<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1997
REGISTRATION NO. 333-19879
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EVANS WITHYCOMBE RESIDENTIAL, INC.
(Exact name of guarantor of the Debt Securities and issuer of common stock,
preferred stock and warrants as specified in its charter)
MARYLAND 86-0766008
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
EVANS WITHYCOMBE RESIDENTIAL, L.P.
(Exact name of issuer of the Debt Securities as specified in its charter)
DELAWARE 86-0766007
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6991 East Camelback Road, Suite A-200, Scottsdale, Arizona 85251, (602) 840-1040
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
STEPHEN O. EVANS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
EVANS WITHYCOMBE RESIDENTIAL, INC.
6991 EAST CAMELBACK ROAD, SUITE A-200
SCOTTSDALE, ARIZONA 85251
(602) 840-1040
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------------
COPY TO:
KENNETH M. DORAN, ESQ.
GIBSON, DUNN & CRUTCHER LLP
333 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071-3197
(213) 229-7000
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement from the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND RELATES TO
REGISTRATION STATEMENT NO. 33-96756 PREVIOUSLY FILED BY THE COMPANY ON FORM S-3
AND DECLARED EFFECTIVE ON DECEMBER 8, 1995.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement relates to securities which may be offered from
time to time by Evans Withycombe Residential, Inc. (the "Company") and Evans
Withycombe Residential, L.P., a majority-owned limited partnership subsidiary of
the Company (the "Operating Partnership"). This Registration Statement contains
a form of basic prospectus (the "Basic Prospectus") relating to both the Company
and the Operating Partnership which will be used in connection with an offering
of securities by the Company and/or the Operating Partnership. The specific
terms of the securities to be offered will be set forth in a Prospectus
Supplement relating to such securities.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED MARCH 25, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH , 1997)
[LOGO]
EVANS WITHYCOMBE RESIDENTIAL, L.P.
$75,000,000 % NOTES DUE 2004
$50,000,000 % NOTES DUE 2007
------------------
The % Notes due 2004 (the "2004 Notes") and the % Notes due 2007 (the
"2007 Notes" and, together with the 2004 Notes, the "Notes"), offered hereby
(the "Offering") are being issued by Evans Withycombe Residential, L.P., a
Delaware limited partnership (the "Operating Partnership"), in aggregate
principal amounts of $75,000,000 and $50,000,000, respectively. The Notes will
mature on April 15, 2004 and April 15, 2007, respectively, and are redeemable at
any time at the option of the Operating Partnership, in whole or in part, at a
redemption price equal to the sum of (i) the principal amount of the Notes being
redeemed plus accrued interest to the redemption date and (ii) the Make-Whole
Amount (as defined in "Description of the Notes--Optional Redemption"), if any.
The Notes are not subject to any mandatory sinking fund. Interest on the Notes
is payable semi-annually in arrears on each of April 15 and October 15,
commencing October 15, 1997.
Each series of Notes will be represented by a single fully-registered global
note in book-entry form, without coupons (each a "Global Note"), registered in
the name of the nominee of the Depository Trust Company ("DTC"). Beneficial
interests in the Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by DTC (with respect to beneficial
interests of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial
owners). Owners of beneficial interests in the Global Notes will be entitled to
physical delivery of Notes in definitive form equal in principal amount to their
respective beneficial interest only under the limited circumstances described
under "Description of the Notes--Book-Entry System." Settlement for the Notes
will be made in immediately available funds. The Notes will trade in DTC's
Same-Day Funds Settlement System until maturity or until the Notes are issued in
definitive form, and secondary market trading activity in the Notes will
therefore settle in immediately available funds. All payments of principal and
interest in respect of the Notes will be made by the Operating Partnership in
immediately available funds. See "Description of the Notes--Same-Day Settlement
and Payment."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS RELATING TO AN INVESTMENT IN THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING OPERATING
PUBLIC (1) DISCOUNT (2) PARTNERSHIP (1)(3)
<S> <C> <C> <C>
Per 2004 Note................. % % %
Total......................... $ $ $
Per 2007 Note................. % % %
Total......................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1997.
