is an
officer or employee of EQR or an affiliate of EQR with any other officer or
employee of EQR or an affiliate of EQR;
(j) any Person (including affiliates of such Person) or "group" (as
such term is defined in applicable federal securities laws and regulations)
shall acquire more than thirty percent (30%) of the common shares of EQR;
(k) EQR shall cease at any time to qualify as a real estate
investment trust under the Code;
(l) if any Termination Event with respect to a Plan shall occur as a
result of which Termination Event or Events any member of the ERISA Group has
incurred or may incur any liability to the PBGC or any other Person and the sum
(determined as of the date of occurrence of such Termination Event) of the
insufficiency of such Plan and the insufficiency of any and all other Plans with
respect to which such a Termination Event shall occur and be continuing (or, in
the case of a Multiple Employer Plan with respect to which a Termination Event
described in clause (ii) of the definition of Termination Event shall occur and
be continuing, the liability of the Borrower) is equal to or greater than
$10,000,000 and which the Lead Agent reasonably determines will have a Material
Adverse Effect;
(m) if, any member of the ERISA Group shall commit a failure described
in Section 402(f)(1) of ERISA or Section 412(n)(1) of the Code and the amount of
the lien determined under Section 402(f)(3) of ERISA or Section 412(n)(3) of the
Code that could reasonably be expected to be imposed on any member of the ERISA
Group or their assets in respect of such failure shall be equal to or greater
than $10,000,000 and which the Lead Agent reasonably determines will have a
Material Adverse Effect;
(n) at any time, for any reason the Borrower or EQR seeks to
repudiate its obligations under any Loan Document; or
(o) a default beyond any applicable notice or grace period under any
of the other Loan Documents.
SECTION 6.2. Rights and Remedies. (a) Upon the occurrence of any
Event of Default described in Sections 6.1(f) or (g), the Commitment shall
immediately terminate and the unpaid principal amount of, and any and all
accrued
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interest on, the Loans and any and all accrued fees and other Obligations
hereunder shall automatically become immediately due and payable, with all
additional interest from time to time accrued thereon and without presentation,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and notice of acceleration), all of which are hereby
expressly waived by the Borrower; and upon the occurrence and during the
continuance of any other Event of Default, subject to the provisions of Section
6.2(b), the Lead Agent may (and upon the demand of the Required Banks shall), by
written notice to the Borrower, in addition to the exercise of all of the rights
and remedies permitted the Lead Agent and the Banks at law or equity or under
any of the other Loan Documents, declare the Commitments terminated and the
unpaid principal amount of and any and all accrued and unpaid interest on the
Loans and any and all accrued fees and other Obligations hereunder to be, and
the same shall thereupon be, immediately due and payable with all additional
interest from time to time accrued thereon and (except as otherwise as provided
in the Loan Documents) without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by the
Borrower.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Document, the Co-Lead Agent, the Lead Agent, and
the Banks each agree that any exercise or enforcement of the rights and remedies
granted to the Co-Lead Agent, the Lead Agent or the Banks under this Agreement
or at law or in equity with respect to this Agreement or any other Loan
Documents shall be commenced and maintained by the Co-Lead Agent or the Lead
Agent on behalf of the Co-Lead Agent, the Lead Agent and/or the Banks. The Lead
Agent shall act at the direction of the Required Banks in connection with the
exercise of any and all remedies at law, in equity or under any of the Loan
Documents (including, without limitation, those set forth in Section 6.4 hereof)
or, if the Required Banks are unable to reach agreement, then, from and after an
Event of Default, the Lead Agent may pursue such rights and remedies as it may
determine.
SECTION 6.3. Notice of Default. The Lead Agent shall give notice to
the Borrower under Section 6.1(c) promptly upon being requested to do so by the
Required Banks and the Co-Lead Agent and shall thereupon notify all the
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Banks thereof. Neither Lead Agent nor Co-Lead Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default (other
than nonpayment of principal of or interest on the Loans) unless Lead Agent or
Co-Lead Agent has received notice in writing from a Bank or Borrower or any
court or governmental agency referring to this Agreement or the other Loan
Documents, describing such event or condition. Should Lead Agent or Co-Lead
Agent receive notice of the occurrence of an Default or Event of De fault
expressly stating that such notice is a notice of an Default or Event of
Default, or should Lead Agent or Co-Lead Agent send Borrower a notice of Default
or Event of Default, Lead Agent or Co-Lead Agent, as applicable, shall promptly
give notice thereof to each Bank.
SECTION 6.4. Actions in Respect of Letters of Credit. (a) If, at any
time and from time to time, any Letter of Credit shall have been issued
hereunder and an Event of Default shall have occurred and be continuing, then,
upon the occurrence and during the continuation thereof, the Lead Agent may,
and upon the demand of the Required Banks and the Co-Lead Agent shall, whether
in addition to the taking by the Lead Agent of any of the actions described in
this Article or otherwise, make a demand upon the Borrower to, and forthwith
upon such demand (but in any event within ten (10) days after such demand) the
Borrower shall, pay to the Lead Agent, on behalf of the Banks, in same day funds
at the Lead Agent's office designated in such demand, for deposit in a special
cash collateral account (the "Letter of Credit Collateral Account") to be
maintained in the name of the Lead Agent (on behalf of the Banks) and under its
sole dominion and control at such place as shall be designated by the Lead
Agent, an amount equal to the amount of the Letter of Credit Usage under the
Letters of Credit. Interest shall accrue on the Letter of Credit Collateral
Account at a rate equal to the rate on overnight funds.
(b) The Borrower hereby pledges, assigns and grants to the Lead Agent, as
administrative agent for its benefit and the ratable benefit of the Banks a lien
on and a security interest in, the following collateral (the "Letter of Credit
Collateral"):
(i) the Letter of Credit Collateral Account, all cash deposited
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Letter of Credit Collateral Account;
(ii) all notes, certificates of deposit and other instruments from
time to time hereafter delivered to
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or otherwise possessed by the Lead Agent for or on behalf of the Borrower in
substitution for or in respect of any or all of the then existing Letter of
Credit Collateral;
(iii) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of the then existing Letter of Credit Collateral;
and
(iv) to the extent not covered by the above clauses, all proceeds of
any or all of the foregoing Letter of Credit Collateral.
The lien and security interest granted hereby secures the payment of all
obligations of the Borrower now or hereafter existing hereunder and under any
other Loan Document.
(c) The Borrower hereby authorizes the Lead Agent for the ratable benefit
of the Banks to apply, from time to time after funds are deposited in the Letter
of Credit Collateral Account, funds then held in the Letter of Credit Collateral
Account to the payment of any amounts, in such order as the Lead Agent may
elect, as shall have become due and payable by the Borrower to the Banks in
respect of the Letters of Credit.
(d) Neither the Borrower nor any Person claiming or acting on behalf of or
through the Borrower shall have any right to withdraw any of the funds held in
the Letter of Credit Collateral Account, except as provided in Section 6.4(h)
hereof.
(e) The Borrower agrees that it will not (i) sell or otherwise dispose of
any interest in the Letter of Credit Collateral or (ii) create or permit to
exist any lien, security interest or other charge or encumbrance upon or with
respect to any of the Letter of Credit Collateral, except for the security
interest created by this Section 6.4.
(f) If any Event of Default shall have occurred and be continuing:
(i) The Lead Agent may, in its sole discretion, without notice to the
Borrower except as required by law and at any time from time to time, charge,
set off or otherwise apply all or any part of first, (x) amounts previously
drawn on any Letter of Credit that have not been reimbursed by the Borrower and
(y) any Letter of Credit Usage described in clause (ii) of the definition
thereof that are then due and
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payable and second, any other unpaid Obligations then due and payable against
the Letter of Credit Collateral Account or any part thereof, in such order as
the Lead Agent shall elect. The rights of the Lead Agent under this Section 6.4
are in addition to any rights and remedies which any Bank may have.
(ii) The Lead Agent may also exercise, in its sole discretion, in
respect of the Letter of Credit Collateral Account, in addition to the other
rights and remedies provided herein or otherwise available to it, all the
rights and remedies of a secured party upon default under the Uniform Commercial
Code in effect in the State of New York at that time.
(g) The Lead Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Letter of Credit Collateral if the Letter of
Credit Collateral is accorded treatment substantially equal to that which the
Lead Agent accords its own property, it being understood that, assuming such
treatment, the Lead Agent shall not have any responsibility or liability with
respect thereto.
(h) At such time as all Events of Default have been cured or waived in
writing, all amounts remaining in the Letter of Credit Collateral Account shall
be promptly returned to the Borrower. Absent such cure or written waiver, any
surplus of the funds held in the Letter of Credit Collateral Account and
remaining after payment in full of all of the Obligations of the Borrower
hereunder and under any other Loan Document after the Maturity Date shall be
paid to the Borrower or to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 6.5. Distribution of Proceeds after Default. Notwithstanding
anything contained herein to the contrary, from and after an Event of Default,
to the extent proceeds are received by Lead Agent, such proceeds will be
distributed to the Banks pro rata in accordance with the unpaid principal amount
of the Loans.
ARTICLE VII
THE AGENTS
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Lead Agent and Co-Lead Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other
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Loan Documents as are delegated to the Lead Agent and Co-Lead Agent by the
terms hereof or thereof, together with all such powers as are reasonably
incidental thereto. Except as set forth in Sections 7.8 and 7.9 hereof, the
provisions of this Article VII are solely for the benefit of Lead Agent, Co-Lead
Agent and the Banks, and Borrower shall not have any rights to rely on or
enforce any of the provisions hereof. In performing its functions and duties
under this Agreement, Lead Agent and Co-Lead Agent shall each act solely as an
agent of the Banks and do not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency or trust with or
for the Borrower.
SECTION 7.2. Agency and Affiliates. Morgan and Bank of America
National Trust and Savings Association shall have the same rights and powers
under this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not the Lead Agent or Co-Lead Agent
respectively, and Morgan and Bank of America National Trust and Savings
Association and their affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower, EQR or any
Subsidiary or affiliate of the Borrower as if they were not the Lead Agent and
Co-Lead Agent, respectively, hereunder, and the term "Bank" and "Banks" shall
include Morgan and Bank of America National Trust and Savings Association in
their individual capacities.
SECTION 7.3. Action by Lead Agent and Co-Lead Agent. The obligations
of the Lead Agent and Co-Lead Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing, the Lead Agent and
Co-Lead Agent shall not be required to take any action with respect to any
Default or Event of Default, except as expressly provided in Article VI. The
duties of Lead Agent and Co-Lead Agent shall be administrative in nature.
Subject to the provisions of Sections 7.1, 7.5 and 7.6, Lead Agent and Co-Lead
Agent shall administer the Loans in the same manner as each administers its own
loans.
SECTION 7.4. Consultation with Experts. As between Lead Agent and the
Banks, the Lead Agent and Co-Lead Agent may consult with legal counsel (who may
be counsel for the Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
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SECTION 7.5. Liability of Lead Agent and Co-Lead Agent. As between
Lead Agent and the Banks, none of the Lead Agent, the Co-Lead Agent nor any of
their affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii) in
the absence of its own gross negligence or wilful misconduct. As between Lead
Agent and the Banks, none of the Lead Agent, the Co-Lead Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower, except with respect to payment of principal and
interest; (iii) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered to the Lead Agent or the Co-
Lead Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the other Loan Documents or any other instrument or writing furnished
in connection herewith. As between Lead Agent and the Banks, neither the Lead
Agent nor the Co-Lead Agent shall incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Lead Agent and the Co-Lead Agent and their
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitee's gross negligence or wilful
misconduct) that such indemnitee may suffer or incur in connection with its
duties as Lead Agent and/or Co-Lead Agent under this Agreement, the other Loan
Documents or any action taken or omitted by such indemnitee hereunder as Lead
Agent or as Co-Lead Agent. In the event that the Co-Lead Agent or the Lead
Agent shall, subsequent to its receipt of indemnification payment(s) from Banks
in accordance with this section, recoup any amount from the Borrower, or any
other party liable therefor in connection with such indemnification, such Co-
Lead Agent or the Lead Agent shall reimburse the Banks which previously made the
payment(s) pro rata, based upon the actual amounts which were theretofore paid
by each Bank. The Co-Lead Agent or the Lead Agent, as the case may be, shall
reimburse such Banks so entitled to
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reimbursement within two (2) Domestic Business Days of its receipt of such funds
from the Borrower or such other party liable therefor.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Lead Agent, the Co-Lead Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Lead Agent, Co-Lead Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.8. Successor Lead Agent or Co-Lead Agent. The Lead Agent
or the Co-Lead Agent may resign at any time by giving notice thereof to the
Banks, the Borrower and each other and the Lead Agent or the Co-Lead Agent, as
applicable, shall resign in the event its Commitment is reduced to zero. Upon
any such resignation, the Required Banks shall have the right to appoint a
successor Lead Agent or Co-Lead Agent, as applicable, which successor Lead Agent
or successor Co-Lead Agent (as applicable) shall, provided no Event of Default
has occurred and is then continuing, be subject to Borrower's approval, which
approval shall not be unreasonably withheld or delayed (except that Borrower
shall, in all events, be deemed to have approved Bank of America National Trust
and Savings Association as a successor Lead Agent and Morgan as a successor Co-
Lead Agent). If no successor Lead Agent or Co-Lead Agent (as applicable) shall
have been so appointed by the Required Banks and approved by the Borrower, and
shall have accepted such appointment, within 30 days after the retiring Lead
Agent or Co-Lead Agent (as applicable) gives notice of resignation, then the
retiring Lead Agent or retiring Co-Lead Agent (as applicable) may, on behalf of
the Banks, ap point a successor Lead Agent or Co-Lead Agent (as applicable),
which shall be the Co-Lead Agent or the Lead Agent, as the case may be, who
shall act until the Required Banks shall appoint a Lead Agent or Co-Lead Agent.
Upon the acceptance of its appointment as the Lead Agent or Co-Lead Agent
hereunder by a successor Lead Agent or successor Co-Lead Agent, as applicable,
such successor Lead Agent or successor Co-Lead Agent, as applicable, shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Lead Agent or retiring Co-Lead Agent, as applicable, and the retiring
Lead Agent or the retiring Co-Lead Agent, as applicable, shall be discharged
from its
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duties and obligations hereunder. After any retiring Lead Agent's or
retiring Co-Lead Agent's resignation hereunder, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Lead Agent or the Co-Lead Agent, as applicable. For gross
negligence or willful misconduct, as determined by all the Banks (excluding for
such determination Lead Agent or Co-Lead Agent in its capacity as a Bank, as
applicable), Lead Agent or Co-Lead Agent may be removed at any time by giving at
least thirty (30) Domestic Business Days prior written notice to Lead Agent, Co-
Lead Agent and Borrower. Such resignation or removal shall take effect upon the
acceptance of appointment by a successor Lead Agent or Co-Lead Agent, as
applicable, in accordance with the provisions of this Section 7.8.
SECTION 7.9. Consents and Approvals. All communications from Lead
Agent to the Banks requesting the Banks' determination, consent, approval or
disapproval (i) shall be given in the form of a written notice to each Bank,
(ii) shall be accompanied by a description of the matter or item as to which
such determination, approval, consent or disapproval is requested, or shall
advise each Bank where such matter or item may be inspected, or shall otherwise
describe the matter or issue to be resolved, (iii) shall include, if reasonably
requested by a Bank and to the extent not previously provided to such Bank,
written materials and a summary of all oral information provided to Lead Agent
by Borrower in respect of the matter or issue to be resolved, and (iv) shall
include Lead Agent's recommended course of action or determination in respect
thereof. Each Bank shall reply promptly, but in any event within ten (10)
Domestic Business Days after receipt of the request therefor from Lead Agent
(the "Bank Reply Period"). Unless a Bank shall give written notice to Lead
Agent that it objects to the recommendation or determination of Lead Agent
(together with a written explanation of the reasons behind such objection)
within the Bank Reply Period, such Bank shall be deemed to have approved of or
consented to such recommendation or determination. With respect to decisions
requiring the approval of the Required Banks or all the Banks, Lead Agent shall
submit its recommendation or determination for approval of or consent to such
recommendation or determination to all Banks and upon receiving the required
approval or consent shall follow the course of action or determination of the
Required Banks (and each non-responding Bank shall be deemed to have concurred
with such recommended course of action) or all the Banks, as the case may be.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Euro-
Dollar Borrowing or Money Market LIBOR Loan:
(a) the Lead Agent is advised by the Reference Bank that the Euro-Dollar
Reference Bank has determined in good faith that deposits in dollars (in the
applicable amounts) are not being offered to the Euro-Dollar Reference Bank in
the relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the Commitments
advise the Lead Agent that the Adjusted London Interbank Offered Rate, as
determined by the Lead Agent will not adequately and fairly reflect the cost to
such Bank of funding its Euro-Dollar Loans for such Interest Period, the Lead
Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Lead Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the Banks to
make Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the
Lead Agent at least two Domestic Business Days before the date of (i) any Euro-
Dollar Borrowing for which a Notice of Borrowing has previously been given that
it elects not to borrow on such date, such Borrowing shall instead be made as a
Base Rate Borrowing, or (ii) any Money Market LIBOR Borrowing for which a
Notice of Money Market Borrowing has previously been given, the Money Market
LIBOR Loans comprising such Borrowing shall bear interest for each day from and
including the first day to but excluding the last day of the Interest Period
applicable thereto at the Base Rate for such day. For purposes of this Section
8.1(b), in determining whether the Adjusted London Interbank Offered Rate, as
determined by Lead Agent, will not adequately and fairly reflect the cost to any
Bank of funding its Euro-Dollar Loans for such Interest Period, such
determination will be based solely on the ability of such Bank to obtain
matching funds in the London interbank market at a reasonably equivalent rate.
SECTION 8.2. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority,
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central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
made after the Closing Date of any such authority, central bank or comparable
agency shall make it unlawful for any Bank (or its Euro-Dollar Lending Office)
(x) to make, maintain or fund its Euro-Dollar Loans, or (y) to participate in
any Letter of Credit issued by the Fronting Bank, or, with respect to the
Fronting Bank, to issue any Letter of Credit, the Lead Agent shall forthwith
give notice thereof to the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Lead Agent that the circumstances giving rise
to such suspension no longer exist, the obligation of such Bank in case of the
event described in clause (x) above to make Euro-Dollar Loans, or in the case of
the event described in clause (y) above, to participate in any Letter of Credit
issued by the Fronting Bank or, with respect to the Fronting Bank, to issue any
Letter of Credit, shall be suspended. With respect to Euro-Dollar Loans, before
giving any notice to the Lead Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall determine that it may
not lawfully continue to maintain and fund any of its outstanding Euro-Dollar
Loans to maturity and shall so specify in such notice, the Borrower shall be
deemed to have delivered a Notice of Interest Rate Election and such Euro-Dollar
Loan shall be converted as of such date to a Base Rate Loan (without payment of
any amounts that Borrower would otherwise be obligated to pay pursuant to
Section 2.13 hereof with respect to Loans converted pursuant to this Section
8.2) in an equal principal amount from such Bank (on which interest and
principal shall be payable contemporaneously with the related Euro-Dollar Loans
of the other Banks), and such Bank shall make such a Base Rate Loan.
If at any time, it shall be unlawful for any Bank to make, maintain or
fund its Euro-Dollar Loans, the Borrower shall have the right, upon five (5)
Domestic Business Day's notice to the Lead Agent, to either (x) cause a bank,
reasonably acceptable to the Lead Agent, to offer to purchase the Commitments of
such Bank for an amount equal to such Bank's outstanding Loans, and to become a
Bank hereunder, or obtain the agreement of one or more existing Banks to offer
to purchase the Commitments of such Bank for such amount, which offer such Bank
is hereby required to accept, or (y) to repay in full all Loans then outstanding
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of such Bank, together with interest and all other amounts due thereon, upon
which event, such Bank's Commitments shall be deemed to be cancelled pursuant to
Section 2.11(c).
SECTION 8.3. Increased Cost and Reduced Return.