(2) The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) Before deducting estimated expenses of $500,000 payable by the Operating
Partnership.
--------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Global Notes will be made in New York, New York on or about
, 1997 against payment therefor in immediately available funds.
--------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
---------------
The date of this Prospectus Supplement is , 1997
<PAGE>
Certain persons participating in this offering may engage in transactions that
stabilize, maintain, or otherwise affect the price of the Notes. such
transactions may include stabilizing, the purchase of Notes to cover syndicate
short positions and the imposition of penalty bids. For a description of those
activities, see "Underwriting."
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Supplement Summary.............................................................................. S-3
Recent Developments........................................................................................ S-7
Use of Proceeds............................................................................................ S-8
Capitalization............................................................................................. S-9
Selected Financial Information............................................................................. S-11
Business and Properties.................................................................................... S-14
Description of the Notes................................................................................... S-22
Underwriting............................................................................................... S-29
Legal Matters.............................................................................................. S-30
PROSPECTUS
Available Information...................................................................................... 2
Incorporation of Certain Documents by Reference............................................................ 3
Risk Factors............................................................................................... 3
The Company and the Operating Partnership.................................................................. 7
Use of Proceeds............................................................................................ 7
Consolidated Ratios of Earnings to Fixed Charges........................................................... 8
Description of Debt Securities............................................................................. 8
Description of the Capital Stock........................................................................... 21
Certain Provisions of Maryland Law and of the Company's Charter and Bylaws................................. 24
Description of Warrants.................................................................................... 28
Federal Income Tax Considerations.......................................................................... 28
Plan of Distribution....................................................................................... 29
Experts.................................................................................................... 30
Legal Matters.............................................................................................. 30
</TABLE>
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. CAPITALIZED TERMS
USED IN THIS PROSPECTUS SUPPLEMENT SUMMARY HAVE THE MEANINGS SET FORTH ELSEWHERE
IN THE PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. UNLESS OTHERWISE
INDICATED OR AS THE CONTEXT OTHERWISE REQUIRES, (A) REFERENCES TO THE "COMPANY"
INCLUDE EVANS WITHYCOMBE RESIDENTIAL, INC., ITS PREDECESSOR, EVANS WITHYCOMBE,
INC., AND ITS AFFILIATES, PREDECESSORS AND PARTNERS (COLLECTIVELY, "EVANS
WITHYCOMBE"), EVANS WITHYCOMBE RESIDENTIAL, L.P. (THE "OPERATING PARTNERSHIP"),
EVANS WITHYCOMBE FINANCE PARTNERSHIP, L.P. (THE "FINANCING PARTNERSHIP") AND
EVANS WITHYCOMBE MANAGEMENT, INC. (THE "MANAGEMENT COMPANY") AND (B) REFERENCES
TO THE OPERATING PARTNERSHIP INCLUDE THE FINANCING PARTNERSHIP.
THE OPERATING PARTNERSHIP
Evans Withycombe Residential, L.P. (the "Operating Partnership") is one of
the largest developers and managers of upscale apartment communities in Arizona
and has expanded its operations into selected sub-markets in Southern
California. The Operating Partnership's property portfolio consists of
stabilized properties and properties under construction and in lease-up. The
Operating Partnership owns and manages 44 stabilized multifamily apartment
communities located in Arizona and seven stabilized multifamily communities in
Southern California, containing a total of 14,523 apartments, of which 12,125
are in Arizona and 2,398 are in Southern California. The 51 stabilized
communities in Arizona and California are referred to herein as the "Stabilized
Communities." See "Business and Properties--Communities." The Operating
Partnership is also in the process of developing or expanding five apartment
communities in Arizona with a total of 1,198 apartments (the "Communities Under
Construction" and, together with the Stabilized Communities, the "Communities").
The Operating Partnership generally considers a property stabilized when it
first reaches 93% physical occupancy. The Operating Partnership also owns sites
intended for the development of three additional multifamily apartment
communities, and a site intended for the expansion of one of the Communities
Under Construction, all of which are in Phoenix. There can be no assurance that
the sites intended for development will be developed.
Evans Withycombe Residential, Inc. (the "Company"), operates as a
self-administered and self-managed real estate investment trust (a "REIT"). All
of the Communities and other assets of the Company are held by, and all of the
Company's operations are conducted through, the Operating Partnership (either
directly or through subsidiaries). The Company is the sole general partner and
also a limited partner of the Operating Partnership and owns an approximately
79.7% interest therein. To maintain the Company's qualification as a REIT while
realizing income from its fee management and related service business, the
Company's management operations are conducted through Evans Withycombe
Management, Inc. (the "Management Company") pursuant to the terms of management
agreements with the Operating Partnership and the Financing Partnership.
The Operating Partnership's principal executive office is located at 6991
East Camelback Road, Suite A-200, Scottsdale, Arizona 85251, and its telephone
number is (602) 840-1040.
S-3
<PAGE>
THE STABILIZED COMMUNITIES
The Stabilized Communities consist of 51 stabilized multifamily apartment
communities located in the following metropolitan areas:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
METROPOLITAN AREA COMMUNITIES APARTMENTS TOTAL(1)
- ------------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Phoenix, Arizona....................................... 37 9,864 67.9%
Tucson, Arizona........................................ 7 2,261 15.6%
Southern California.................................... 7 2,398 16.5%
--
----------- -----
51 14,523 100.0%
--
--
----------- -----
----------- -----
</TABLE>
- ------------------------
(1) The Operating Partnership is in preliminary negotiations with respect to the
sale of three Communities in Arizona with a total of 863 units (see "Recent
Developments--Other Recent Developments-- Dispositions"). In the event that
the three dispositions are consummated, the total number of apartments would
be 13,660 and the number of Communities, number of units and percent of
total in each market would be as follows: Phoenix--34 Communities, 9,001
Units, 65.9%; Tucson--7 Communities, 2,261 Units, 16.5%; Southern
California--7 Communities, 2,398 Units, 17.6%.
All of the Stabilized Communities are owned and operated by the Operating
Partnership and have an average size of 285 units. The average size of the
apartments in the Communities is 902 square feet. The Operating Partnership's
goal is for each community to reflect the Operating Partnership's brand image as
a market leader in its property type and geographical sub-market. Each Community
is individually designed to suit the specific site characteristics and
anticipated needs and desires of the residents. The Communities have been
designed and constructed in an attempt to integrate the natural surroundings and
architectural character of the neighborhood. The Communities are extensively
landscaped to create inviting open spaces and to complement the building
architecture. The objectives of the site layout and building design are to
provide residents with premium views, convenient parking, easy access to
amenities and a comfortable living environment.
S-4
<PAGE>
THE OFFERING
Unless otherwise indicated, all capitalized terms used herein and not
defined herein shall have the meanings provided in "Description of the
Notes--Additional Covenants of the Operating Partnership." For a more complete
description of the terms of the Notes specified in the following summary, see
"Description of the Notes" and "Description of Debt Securities" in the
accompanying Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED................ $75,000,000 aggregate principal amount of % Notes due
2004 and $50,000,000 aggregate principal amount of %
Notes due 2007.
MATURITY.......................... The 2004 Notes will mature on April 15, 2004 and the
2007 Notes will mature on April 15, 2007.
INTEREST PAYMENT DATES............ Semi-annually in arrears on each of April 15 and October
15, commencing October 15, 1997.
RANKING........................... The Notes will rank PARI PASSU with (I.E., the Notes
will generally rank equally with) each other and with
all the Operating Partnership's other unsecured and
unsubordinated indebtedness, but will be effectively
subordinated following this Offering to $277.7 million
of indebtedness that is secured by mortgages on 33 of
the Operating Partnership's Communities. See
"Capitalization."
USE OF PROCEEDS................... The net proceeds to the Operating Partnership from this
Offering will be used to repay indebtedness outstanding
under the Operating Partnership's $225 million unsecured
revolving credit facility ("Revolving Credit Facility").
At February 28, 1997, there was approximately $155
million outstanding on the Revolving Credit Facility
with an effective interest rate of 6.94%.