---------------------------------
(a) If, on or after (x) the date hereof in the case of Committed
Loans made pursuant to Section 2.1, or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
made at the Closing Date of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System (but excluding with respect to any Euro-Dollar Loan any
such requirement reflected in an applicable Euro-Dollar Reserve Percentage)),
special deposit, insurance assessment or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank (or its
Applicable Lending Office) or shall impose on any Bank (or its Applicable
Lending Office) or on the London interbank market any other condition materially
more burdensome in nature, extent or consequence than those in existence as of
the Closing Date affecting such Bank's Euro-Dollar Loans, its Note, or its
obligation to make Euro-Dollar Loans, and the result of any of the foregoing is
to increase the cost to such Bank (or its Applicable Lending Office) of making
or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received
or receivable by such Bank (or its Applicable Lending Office) under this
Agreement or under its Note with respect to such Euro-Dollar Loans, by an amount
deemed by such Bank to be material, then, within 15 days after demand by such
Bank (with a copy to the Lead Agent and Co-Lead Agent), the Borrower shall pay
to such Bank such additional amount or amounts (based upon a reasonable
allocation thereof by such Bank to the Euro-Dollar Loans made by such Bank
hereunder) as will compensate such Bank for such increased cost or reduction to
the extent such Bank generally imposes such additional amounts on other
borrowers of such Bank in similar circumstances.
(b) If any Bank shall have reasonably determined that, after the date
hereof, the adoption of any applicable
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law, rule or regulation regarding capital adequacy, or any change in any such
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) made after
the Closing Date of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on capital of such Bank
(or its Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount reasonably deemed by such Bank to
be material, then from time to time, within 15 days after demand by such Bank
(with a copy to the Lead Agent and Co-Lead Agents), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or its
Parent) for such reduction to the extent such Bank generally imposes such
additional amounts on other borrowers of such Bank in similar circumstances.
(c) Each Bank will promptly notify the Borrower, the Lead Agent and
the Co-Lead Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall fail to notify Borrower of any
such event within 90 days following the end of the month during which such event
occurred, then Borrower's liability for any amounts described in this Section
incurred by such Bank as a result of such event shall be limited to those
attributable to the period occurring subsequent to the ninetieth (90th) day
prior to the date upon which such Bank actually notified Borrower of the
occurrence of such event. A certificate of any Bank claiming compensation under
this Section and setting forth a reasonably detailed calculation of the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of demonstrable error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
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(d) If at any time, any Bank shall be owed amounts pursuant to this
Section 8.3, the Borrower shall have the right, upon five (5) Domestic Business
Day's notice to the Lead Agent to either (x) cause a bank, reasonably acceptable
to the Lead Agent, to offer to purchase the Commitments of such Bank for an
amount equal to such Bank's outstanding Loans, and to become a Bank hereunder,
or to obtain the agreement of one or more existing Banks to offer to purchase
the Commitments of such Bank for such amount, which offer such Bank is hereby
required to accept, or (y) to repay in full all Loans then outstanding of such
Bank, together with interest and all other amounts due thereon, upon which
event, such Bank's Commitment shall be deemed to be cancelled pursuant to
Section 2.11(c).
SECTION 8.4. Taxes.
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(a) Any and all payments by the Borrower to or for the account of any
Bank, the Co-Lead Agent or the Lead Agent hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank, the Co-Lead Agent and the Lead Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Bank, the Co-Lead Agent or the Lead Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on its income, and franchise or similar taxes imposed on it, by
the jurisdiction of such Bank's Applicable Lending Office or any political
subdivision thereof or by any other jurisdiction (or any political subdivision
thereof) as a result of a present or former connection between such Bank, Co-
Lead Agent or Lead Agent and such other jurisdiction or by the United States
(all such non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Non-Excluded
Taxes"). If the Borrower shall be required by law to deduct any Non-Excluded
Taxes from or in respect of any sum payable hereunder or under any Note or
Letter of Credit, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.4) such Bank, the Fronting Bank,
the Co-Lead Agent or the Lead Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other
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authority in accordance with applicable law and (iv) the Borrower shall furnish
to the Lead Agent, at its address referred to in Section 9.1, the original or a
certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note or
the Letter of Credit or from the execution or delivery of, or otherwise with
respect to, this Agreement or any Note or Letter of Credit (hereinafter referred
to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank, the Fronting Bank,
the Co-Lead Agent and the Lead Agent for the full amount of Non-Excluded Taxes
or Other Taxes (including, without limitation, any Non-Excluded Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this
Section 8.4) paid by such Bank, the Fronting Bank, the Co-Lead Agent or the Lead
Agent (as the case may be) and, so long as such Bank, Co-Lead Agent or Lead
Agent has promptly paid any such Non-Excluded Taxes or Other Taxes, any
liability for penalties and interest arising therefrom or with respect thereto.
This indemnification shall be made within 15 days from the date such Bank, the
Fronting Bank, the Co-Lead Agent or the Lead Agent (as the case may be) makes
demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
shall provide the Borrower with (A) two duly completed copies of Internal
Revenue Service form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (B) an Internal Revenue Service
Form W-8 or W-9, or any successor form prescribed by the Internal Revenue
Service, and shall provide Borrower with two further copies of any such form or
certification on or before the date that any such form or certification expires
or becomes obsolete and after the occurrence of any event requiring a change in
the most recent form previously delivered by it to Borrower, certifying (i) in
the case of a Form 1001 or 4224, that such Bank is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or
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business in the United States, and (ii) in the case of a Form W-8 or W-9, that
it is entitled to an exemption from United States backup withholding tax. If the
form provided by a Bank at the time such Bank first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from "Non-
Excluded Taxes" as defined in Section 8.4(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.4(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.4(c) with respect to
Non-Excluded Taxes imposed by the United States; provided, however, that should
a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Non-Excluded Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes so long
as Borrower shall incur no cost or liability as a result thereof.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.4, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if such change, in the
judgment of such Bank, is not otherwise disadvantageous to such Bank.
(g) If at any time, any Bank shall be owed amounts pursuant to this
Section 8.4, the Borrower shall have the right, upon five (5) Domestic Business
Day's notice to the Lead Agent to either (x) cause a bank, reasonably acceptable
to the Lead Agent, to offer to purchase the Commitments of such Bank for an
amount equal to such Bank's outstanding Loans, and to become a Bank hereunder,
or to obtain the agreement of one or more existing Banks to offer to purchase
the Commitments of such Bank for such amount, which offer such Bank is hereby
required to accept, or (y) to repay in full all Loans then outstanding of such
Bank, together with interest and all other amounts due thereon, upon which
event, such Bank's Commitment shall be deemed to be cancelled pursuant to
Section 2.11(c).
SECTION 8.5. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank
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to make Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any
Bank has demanded compensation under Section 8.3 or 8.4 with respect to its
Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Lead Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) Borrower shall be deemed to have delivered a Notice of Interest
Rate Election with respect to such affected Euro-Dollar Loans and thereafter all
Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be
made instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the other
Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar Loans
shall be applied to repay its Base Rate Loans instead, and
(c) Borrower will not be required to make any payment which would
otherwise be required by Section 2.13 with respect to such Euro-Dollar Loans
converted to Base Rate Loans pursuant to clause (a) above.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission followed by telephonic confirmation or similar writing)
and shall be given to such party: (x) in the case of the Borrower, the Co-Lead
Agent or the Lead Agent, at its address, telex number or facsimile number set
forth on the signature pages hereof with a duplicate copy thereof, in the case
of the Borrower, to the Borrower, at Equity Residential Properties Trust, Two
North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attn: General
Counsel, and to Rosenberg & Liebentritt, P.C., Two North Riverside Plaza, Suite
1515, Chicago, Illinois 60606, Attn: James M. Phipps, Esq., (y) in the case of
any Bank, at its address, telex number or facsimile number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
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address, telex number or facsimile number as such party may hereafter specify
for the purpose by notice to the Lead Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex or
facsimile transmission, when such telex or facsimile is transmitted to the telex
number or facsimile number specified in this Section and the appropriate
answerback or facsimile confirmation is received, (ii) if given by certified
registered mail, return receipt requested, with first class postage prepaid,
addressed as aforesaid, upon receipt or refusal to accept delivery, (iii) if
given by a nationally recognized overnight carrier, 24 hours after such
communication is deposited with such carrier with postage prepaid for next day
delivery, or (iv) if given by any other means, when delivered at the address
specified in this Section; provided that notices to the Lead Agent and the Co-
Lead Agent under Article II or Article VIII shall not be effective until
received.
SECTION 9.2. No Waivers. No failure or delay by the Lead Agent, the
Co-Lead Agent or any Bank in exercising any right, power or privilege hereunder
or under any Note shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 9.3. Expenses; Indemnification.
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(a) The Borrower shall pay within thirty (30) days after written
notice from the Lead Agent or Co-Lead Agent, as applicable, (i) all reasonable
out-of-pocket costs and expenses of the Lead Agent and the Co-Lead Agent
(including reasonable fees and disbursements of special counsel Skadden, Arps,
Slate, Meagher & Flom LLP), in connection with the preparation of this
Agreement, the Loan Documents and the documents and instruments referred to
therein, and any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder, (ii) all reasonable fees and disbursements
of special counsel Skadden, Arps, Slate, Meagher & Flom LLP in connection with
the syndication of the Loans and (iii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Lead Agent, Co-Lead Agent and
each Bank, including fees and disbursements of counsel for the Lead Agent, the
Co-Lead Agent and each of the Banks, in connection with the enforcement of the
Loan Documents and the
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instruments referred to therein and such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom;
provided, however, that the attorneys' fees and disbursements for which Borrower
is obligated under this subsection (a)(iii) shall be limited to the reasonable
non-duplicative fees and disbursements of (A) counsel for Lead Agent, (B)
counsel for Co-Lead Agent and (C) counsel for all of the Banks as a group; and
provided, further, that all other costs and expenses for which Borrower is
obligated under this subsection (a)(iii) shall be limited to the reasonable non-
duplicative costs and expenses of Lead Agent and Co-Lead Agent. For purposes of
this Section 9.3(a)(iii), (1) counsel for Lead Agent shall mean a single outside
law firm representing Lead Agent, (2) counsel for Co-Lead Agent shall mean a
single outside law firm representing Co-Lead Agent (which may or may not be the
same law firm representing Lead Agent) and (3) counsel for all of the Banks as a
group shall mean a single outside law firm representing such Banks as a group
(which law firm may or may not be the same law firm representing either or both
of Lead Agent or Co-Lead Agent).