LIMITATIONS ON INCURRENCE OF TOTAL
DEBT............................ The Operating Partnership and its Subsidiaries (as
defined) will not incur any Debt (as defined), other
than Intercompany Debt (as defined), if, after giving
effect thereto, the aggregate principal amount of all
outstanding Debt of the Operating Partnership and its
Subsidiaries is greater than 60% of Total Assets (as
defined).
LIMITATIONS ON INCURRENCE OF
SECURED DEBT.................... In addition to the foregoing limitation on the
incurrence of Debt, the Operating Partnership and its
Subsidiaries will not incur any Secured Debt (as
defined) if, after giving effect thereto, the aggregate
principal amount of all outstanding Secured Debt of the
Operating Partnership and its Subsidiaries is greater
than 40% of Total Assets (as defined).
DEBT SERVICE COVERAGE............. In addition to the foregoing limitation on the
incurrence of Debt, the Operating Partnership and its
Subsidiaries will not incur any Debt, other than
Intercompany Debt, if the ratio of Consolidated Income
Available for Debt Service (as defined) to Annual Debt
Service Charge (as defined) for the four consecutive
fiscal quarters most recently ended prior to the date of
the incurrence of such additional Debt, is less than 1.5
to 1,
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
on a pro forma basis after giving effect to the
incurrence of such Debt and to the application of the
proceeds therefrom, as calculated based on certain
assumptions described below under "Description of the
Notes--Additional Covenants of the Operating
Partnership--Debt Service Coverage."
MAINTENANCE OF TOTAL UNENCUMBERED
ASSETS.......................... The Operating Partnership shall maintain at all times
Total Unencumbered Assets (as defined) of not less than
150% of the aggregate outstanding principal amount of
Unsecured Debt (as defined) of the Operating Partnership
and its Subsidiaries.
OPTIONAL REDEMPTION............... The Notes are redeemable at any time at the option of
the Operating Partnership, in whole or in part, at a
redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued interest
to the redemption date and (ii) the Make-Whole Amount
(as defined below under "Description of the
Notes--Optional Redemption"), if any. See "Description
of the Notes--Optional Redemption."
</TABLE>
S-6
<PAGE>
RECENT DEVELOPMENTS
ARIZONA DEVELOPMENT ACTIVITY
In 1996 and 1997 the Operating Partnership developed 1,564 stabilized
apartment units in Arizona, as part of the construction of four new Communities
and the expansion of five existing Communities.
EXPANSION INTO SOUTHERN CALIFORNIA
In 1996 and 1997, the Operating Partnership acquired an aggregate of six
apartment communities in Southern California, increasing its California
portfolio to seven apartment communities comprising a total of 2,398 apartments.
- - In March 1997, the Operating Partnership purchased the Marquessa Apartments, a
336 unit apartment community in Corona Hills, California for a total purchase
price of $23.0 million, of which approximately $18.35 million was represented
by the assumption of debt and the remainder was funded from borrowings under
the Revolving Credit Facility.
- - In February 1997, the Operating Partnership purchased Canyon Ridge Apartments,
a 162 unit apartment community in San Diego for a total purchase price of
approximately $11 million in cash, which the Operating Partnership funded with
borrowings under its Revolving Credit Facility.
- - In June 1996, the Operating Partnership acquired the Canyon Crest Views
apartments, a 178 unit apartment community in Riverside, California for a
total purchase price of approximately $12.8 million in cash.
- - In July 1996, the Operating Partnership acquired Portofino, a 176 unit
apartment community in Chino Hills, California for a total purchase price of
approximately $12.2 million in cash and Parkview Terrace Club Apartments, a
558 unit apartment community in Redlands, California for $9.3 million in cash
and the assumption of approximately $22.6 million in tax exempt bonds.
- - In December 1996, the Operating Partnership acquired the Redlands Lawn &
Tennis Club Apartments, a 496 unit apartment community in Redlands,
California, for a total purchase price of $28.8 million, which included the
assumption of approximately $24 million in tax exempt bond financing.
Additionally, the Operating Partnership is actively pursuing and is in
preliminary negotiations regarding additional properties in Riverside/San
Bernardino and San Diego, but no assurance can be given that it will continue to
pursue or consummate any acquisitions as a result of these negotiations.