(b) The Borrower agrees to indemnify the Co-Lead Agent, the Lead
Agent and each Bank, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an "Indemnitee") and hold
each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by such
Indemnitee in connection with any investigative, administrative or judicial
proceeding that may at any time (including, without limitation, at any time
following the payment of the Obligations) be asserted against any Indemnitee,
as a result of, or arising out of, or in any way related to or by reason of, (i)
any of the transactions contemplated by the Loan Documents or the execution,
delivery or performance of any Loan Document, (ii) any violation by the
Borrower, EQR or the Environmental Affiliates of any applicable Environmental
Law, (iii) any Environmental Claim arising out of the management, use, control,
ownership or operation of property or assets by the Borrower, EQR or any of the
Environmental Affiliates, including, without limitation, all on-site and off-
site activities of Borrower or any Environmental Affiliate involving Materials
of Environmental Concern, (iv) the breach of any environmental representation or
warranty set forth herein, but excluding those liabilities, losses, damages,
costs and expenses (a) for which such Indemnitee has been compensated pursuant
to the terms of this Agreement, (b) incurred solely by reason of
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the gross negligence, wilful misconduct bad faith or fraud of any Indemnitee as
finally determined by a court of competent jurisdiction, (c) violations of
Environmental Laws relating to a Property which are caused by the act or
omission of such Indemnitee after such Indemnitee takes possession of such
Property or (d) any liability of such Indemnitee to any third party based upon
contractual obligations of such Indemnitee owing to such third party which are
not expressly set forth in the Loan Documents. In addition, the indemnification
set forth in this Section 9.3(b) in favor of any director, officer, agent or
employee of Lead Agent, Co-Lead Agent or any Bank shall be solely in their
respective capacities as such director, officer, agent or employee. The
Borrower's obligations under this Section shall survive the termination of this
Agreement and the payment of the Obligations.
SECTION 9.4. Sharing of Set-Offs. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby expressly waived,
but subject to the prior consent of the Lead Agent and the Co-Lead Agent, to set
off and to appropriate and apply any and all deposits (general or special, time
or demand, provisional or final) and any other indebtedness at any time held or
owing by such Bank (including, without limitation, by branches and agencies of
such Bank wherever located) to or for the credit or the account of the Borrower
against and on account of the Obligations of the Borrower then due and payable
to such Bank under this Agreement or under any of the other Loan Documents,
including, without limitation, all interests in Obligations purchased by such
Bank. Each Bank agrees that if it shall by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest due with respect to any Note held by it or
Letter of Credit participated in by it, or, in the case of the Fronting Bank,
Letter of Credit issued by it, which is greater than the proportion received by
any other Bank or Letter of Credit issued or participated in by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks or Letter of Credit issued
or participated in by such other Banks shall be
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shared by the Banks pro rata; provided that nothing in this Section shall impair
the right of any Bank to exercise any right of set-off or counterclaim it may
have to any deposits not received in connection with the Loans and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness under the Notes or the Letters of Credit. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note or a Letter of Credit, whether
or not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation. Notwithstanding anything to the
contrary contained herein, any Bank may, by separate agreement with the
Borrower, waive its right to set off contained herein or granted by law and any
such written waiver shall be effective against such Bank under this Section 9.4.
SECTION 9.5. Amendments and Waivers. Any provision of this Agreement
or the Notes, the Letters of Credit or other Loan Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Borrower, the Lead Agent, the Co-Lead Agent and the Required Banks (and, if
the rights or duties of the Lead Agent or the Co-Lead Agent in their capacity as
Lead Agent or Co-Lead Agent, as applicable, are affected thereby, by the Lead
Agent or the Co-Lead Agent, as applicable); provided that no such amendment or
waiver with respect to this Agreement, the Notes, the Letters of Credit or any
other Loan Documents shall, unless signed by all the Banks, (i) increase or
decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on any
Loan or any fees hereunder or for any reduction or termination of any
Commitment, (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (v) release the EQR Guaranty or (vi)
modify the provisions of this Section 9.5.
SECTION 9.6. Successors and Assigns.
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(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement or the other Loan Documents without the prior
written consent of all Banks and the Lead Agent and a Bank may not assign or
otherwise transfer any of its interest under this Agreement except as permitted
in subsection (b) and (c) of this Section 9.6.
(b) Any Bank may at any time grant (i) prior to the occurrence of an
Event of Default, to an existing Bank, one or more banks, finance companies,
insurance companies or other financial institutions in minimum amounts of not
less than $10,000,000 (or any lesser amount in the case of participations to an
existing Bank or in the case of participations with respect to Money Market
Loans only) and (ii) after the occurrence and during the continuance of an Event
of Default, to any Person in any amount (in each case, a "Participant"),
participating interests in its Commitment or any or all of its Loans, with (and
subject to) the consent of the Lead Agent (other than with respect to Money
Market Loans) and, provided that no Event of Default shall have occurred and be
continuing, the Borrower (other than with respect to Money Market Loans), which
consent shall not be unreasonably withheld or delayed. Any participation made
during the continuation of an Event of Default shall not be affected by the
subsequent cure of such Event of Default. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon notice to
the Borrower and the Lead Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower, the Co-Lead Agent
and the Lead Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), (iii), (iv) or (v) of Section 9.5 without the
consent of the Participant. The Borrower agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled to the benefits
of Article VIII with respect to its participating interest. An assignment or
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other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of, and subject
to the restrictions with respect to, a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to (i) prior to the occurrence of
an Event of Default, an existing Bank or one or more banks, finance companies,
insurance or other financial institutions which (A) has (or, in the case of a
bank which is a subsidiary, such bank's parent has) a rating of its senior debt
obligations of not less than Baa-1 by Moody's Investors Service or a comparable
rating by a rating agency acceptable to Lead Agent and (B) has total assets in
excess of Ten Billion Dollars ($10,000,000,000), in minimum amounts of not less
than Ten Million Dollars ($10,000,000) and integral multiple of One Million
Dollars ($1,000,000) thereafter (or any lesser amount in the case of assignments
to an existing Bank) and (ii) after the occurrence and during the continuance of
an Event of Default, to any Person in any amount (in each case, an "Assignee"),
all or a proportionate part of all, of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, and, in either case, such
Assignee shall assume such rights and obligations, pursuant to a Transfer
Supplement in substantially the form of Exhibit "E" hereto executed by such
Assignee and such transferor Bank, with (and subject to) the consent of the Lead
Agent and, provided that no Event of Default shall have occurred and be
continuing, the Borrower, which consent shall not be unreasonably withheld or
delayed; provided that if an Assignee is an affiliate of such transferor Bank or
was a Bank immediately prior to such assignment, no such consent shall be
required; and provided further that such assignment may, but need not, include
rights of the transferor Bank in respect of outstanding Money Market Loans. Upon
execution and delivery of such instrument and payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and no further consent
or action by any party shall be required and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Lead Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to the Assignee. In connection with any
such assignment, the transferor Bank shall pay to the Lead Agent
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an administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States of America
or a state thereof, it shall deliver to the Borrower and the Lead Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.4. Any assignment made during
the continuation of an Event of Default shall not be affected by any subsequent
cure of such Event of Default.
(d) Any Bank (each, a "Designating Lender") may at any time designate
one Designated Lender to fund Money Market Loans on behalf of such Designating
Lender subject to the terms of this Section 9.6(d) and the provisions in Section
9.6(b) and (c) shall not apply to such designation. No Bank may designate more
than one (1) Designated Lender at any one time. The parties to each such
designation shall execute and deliver to the Lead Agent for its acceptance a
Designation Agreement. Upon such receipt of an appropriately completed
Designation Agreement executed by a Designating Lender and a designee
representing that it is a Designated Lender, the Lead Agent will accept such
Designation Agreement and will give prompt notice thereof to the Borrower,
whereupon, (i) the Borrower shall execute and deliver to the Designating Lender
a Designated Lender Note payable to the order of the Designated Lender, (ii)
from and after the effective date specified in the Designation Agreement, the
Designated Lender shall become a party to this Agreement with a right (subject
to the provisions of Section 2.3(b)) to make Money Market Loans on behalf of its
Designating Lender pursuant to Section 2.3 after the Borrower has accepted a
Money Market Loan (or portion thereof) of the Designating Lender, and (iii) the
Designated Lender shall not be required to make payments with respect to any
obligations in this Agreement except to the extent of excess cash flow of such
Designated Lender which is not otherwise required to repay obligations of such
Designated Lender which are then due and payable; provided, however, that
regardless of such designation and assumption by the Designated Lender, the
Designating Lender shall be and remain obligated to the Borrower, the Lead
Agent, the Co-Lead Agent, the Co-Agents and the Banks for each and every of the
obligations of the Designating Lender and its related Designated Lender with
respect to this Agreement, including, without limitation, any indemnification
obligations under Section 7.6 hereof and any sums otherwise payable to the
Borrower by the Designated Lender. Each Designating Lender shall serve as the
administrative agent of the Designated Lender and shall on behalf of, and to the
exclusion of, the Designated Lender: (i) receive any and all payments made for
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the benefit of the Designated Lender and (ii) give and receive all
communications and notices and take all actions hereunder, including, without
limitation, votes, approvals, waivers, consents and amendments under or relating
to this Agreement and the other Loan Documents. Any such notice, communication,
vote, approval, waiver, consent or amendment shall be signed by the Designating
Lender as administrative agent for the Designated Lender and shall not be signed
by the Designated Lender on its own behalf and shall be binding upon the
Designated Lender to the same extent as if signed by the Designated Lender on
its own behalf. The Borrower, the Lead Agent, the Co-Lead Agent, the Co-Agents
and the Banks may rely thereon without any requirement that the Designated
Lender sign or acknowledge the same. No Designated Lender may assign or transfer
all or any portion of its interest hereunder or under any other Loan Document,
other than assignments to the Designating Lender which originally designated
such Designated Lender or otherwise in accordance with the provisions of Section
9.6 (b) and (c).
(e) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note and the Letter(s) of Credit participated in by
such Bank or, in the case of the Fronting Bank, issued by it, to a Federal
Reserve Bank. No such assignment shall release the transferor Bank from its
obligations hereunder.
(f) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.3 or 8.4 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.7. Collateral. Each of the Banks represents to the Lead
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.8. Governing Law; Submission to Jurisdiction. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
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GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CON FLICTS OF LAW).
(b) Any legal action or proceeding with respect to this Agreement or
any other Loan Document and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and appellate courts from any thereof. The
Borrower irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the hand delivery, or
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Borrower at its address set forth below. The Borrower hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement or any other Loan Document brought in the courts referred to
above and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall affect the right of
the Lead Agent or the Co-Lead Agent to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Borrower in any other jurisdiction.
SECTION 9.9. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Lead Agent and the Borrower
of counterparts hereof signed by each of the parties hereto (or, in the case of
any party as to which an executed counterpart shall not have been received,
receipt by the Lead Agent in form satisfactory to it of telegraphic, telex or
other written confirmation from such party of execution of a counterpart hereof
by such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE LEAD
AGENT, THE CO-LEAD AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN
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ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Survival. All indemnities set forth herein shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
SECTION 9.12. Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any domestic or foreign branch office,
subsidiary or affiliate of such Bank.
SECTION 9.13. Limitation of Liability. No claim may be made by the
Borrower or any other Person acting by or through Borrower against the Lead
Agent, the Co-Lead Agent or any Bank or the affiliates, directors, officers,
employees, attorneys or agent of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement or by the other Loan Documents, or any act, omission or event
occurring in connection therewith; and the Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 9.14. Recourse Obligation. This Agreement and the Obligations
hereunder are fully recourse to the Borrower. Notwithstanding the foregoing, no
recourse under or upon any obligation, covenant, or agreement contained in this
Agreement shall be had against any officer, director, shareholder or employee of
the Borrower or EQR except in the event of fraud or misappropriation of funds on
the part of such officer, director, shareholder or employee.
SECTION 9.15. Confidentiality. The Lead Agent, the Co-Lead Agent and
each Bank shall use reasonable efforts to assure that information about
Borrower, EQR and its Subsidiaries and Investments Affiliates, and the
Properties thereof and their operations, affairs and financial condition, not
generally disclosed to the public, which is furnished to Lead Agent, the Co-Lead
Agent or any Bank pursuant to the provisions hereof or any other Loan Document
is used only for the purposes of this Agreement and shall not be divulged to any
Person other than the Lead Agent, the Co-Lead Agent, the Banks, and their
affiliates and respective officers, directors, employees and agents who are
actively and directly participating in the evaluation, administration or
enforcement of the Loan, except: (a) to
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their attorneys and accountants, (b) in connection with the enforcement of the
rights and exercise of any remedies of the Lead Agent, the Co-Lead Agent and the
Banks hereunder and under the other Loan Documents, (c) in connection with
assignments and participations and the solicitation of prospective assignees and
participants referred to in Section 9.6 hereof, who have agreed in writing to be
bound by a confidentiality agreement substantially equivalent to the terms of
this Section 9.15, and (d) as may otherwise be required or requested by any
regulatory authority having jurisdiction over the Lead Agent, the Co-Lead Agent
or any Bank or by any applicable law, rule, regulation or judicial process.
SECTION 9.16. Bank's Failure to Fund.
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(a) Unless the Lead Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Lead Agent such Bank's share of such Borrowing, the Lead Agent may assume that
such Bank has made such share available to the Lead Agent on the date of such
Borrowing in accordance with subsection (b) of Section 2.4 or Section 2.16(e)
hereof, and the Lead Agent may, in reliance upon such assumption, make available
to Borrower on such date a corresponding amount. If and to the extent that such
Bank shall not have so made such share available to the Lead Agent, such Bank
and Borrower severally agree to repay to the Lead Agent forthwith on demand
such corresponding amount together with interest thereon, in accordance with the
provisions of Section 2.4(c) or Section 2.16(e) hereof. If such Bank shall
repay to the Lead Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement. Nothing contained in this Section or Sections 2.4(c) or 2.16(e)
shall be deemed to reduce the Commitment of any Bank or in any way affect the
rights of Borrower with respect to any defaulting Bank or Lead Agent. The
failure of any Bank to make available to the Lead Agent such Bank's share of any
Borrowing in accordance with Sections 2.4(b) or 2.16(e) hereof shall not relieve
any other Bank of its obligations to fund its Commitment, in accordance with the
provisions hereof.
(b) If a Bank does not advance to Lead Agent such Bank's pro rata
share of a Loan in accordance herewith, then neither Lead Agent, Co-Lead Agent
nor the other Banks shall
110
<PAGE>
be required or obligated to fund such Bank's pro rata share of such Loan.
(c) As used herein, the following terms shall have the meanings set
forth below:
(i) "Defaulting Bank" shall mean any Bank which (x) does not advance
to the Lead Agent such Bank's pro rata share of a Loan in accordance herewith
for a period of five (5) Domestic Business Days after notice of such failure
from Lead Agent, (y) shall otherwise fail to perform such Bank's obligations
under the Loan Documents for a period of five (5) Domestic Business Days after
notice of such failure from Lead Agent, or (z) shall fail to pay the Lead Agent,
Co-Lead Agent or any other Bank, as the case may be, upon demand, such Bank's
pro rata share of any costs, expenses or disbursements incurred or made by the
Lead Agent pursuant to the terms of the Loan Documents for a period of five (5)
Domestic Business Days after notice of such failure from Lead Agent, and in all
cases, such failure is not as a result of a good faith dispute as to whether
such advance is properly required to be made pursuant to the provisions of this
Agreement, or as to whether such other performance or payment is properly
required pursuant to the provisions of this Agreement.
(ii) "Junior Creditor" means any Defaulting Bank which has not (x)
fully cured each and every default on its part under the Loan Documents and (y)
unconditionally tendered to the Lead Agent such Defaulting Bank's pro rata share
of all costs, expenses and disbursements required to be paid or reimbursed
pursuant to the terms of the Loan Documents.
(iii) "Payment in Full" means, as of any date, the receipt by the
Banks who are not Junior Creditors of an amount of cash, in lawful currency of
the United States, sufficient to indefeasibly pay in full all Senior Debt.
(iv) "Senior Debt" means (x) collectively, any and all indebtedness,
obligations and liabilities of the Borrower to the Banks who are not Junior
Creditors from time to time, whether fixed or contingent, direct or indirect,
joint or several, due or not due, liquidated or unliquidated, determined or
undetermined, arising by contract, operation of law or otherwise, whether on
open account or evidenced by one or more instruments, and whether for
111
<PAGE>
principal, premium, interest (including, without limitation, interest accruing
after the filing of a petition initiating any proceeding referred to in Section
6.1(f) or (g)), reimbursement for fees, indemnities, costs, expenses or
otherwise, which arise under, in connection with or in respect of the Loans or
the Loan Documents, and (y) any and all deferrals, renewals, extensions and
refundings of, or amendments, restatements, rearrangements, modifications or
supplements to, any such indebtedness, obligation or liability.
(v) "Subordinated Debt" means (x) any and all indebtedness,
obligations and liabilities of Borrower to one or more Junior Creditors from
time to time, whether fixed or contingent, direct or indirect, joint or several,
due or not due, liquidated or unliquidated, determined or undetermined, arising
by contract, operation of law or otherwise, whether on open account or evidenced
by one or more instruments, and whether for principal, premium, interest
(including, without limitation, interest accruing after the filing of a petition
initiating any proceeding referred to in Section 6.1(f) or (g)), reimbursement
for fees, indemnities, costs, expenses or otherwise, which arise under, in
connection with or in respect of the Loans or the Loan Documents, and (y) any
and all deferrals, renewals, extensions and refundings of, or amendments,
restatements, rearrangements, modifications or supplements to, any such
indebtedness, obligation or liability.
(d) Immediately upon a Bank's becoming a Junior Creditor, no Junior
Creditor shall, prior to Payment in Full of all Senior Debt:
(i) accelerate, demand payment of, sue upon, collect, or receive any
payment upon, in any manner, or satisfy or otherwise discharge, any Subordinated
Debt, whether for principal, interest and otherwise;
(ii) take or enforce any Liens to secure Subordinated Debt or attach
or levy upon any assets of Borrower, to enforce any Subordinated Debt;
(iii) enforce or apply any security for any Subordinated Debt; or
112
<PAGE>
(iv) incur any debt or liability, or the like, to, or receive any
loan, return of capital, advance, gift or any other property, from, the
Borrower.
(e) In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
dissolution, reorganization, readjustment, composition or other similar
proceeding relating to Borrower;
(ii) any liquidation, dissolution or other winding-up of the
Borrower, voluntary or involuntary, whether or not involving insolvency,
reorganization or bankruptcy proceedings;
(iii) any assignment by the Borrower for the benefit of creditors;
(iv) any sale or other transfer of all or substantially all assets
of the Borrower; or
(v) any other marshalling of the assets of the Borrower;
each of the Banks shall first have received Payment in Full of all Senior Debt
before any payment or distribution, whether in cash, securities or other
property, shall be made in respect of or upon any Subordinated Debt. Any payment
or distribution, whether in cash, securities or other property that would
otherwise be payable or deliverable in respect of Subordinated Debt to any
Junior Creditor but for this Agreement shall be paid or delivered directly to
the Lead Agent for distribution to the Banks in accordance with this Agreement
until Payment in Full of all Senior Debt. If any Junior Creditor receives any
such payment or distribution, it shall promptly pay over or deliver the same to
the Lead Agent for application in accordance with the preceding sentence.