FINANCING ACTIVITY
- - 1997 COMMON STOCK OFFERING. In February 1997, the Company completed a public
offering of 1,800,000 shares of its common stock. Net proceeds to the Company
were approximately $35,820,000. The Company used the proceeds to pay down the
Revolving Credit Facility.
- - DEBT RATING. At February 28, 1997, the Company's total debt was approximately
$413.6 million and the Company's debt to total market capitalization (market
equity plus debt) was approximately 44.7%. The Company received an investment
grade rating of "BBB-" from Standard & Poor's Corporation, "Baa3" from Moody's
Investors Service, Inc. and "BBB-" from Fitch Investors Service, Inc. in
December 1996 with respect to prospective issuances of senior unsecured debt.
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time by the assigning rating
organization, and each rating should be evaluated independently of any other
rating. A rating of (a) BBB- from Standard & Poor's Corporation indicates that
the obligations of the Operating Partnership are in the lower range of those
obligations that exhibit adequate protection parameters, (b) Baa3 from Moody's
Investor Service Inc. indicates that the obligations of the Operating
Partnership are considered to be in the lower range of medium-grade
obligations, which are not
S-7
<PAGE>
considered to be highly protected or poorly secured and (c) BBB- from Fitch
Investors Service, Inc. indicates that the obligations of the Operating
Partnership are considered to be of investment grade and of satisfactory
credit quality and that its ability to pay interest and to repay principal is
considered to be adequate.
- - REDUCTION OF MORTGAGE INDEBTEDNESS. In January 1997, the Operating Partnership
repaid four mortgage loans with an aggregate unpaid principal balance of
approximately $24.9 million with borrowings under the Revolving Credit
Facility. The mortgages were repaid with respect to Miramonte, Scottsdale
Meadows, Rancho Murietta and Villa Encanto. See "Capitalization."
- - EXPANDED REVOLVING CREDIT FACILITY. On September 25, 1996, the Company
expanded its existing $125 million unsecured revolving credit facility to $225
million with a bank group. The Revolving Credit Facility bears interest at a
floating rate of the London Interbank Offered Rate ("LIBOR") plus 150 basis
points (100 basis points equals one percent) (or, at the option of the
Company, at the prime rate announced by the banks). The interest rate was
reduced 25 basis points upon the Company achieving an investment grade rating
of "Baa3" or "BBB-." The Revolving Credit Facility has a term of three years,
with an option to extend for one year, subject to certain conditions, and
provides for monthly payments of interest only. It will be used to finance
acquisitions, to fund construction and development and renovation costs and
for working capital purposes. At March 19, 1997, there was approximately $159
million outstanding on the Revolving Credit Facility with an effective
interest rate of 6.94%.
- - 1996 COMMON STOCK OFFERING. In the second quarter of 1996, the Company
completed a public offering of 4,700,000 shares of its common stock of which
2,088,889 shares were sold by the Company and an aggregate of 2,611,111 shares
were sold by two institutional stockholders. Net proceeds to the Company were
approximately $40,891,000. The Company used the proceeds from the sale of
common stock to pay down amounts outstanding under its Revolving Credit
Facility.
OTHER RECENT DEVELOPMENTS
- - MANAGEMENT AGREEMENTS. The Operating Partnership has entered into agreements,
effective as of March 1, 1997, to manage four apartment communities in the
Phoenix area with approximately 590 units.
- - DISPOSITIONS. In accordance with its selective disposition strategy, the
Operating Partnership is in preliminary negotiations with respect to the sale
of three Communities. No assurance can be given that such dispositions or
sales will be consummated.