(f) Each Junior Creditor shall file in any bankruptcy or other
proceeding of Borrower in which the filing of claims is required by law, all
claims relating to Subordinated Debt that such Junior Creditor may have against
Borrower and assign to the Banks who are not Junior Creditors all rights of such
Junior Creditor thereunder. If such Junior Creditor does not file any such
claim prior to
113
<PAGE>
forty-five (45) days before the expiration of the time to file such claim, Lead
Agent, as attorney-in-fact for such Junior Creditor, is hereby irrevocably
authorized to do so in the name of such Junior Creditor or, in Lead Agent's sole
discretion, to assign the claim to a nominee and to cause proof of claim to be
filed in the name of such nominee. The foregoing power of attorney is coupled
with an interest and cannot be revoked. The Lead Agent shall, to the exclusion
of each Junior Creditor, have the sole right, subject to Section 9.5 hereof, to
accept or reject any plan proposed in any such proceeding and to take any other
action that a party filing a claim is entitled to take. In all such cases,
whether in administration, bankruptcy or otherwise, the Person or Persons
authorized to pay such claim shall pay to Lead Agent the amount payable on such
claim and, to the full extent necessary for that purpose, each Junior Creditor
hereby transfers and assigns to the Lead Agent all of the Junior Creditor's
rights to any such payments or distributions to which Junior Creditor would
otherwise be entitled.
(g)(i) If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
any Junior Creditor in contravention of any of the terms hereof, such payment or
distribution or security shall be received in trust for the benefit of, and
shall promptly be paid over or delivered and transferred to, Lead Agent for
application to the payment of all Senior Debt, to the extent necessary to
achieve Payment in Full. In the event of the failure of any Junior Creditor to
endorse or assign any such payment, distribution or security, Lead Agent is
hereby irrevocably authorized to endorse or assign the same as attorney-in-fact
for such Junior Creditor.
(ii) Each Junior Creditor shall take such action (including, without
limitation, the execution and filing of a financing statement with respect to
this Agreement and the execution, verification, delivery and filing of proofs of
claim, consents, assignments or other instructions that Lead Agent may require
from time to time in order to prove or realize upon any rights or claims
pertaining to Subordinated Debt or to effectuate the full benefit of the
subordination contained herein) as may, in Lead Agent's sole and absolute
discretion, be necessary or desirable to assure the effectiveness of the
subordination effected by this Agreement.
114
<PAGE>
(h)(i) Each Bank that becomes a Junior Creditor understands and
acknowledges by its execution hereof that each other Bank is entering into this
Agreement and the Loan Documents in reliance upon the absolute subordination in
right of payment and in time of payment of Subordinated Debt to Senior Debt as
set forth herein.
(ii) Only upon the Payment in Full of all Senior Debt shall any
Junior Creditor be subrogated to any remaining rights of the Banks which are not
Defaulting Banks to receive payments or distributions of assets of the Borrower
made on or applicable to any Senior Debt.
(iii) Each Junior Creditor agrees that it will deliver all
instruments or other writings evidencing any Subordinated Debt held by it to
Lead Agent, promptly after request therefor by the Lead Agent.
(iv) No Junior Creditor may at any time sell, assign or otherwise
transfer any Subordinated Debt, or any portion thereof, including, without
limitation, the granting of any Lien thereon, unless and until satisfaction of
the requirements of Section 9.6 above and the proposed transferee shall have
assumed in writing the obligation of the Junior Creditor to the Banks under this
Agreement, in a form acceptable to the Lead Agent.
(v) If any of the Senior Debt, should be invalidated, avoided or set
aside, the subordination provided for herein nevertheless shall continue in full
force and effect and, as between the Banks which are not Defaulting Banks and
all Junior Creditors, shall be and be deemed to remain in full force and effect.
(vi) Each Junior Creditor hereby irrevocably waives, in respect of
Subordinated Debt, all rights (x) under Sections 361 through 365, 502(e) and 509
of the Bankruptcy Code (or any similar sections hereafter in effect under any
other Federal or state laws or legal or equitable principles relating to
bankruptcy, insolvency, reorganizations, liquidations or otherwise for the
relief of debtors or protection of creditors), and (y) to seek or obtain
conversion to a different type of proceeding or to seek or obtain dismissal of a
proceeding, in each case in relation to a bankruptcy, reorganization, insolvency
or other proceeding under similar laws with respect to the Borrower. Without
limiting the generality of the foregoing,
115
<PAGE>
each Junior Creditor hereby specifically waives (A) the right to seek to give
credit (secured or otherwise) to the Borrower in any way under Section 364 of
the Bankruptcy Code unless the same is subordinated in all respects to Senior
Debt in a manner acceptable to Lead Agent in its sole and absolute discretion
and (B) the right to receive any collateral security (including any "super
priority" or equal or "priming" or replacement Lien) for any Subordinated Debt
unless the Banks which are not Defaulting Banks have received a senior position
acceptable to the Banks in their sole and absolute discretion to secure all
Senior Debt (in the same collateral to the extent collateral is involved).
(i)(i) In addition to and not in limitation of the subordination
effected by this Section 9.16, the Lead Agent and each of the Banks which are
not Defaulting Banks may in their respective sole and absolute discretion, also
exercise any and all other rights and remedies available at law or in equity in
respect of a Defaulting Bank; and
(ii) The Lead Agent shall give each of the Banks notice of the
occurrence of a default under this Section 9.16 by a Defaulting Bank and if the
Lead Agent and/or one or more of the other Banks shall, at their option, fund
any amounts required to be paid or advanced by a Defaulting Bank, the other
Banks who have elected not to fund any portion of such amounts shall not be
liable for any reimbursements to the Lead Agent and/or to such other funding
Banks.
(j) Notwithstanding anything to the contrary contained or implied
herein, a Defaulting Bank shall not be entitled to vote on any matter as to
which a vote by the Banks is required hereunder, including, without limitation,
any actions or consents on the part of the Lead Agent as to which the approval
or consent of all the Banks or the Required Banks is required under Article
VIII, Section 9.5 or elsewhere, so long as such Bank is a Defaulting Bank;
provided, however, that in the case of any vote requiring the unanimous consent
of the Banks, if all the Banks other than the Defaulting Bank shall have voted
in accordance with each other, then the Defaulting Bank shall be deemed to have
voted in accordance with such Banks.
5. Each of the Lead Agent and any one or more of the Banks which are
not Defaulting Banks may, at their respective option, (i) advance to the
Borrower such Bank's pro
116
<PAGE>
rata share of the Loans not advanced by a Defaulting Bank in accordance with the
Loan Documents, or (ii) pay to the Lead Agent such Bank's pro rata share of any
costs, expenses or disbursements incurred or made by the Lead Agent pursuant to
the terms of this Agreement not theretofore paid by a Defaulting Bank.
Immediately upon the making of any such advance by the Lead Agent or any one of
the Banks, such Bank's pro rata share and the pro rata share of the Defaulting
Bank shall be recalculated to reflect such advance. All payments, repayments and
other disbursements of funds by the Lead Agent to Banks shall thereupon and, at
all times thereafter be made in accordance with such Bank's recalculated pro
rata share unless and until a Defaulting Bank shall fully cure all defaults on
the part of such Defaulting Bank under the Loan Documents or otherwise existing
in respect of the Loans or this Agreement, at which time the pro rata share of
the Bank(s) which advanced sums on behalf of the Defaulting Bank and of the
Defaulting Bank shall be restored to their original percentages.
SECTION 9.17. No Bankruptcy Proceedings. Each of the Borrower, the
Banks, the Lead Agent, the Co-Lead Agent, and the Co-Agents hereby agrees that
it will not institute against any Designated Lender or join any other Person in
instituting against any Designated Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any federal or state
bankruptcy or similar law, until the later to occur of (i) one year and one day
after the payment in full of the latest maturing commercial paper note issued by
such Designated Lender and (ii) the Maturity Date.
117
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential
Properties Trust
By:
-------------------------
Name:
Title:
Facsimile number:
Address: Two North Riverside Plaza
Suite 400
Chicago, Illinois 60606
Attn: Chief Financial
Officer
Commitments
- -----------
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
------------------------------
Name: Timothy O'Donovan
Title: Vice President
$50,000,000 BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
------------------------------
Name: Megan McBride
Title: Vice President
<PAGE>
$40,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By:
------------------------------
Name:
Title:
$40,000,000 U.S. BANK NATIONAL ASSOCIATION
f/k/a and d/b/a/ FIRST BANK
NATIONAL ASSOCIATION
By:
------------------------------
Name:
Title:
$40,000,000 NATIONSBANK OF TEXAS, N.A.
By:
------------------------------
Name:
Title:
$25,000,000 COMMERZBANK AKTIENGESELLSCHAFT
By:
------------------------------
Name:
Title:
$25,000,000 CORESTATES BANK, N.A.
By:
------------------------------
Name:
Title:
<PAGE>
$25,000,000 SIGNET BANK
By:
------------------------------
Name:
Title:
$25,000,000 UNION BANK OF SWITZERLAND, NEW YORK
BRANCH
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
$20,000,000 THE BANK OF NOVA SCOTIA
By:
------------------------------
Name:
Title:
$20,000,000 DRESDNER BANK AKTIENGESELLSCHAFT
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
$20,000,000 FLEET NATIONAL BANK
By:
------------------------------
Name:
Title:
120
<PAGE>
$20,000,000 KREDIETBANK N.V.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
$20,000,000 LASALLE NATIONAL BANK
By:
------------------------------
Name:
Title:
$20,000,000 PNC BANK, NATIONAL ASSOCIATION
By:
------------------------------
Name:
Title:
$20,000,000 SOCIETE GENERALE, A FRENCH BANKING
CORPORATION, ACTING THROUGH
ITS SOUTHWEST AGENCY
By:
------------------------------
Name:
Title:
$20,000,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:
------------------------------
Name:
Title:
121
<PAGE>
$20,000,000 THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By:
------------------------------
Name:
Title:
Total Commitments
- -----------------
$500,000,000
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Co-Lead Agent
By:
------------------------------
Name:
Title:
Bank of America National Trust
and Savings Association
Commercial Real Estate
Services Group
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Megan McBride
Telecopy: (312) 974-4970
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Lead Agent
By:
------------------------------
Name: Timothy O' Donovan
Title:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107
Attention: Nancy K. Dunbar
Telecopy: (302) 634-4222
122
<PAGE>
Domestic and Euro-Currency
Lending Office:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107-
Attention: Kevin M. McCann
Telecopy: (302) 634-1852/1872
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent
By:
------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
f/k/a and d/b/a FIRST BANK
NATIONAL ASSOCIATION, as Co-Agent
By:
------------------------------
Name:
Title:
NATIONSBANK OF TEXAS, N.A.,
as Co-Agent
By:
------------------------------
Name:
Title:
<PAGE>
SCHEDULE 4.6
------------
Borrower and EQR ERISA Plans
The employees of EQR and the Borrower may currently participate in a 401(k)
Plan.
Other benefits include: Employee share purchase plan, stock option plan, health
care plan, dental care, life insurance and accidental
death and dismemberment plan, travel/accident
insurance, short-term disability, long-term disability,
sick time, vacation time, personal days, holidays and
direct paycheck deposit.
A-1
<PAGE>
SCHEDULE 5.13(c)(1)
-------------------
None
<PAGE>
SCHEDULE 5.13(c)(2)
-------------------
None
<PAGE>
EXHIBIT A-1
NOTE
New York, New York
________ __, 1997
For value received, ERP Operating Limited Partnership, an Illinois limited
partnership (the "Borrower"), promises to pay to the order of ____________ (the
"Payee"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Payee to the Borrower pursuant to the Credit
Agreement referred to below on the Maturity Date (as such term is defined in the
Credit Agreement). The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Payee, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Payee and, if the Payee so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Payee on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Payee to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Designated Lender Notes referred to in, and is
delivered pursuant to and subject to all of the terms of, the Second Amended and
Restated Revolving Credit Agreement, dated as of __________, 1997 among the
Borrower, the banks listed on the signature pages thereof, Bank of America
National Trust and Savings Association, as Co-Lead Agent, Morgan Guaranty Trust
Company of New York, as Lead Agent, The First National Bank of Chicago, as Co-
Agent, First Bank National
A-4
<PAGE>
Association, as Co-Agent, and NationsBank of Texas, N.A., as Co-Agent (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential Properties
Trust
By:
-----------------------------
Name:
Title:
A-5
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
A-6
<PAGE>
EXHIBIT A-2
NOTE
New York, New York
________ __, 1997
For value received, ERP Operating Limited Partnership, an Illinois
partnership (the "Borrower"), promises to pay to the order of ____________ (the
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the Maturity Date (as such term is defined in the
Credit Agreement). The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in, and is delivered
pursuant to and subject to all of the terms of, the Second Amended and Restated
Revolving Credit Agreement dated as of __________, 1997 among the Borrower, the
banks listed on the signature pages thereof, Bank of America National Trust and
Savings Association, as Co-Lead Agent, Morgan Guaranty Trust Company of New
York, as Lead Agent, The First National Bank of Chicago, as Co-Agent, First Bank
National Association, as Co-Agent, and NationsBank of Texas, N.A., as Co-Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provi-
<PAGE>
sions for the prepayment hereof and the acceleration of the maturity hereof.
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential Properties Trust
By: _________________________
Name:
Title:
A-2
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-3
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York (the "Lead Agent")
From: ERP Operating Limited Partnership
Re: Second Amended and Restated Revolving Credit Agreement (the "Credit
Agreement") dated as of ______________, 1997 among ERP Operating
Limited Partnership, the Banks parties thereto, the Lead Agent, Bank
of America National Trust and Savings Association, as Co-Lead Agent,
The First National Bank of Chicago, as Co-Agent, First Bank National
Association, as Co-Agent, and NationsBank of Texas, N.A., as Co-Agent
We hereby give notice pursuant to Section 2.3 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount* Interest Period**
- ----------------- -----------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
- --------------
* Amount must be $(MINIMUM BORROWING) or a larger multiple of $(MINIMUM
BORROWING INCREMENT).
** Not less than 14 days (LIBOR Auction) or not less than 14 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
<PAGE>
(NAME OF BORROWER)
By________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to ERP Operating Limited Partnership
(the "Borrower")
Pursuant to Section 23 of the Second Amended and Restated Revolving
Credit Agreement dated as of ________, 1997 among ERP Operating Limited
Partnership, the Banks parties thereto, the undersigned, as Lead Agent, Bank of
America National Trust and Savings Association, as Co-Lead Agent, The First
National Bank of Chicago, as Co-Agent, First Bank National Association, as Co-
Agent, and NationsBank of Texas, N.A., as Co-Agent, are pleased on behalf of the
Borrower to invite you to submit Money Market Quotes to the Borrower for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By______________________
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
--------------------------
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to ERP Operating Limited Partnership (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- -------- --------- ---------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $____________.]**
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Second Amended and Restated Revolving Credit Agreement dated as of ______,
1997 among ERP Operating Limited Partnership, the Banks parties thereto,
Bank of America National Trust and Savings Association, as Co-Lead Agent,
The First National Bank of Chicago, as Co-Agent, First Bank National
Association, as Co-Agent, and NationsBank of Texas, N.A., as
<PAGE>
Co-Agent, and yourselves, as Lead Agent, irrevocably obligates us to make
the Money Market Loan(s) for which any offer(s) are accepted, in whole or
in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for $3,000,000
or a larger multiple of $100,000.
*** Not less than 14 days, as specified in the related Invitation. No more than
five bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
D-2
<PAGE>
EXHIBIT E
TRANSFER SUPPLEMENT
-------------------
TRANSFER SUPPLEMENT (this "Transfer Supplement") dated as of
_________, 199 between ______________________ (the "Assignor") and
_________________ having an address at ______________ (the "Purchasing Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Assignor has made loans to ERP Operating Limited
Partnership, an Illinois limited partnership (the "Borrower"), pursuant to the
Second Amended and Restated Revolving Credit Agreement, dated as of _______,
1997 (as the same may be amended, supplemented or otherwise modified through the
date hereof, the "Credit Agreement"), among the Borrower, the banks party
thereto, Morgan Guaranty Trust Company of New York, as Lead Agent, Bank of
America National Trust and Savings Association, as Co-Lead Agent, The First
National Bank of Chicago, as Co-Agent, First Bank National Association, as Co-
Agent, and NationsBank of Texas, N.A., as Co-Agent. All capitalized terms used
and not otherwise defined herein shall have the respective meanings set forth in
the Credit Agreement;
WHEREAS, the Purchasing Bank desires to purchase and assume from the
Assignor, and the Assignor desires to sell and assign to the Purchasing Bank,
certain rights, title, interest and obligations under the Credit Agreement;
NOW, THEREFORE, IT IS AGREED:
1. In consideration of the amount set forth in the receipt (the
"Receipt") given by Assignor to Purchasing Bank of even date herewith, and
transferred by wire to Assignor, the Assignor hereby assigns and sells, without
recourse, representation or warranty except as specifically set forth herein, to
the Purchasing Bank, and the Purchasing Bank hereby purchases and assumes from
the Assignor, a __% interest (the "Purchased Interest") of the Loans
constituting a portion of the Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as defined below) including, without
limitation, such percentage interest of the Assignor in any Loans owing to the
Assignor, any Note held by the Assignor, any Loan Commitment of the Assignor
<PAGE>
and any other interest of the Assignor under any of the Loan Documents,
including any participation in any Letter of Credit.
2. The Assignor (i) represents and warrants that as of the date hereof the
aggregate outstanding principal amount of its share of the Loans owing to it
(without giving effect to assignments thereof which have not yet become
effective) is $_________; (ii) represents and warrants that it is the legal and
beneficial owner of the interests being assigned by it hereunder and that such
interests are free and clear of any adverse claim; (iii) represents and warrants
that it has not received any notice of Default or Event of Default from the
Borrower; (iv) represents and warrants that it has full power and authority to
execute and deliver, and perform under, this Transfer Supplement, and all
necessary corporate and/or partnership action has been taken to authorize, and
all approvals and consents have been obtained for, the execution, delivery and
performance thereof; (v) represents and warrants that this Transfer Supplement
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms; (vi) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations (or
the truthfulness or accuracy thereof) made in or in connection with the Credit
Agreement, or the other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, or
the other Loan Documents or any other instrument or document furnished pursuant
thereto; and (vii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or the other Loan Documents or any other instrument or document
furnished pursuant thereto. Except as specifically set forth in this Paragraph
2, this assignment shall be without recourse to Assignor.
3. The Purchasing Bank (i) confirms that it has received a copy of the
Credit Agreement, and the other Loan Documents, together with such financial
statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Transfer
Supplement and to become a party to the Credit Agreement, and has not relied on
any statements made by Assignor or Skadden, Arps, Slate, Meagher & Flom LLP
(other than its opinion letter, dated as of _____, 1997) ; (ii) agrees that it
will, independently and without reliance upon any of the Lead Agent, the Co-Lead
Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions
E-2
<PAGE>
and creditworthiness of the Borrower and will make its own credit analysis,
appraisals and decisions in taking or not taking action under the Credit
Agreement, and the other Loan Documents; (iii) appoints and authorizes the Lead
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement, and the other Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are incidental thereto;
(iv) agrees that it will be bound by and perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required
to be performed by it as a Bank; (v) specifies as its address for notices and
lending office, the office set forth beneath its name on the signature page
hereof; (vi) it has full power and authority to execute and deliver, and perform
under, this Transfer Supplement, and all necessary corporate and/or partnership
action has been taken to authorize, and all approvals and consents have been
obtained for, the execution, delivery and performance thereof; (vii) this
Transfer Supplement constitutes its legal, valid and binding obligation
enforceable in accordance with its terms; and (viii) the interest being assigned
hereunder is being acquired by it for its own account, for investment purposes
only and not with a view to the public distribution thereof and without any
present intention of its resale in either case that would be in violation of
applicable securities laws.
4. This Transfer Supplement shall be effective on the date (the
"Effective Date") on which all of the following have occurred (i) it shall have
been executed and delivered by the parties hereto, (ii) copies hereof shall have
been delivered to the Lead Agent and the Borrower, (iii) Purchasing Bank shall
have received an original Note and (iv) the Purchasing Bank shall have paid to
the Assignor the agreed purchase price as set forth in the Receipt.
5. On and after the Effective Date, (i) the Purchasing Bank shall be a
party to the Credit Agreement and, to the extent provided in this Transfer
Supplement, have the rights and obligations of a Bank thereunder and be
entitled to the benefits and rights of the Banks thereunder and (ii) the
Assignor shall, to the extent provided in this Transfer Supplement as to the
Purchased Interest, relinquish its rights and be released from its obligations
under the Credit Agreement.
6. From and after the Effective Date, the Assignor shall cause the Lead
Agent to make all payments under the Credit Agreement, and the Notes in respect
of the Purchased Interest assigned hereby (including, without limitation, all
payments of principal, fees and interest with respect thereto and any amounts
accrued but not paid prior to such date) to the Purchasing Bank.
E-3
<PAGE>
7. This Transfer Supplement may be executed in any number of counterparts
which, when taken together, shall be deemed to constitute one and the same
instrument.
8. Assignor hereby represents and warrants to Purchasing Bank that it has
made all payments demanded to date by Morgan Guaranty Trust Company of New York
("Morgan") as Lead Agent in connection with the Assignor's pro rata share of the
obligation to reimburse the Agent for its expenses and made all Loans required.
In the event Morgan, as Lead Agent, shall demand reimbursement for fees and
expenses from Purchasing Bank for any period prior to the Effective Date,
Assignor hereby agrees to promptly pay Morgan, as Lead Agent, such sums
directly, subject, however, to Paragraph 12 hereof.
9. Assignor will, at the cost of Assignor, and without expense to
Purchasing Bank, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, assignments, notices of assignments, transfers and
assurances as Purchasing Bank shall, from time to time, reasonably require, for
the better assuring, conveying, assigning, transferring and confirming unto
Purchasing Bank the property and rights hereby given, granted, bargained, sold,
aliened, enfeoffed, conveyed, confirmed, assigned and/or intended now or
hereafter so to be, on which Assignor may be or may hereafter become bound to
convey or assign to Purchasing Bank, or for carrying out the intention or
facilitating the performance of the terms of this Agreement or for filing,
registering or recording this Agreement.
10. The parties agree that no broker or finder was instrumental in
bringing about this transaction. Each party shall indemnify, defend the other
and hold the other free and harmless from and against any damages, costs or
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) suffered by such party arising from claims by any broker or
finder that such broker or finder has dealt with said party in connection with
this transaction.
11. Subject to the provisions of Paragraph 12 hereof, if, with respect to
the Purchased Interest only, Assignor shall on or after the Effective Date
receive (a) any cash, note, securities, property, obligations or other
consideration in respect of or relating to the Loan or the Loan Documents or
issued in substitution or replacement of the Loan or the Loan Documents, (b) any
cash or non-cash consideration in any form whatsoever distributed, paid or
issued in any bankruptcy proceeding in connection with the Loan or the Loan
Documents or (c) any other distribution (whether by means of repayment,
redemption, realization of security or otherwise), Assignor shall accept the
same as
E-4
<PAGE>
Purchasing Bank's agent and hold the same in trust on behalf of and for the
benefit of Purchasing Bank, and shall deliver the same forthwith to Purchasing
Bank in the same form received, with the endorsement (without recourse) of
Assignor when necessary or appropriate. If the Assignor shall fail to deliver
any funds received by it within the same Business Day of receipt, unless such
funds are received by Assignor after 4:00 p.m., Eastern Standard Time, then the
following business day after receipt, said funds shall accrue interest at the
federal funds interest rate and in addition to promptly remitting said amount,
Assignor shall remit such interest from the date received to the date such
amount is remitted to the Purchasing Bank.
12. Assignor and Purchasing Bank each hereby agree to indemnify and
hold harmless the other, each of its directors and each of its officers in
connection with any claim or cause of action based on any matter or claim based
on the acts of either while acting as a Bank under the Credit Agreement.
Promptly after receipt by the indemnified party under this Section of notice of
the commencement of any action, such indemnified party shall notify the
indemnifying party in writing of the commencement thereof. If any such action
is brought against any indemnified party and that party notifies the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof. In no event
shall the indemnified party settle or consent to a settlement of such cause of
action or claim without the consent of the indemnifying party.
E-5
<PAGE>
13. THIS TRANSFER SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
Wire Transfer Instructions: ________________________
By:______________________
Name:
Title:
--------------------------
By: _____________________
Name:
Title:
Receipt and Consent acknowledged this
____ day of _____, 199 :
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Lead Agent
By:__________________________
Name:
Title:
[IF REQUIRED ADD THE FOLLOWING:]
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential Properties Trust
By: ________________________
Name:
Title:
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<PAGE>
EXHIBIT G
---------
FORM OF DESIGNATION AGREEMENT
-----------------------------
Dated _____________, 199___
Reference is made to that certain Second Amended and Restated Revolving
Credit Agreement, dated as of ________, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement") among ERP
OPERATING LIMITED PARTNERSHIP, the banks parties thereto, and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK (the "Lead Agent"), as Lead Agent. Terms defined in
the Credit Agreement are used herein with the same meaning.
[NAME OF DESIGNOR] (the "Designor"), [NAME OF DESIGNEE] (the "Designee"),
and the Lead Agent agree as follows:
1. The Designor hereby designates the Designee, and the Designee hereby
accepts such designation, to have a right to make Money Market Loans pursuant to
Article III of the Credit Agreement. Any assignment by Designor to Designee of
its rights to make a Money Market Loan pursuant to such Article III shall be
effective at the time of the funding of such Money Market Loan and not before
such time.
2. Except as set forth in Section 7 below, the Designor makes no
representation or warranty and assumes no responsibility pursuant to this
Designation Agreement with respect to (a) any statements, warranties or
representations made in or in connection with any Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument and document furnished pursuant
thereto and (b) the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under any Loan Document or
any other instrument or document furnished pursuant thereto.
3. The Designee (a) confirms that it has received a copy of each Loan
Document, together with copies of the financial statements referred to in
Articles IV and V of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Designation Agreement; (b) agrees that it will
independently and without reliance upon the Lead Agent, the Designor or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under any Loan Document; (c) confirms that it is a Designated
Lender; (d) appoints and authorizes the Lead Agent to take such action as agent
on its behalf and to exercise such powers and discretion under any Loan Document
as are delegated to the Lead
G-1
<PAGE>
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; and (e) agrees to be bound by each and every
provision of each Loan Document and further agrees that it will perform in
accordance with their terms all of the obligations which by the terms of any
Loan Document are required to be performed by it as a Bank.
4. The Designee hereby appoints Designor as Designee's agent and attorney
in fact, and grants to Designor an irrevocable power of attorney, to receive
payments made for the benefit of Designee under the Credit Agreement, to deliver
and receive all communications and notices under the Credit Agreement and other
Loan Documents and to exercise on Designee's behalf all rights to vote and to
grant and make approvals, waivers, consents of amendments to or under the Credit
Agreement or other Loan Documents. Any document executed by the Designor on the
Designee's behalf in connection with the Credit Agreement or other Loan
Documents shall be binding on the Designee. The Borrower, the Lead Agent and
each of the Banks may rely on and are beneficiaries of the preceding provisions.
5. Following the execution of this Designation Agreement by the Designor
and its Designee, it will be delivered to the Lead Agent for acceptance and
recording by the Lead Agent. The effective date for this Designation Agreement
(the "Effective Date") shall be the date of acceptance hereof by the Lead Agent,
unless otherwise specified on the signature page thereto.
6. The Lead Agent hereby agrees that it will not institute against any
Designated Lender or join any other Person in instituting against any
Designated Lender any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding under any federal or state bankruptcy or similar law,
until the later to occur of (i) one year and one day after the payment in full
of the latest maturing commercial paper note issued by such Designated Lender
and (ii) the Maturity Date.
7. The Designor unconditionally agrees to pay or reimburse the Designee
and save the Designee harmless against all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed or asserted by any of the
parties to the Loan Documents against the Designee, in its capacity as such, in
any way relating to or arising out of this Agreement or any other Loan Documents
or any action taken or omitted by the Designee hereunder or thereunder, provided
that the Designor shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements if the same results from the Designee's gross
negligence or willful misconduct.
8. Upon such acceptance and recording by the Lead Agent, as of the
Effective Date, the Designee shall be a party to the Credit Agreement with a
right (subject to the provisions of
G-2
<PAGE>
Section 2.3(b)) to make Money Market Loans as a Bank pursuant to Section 2.3 of
the Credit Agreement and the rights and obligations of a Bank related thereto;
provided, however, that the Designee shall not be required to make payments with
respect to such obligations except to the extent of excess cash flow of such
Designee which is not otherwise required to repay obligations of such Designated
Lender which are then due and payable. Notwithstanding the foregoing, the
Designor, as administrative agent for the Designee, shall be and remain
obligated to the Borrower, the Co-Agents and the Banks for each and every of the
obligations of the Designee and its Designor with respect to the Credit
Agreement, including, without limitation, any indemnification obligations under
Section 7.6 of the Credit Agreement and any sums otherwise payable to the
Borrower by the Designee.
9. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
10. This Designation Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Designation Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Designation Agreement.
G-3
<PAGE>
IN WITNESS WHEREOF, the Designor and the Designee, intending to be legally
bound, have caused this Designation Agreement to be executed by their officers
thereunto duly authorized as of the date first above written.
Effective Date: ________________________,
199__
[NAME OF DESIGNOR], as Designor
By:____________________________
Title:_________________________
[NAME OF DESIGNEE] as Designee
By:____________________________
Title:_________________________
Applicable Lending Office (and address for
notices):
[ADDRESS]
Accepted this _____ day
of ________, 19__
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Lead Agent
By:_________________________
Title:______________________
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<PAGE>
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statements (Form S-3 No. 333-32183 and Forms S-8 No. 333-06867 and No. 333-
06869) of Equity Residential Properties Trust and in the related Prospectuses of
our report dated January 31, 1997, with respect to the consolidated financial
statements and schedule of Evans Withycombe Residential, Inc. and Subsidiaries
for the year ended December 31, 1996, included in the Current Report on Form
8-K, dated September 10, 1997, of Equity Residential Properties Trust.
Ernst & Young LLP
Phoenix, Arizona
September 10, 1997