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby, after payment of expenses related to the Offering and
underwriting discounts and commissions, are estimated to be approximately $123.3
million. The Operating Partnership will use such net proceeds to repay
indebtedness then outstanding under its Revolving Credit Facility. The Operating
Partnership expects that it will borrow additional amounts under the Revolving
Credit Facility following the Offering to fund acquisitions and developments
from time to time and for working capital purposes. At March 19, 1997,
outstanding borrowings under the Revolving Credit Facility amounted to
approximately $159 million and had an effective interest rate of 6.94%. The
Operating Partnership incurred the indebtedness under the Revolving Credit
Facility primarily to fund acquisitions and developments. The Revolving Credit
Facility has a term of three years, ending September 1999, with an option for
the Company to extend for one year, subject to certain conditions.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1996, the actual
capitalization of the Operating Partnership and its adjusted capitalization
after giving effect to (a) the issuance and sale of the Notes and the
application of the net proceeds therefrom as described under the caption "Use of
Proceeds" and (b) the issuance of 1,800,000 Units of the Operating Partnership
to the Company in connection with the contribution to the Operating Partnership
of the net proceeds from the sale of a like number of shares of common stock of
the Company in February 1997 (the "1997 Stock Offering") and the application of
the net proceeds therefrom of approximately $35,820,000 to repay a portion of
the outstanding balance under the Revolving Credit Facility. The table below
does not give effect to the acquisition of Canyon Ridge and Marquessa in the
first quarter of 1997. See "Recent Developments." The information set forth in
the table should be read in conjunction with the financial and other information
included elsewhere and incorporated by reference in this Prospectus Supplement
and the accompanying Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
DEBT
Mortgage and notes payable (1)....................................... $ 40,143 $ 15,233
"AA"-rated securitized debt.......................................... 130,520 130,520
$50 million securitized debt......................................... 49,509 49,509
% Notes due 2004................................................... -- 75,000
% Notes due 2007................................................... -- 50,000
Unsecured Revolving Credit Facility (1).............................. 152,000 16,090
Variable rate tax free IDA bonds..................................... 64,000 64,000
--------- -----------
436,172 400,352
PARTNERS' CAPITAL (2).................................................. 283,954 319,774
--------- -----------
Total capitalization................................................. $ 720,126 $ 720,126
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) The as adjusted column further reflects that in January 1997, the Operating
Partnership repaid four mortgage loans with an unpaid principal of
approximately $24.9 million with borrowings under the Revolving Credit
Facility.
(2) The Company acquired 1,800,000 units in the Operating Partnership for
$35,820,000 representing the proceeds received from the sale of 1,800,000
shares of Common Stock of the Company on February 14, 1997.
S-9
<PAGE>
PRINCIPAL MATURITIES
The following table sets forth the principal maturities as adjusted as of
December 31, 1996 to give effect to the 1997 Stock Offering and this Offering
and the application of the proceeds thereof.
<TABLE>
<CAPTION>
YEAR
- ---------------------------------------------------------------------------------- DEBT
MATURING
-----------
(AMOUNTS IN
THOUSANDS)
<S> <C>
1997.............................................................................. $ 15,715
1998.............................................................................. 563
1999.............................................................................. 16,695
2000.............................................................................. 650
2001.............................................................................. 131,218
2002.............................................................................. 750
2003.............................................................................. 806
2004.............................................................................. 75,863
2005.............................................................................. 24,953
2006.............................................................................. 43,189
2007.............................................................................. 67,300
Thereafter........................................................................ 22,650
-----------
Total......................................................................... $ 400,352
-----------
-----------
</TABLE>
S-10
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth certain financial and operating data on a
consolidated basis for the Operating Partnership and on a combined historical
basis for Evans Withycombe. The following information should be read in
conjunction with all of the consolidated financial statements and notes thereto
included in the Operating Partnership's Form 10 incorporated by reference into
the accompanying Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS,
EXCEPT PER UNIT AND PROPERTY INFORMATION)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
REVENUES:
Rental...................................... $ 94,350 $ 68,864 $ 51,097 $ 38,613 $ 26,876
Third party management fees................. 1,157 1,268 1,668 2,213 2,204
Interest and other.......................... 6,119 4,399 4,194 3,112 2,373
--------- --------- --------- --------- ---------
Total revenues................................ 101,626 74,531 56,959 43,938 31,453
EXPENSES:
Repairs and maintenance..................... 11,607 8,293 6,288 4,730 3,272
Other property operating.................... 12,713 8,699 7,834 6,593 4,684
Advertising................................. 1,864 1,244 966 1,022 783
Real estate taxes........................... 6,915 4,723 3,204 2,869 2,307
Property management......................... 3,225 2,825 2,505 2,605 2,417
General and administrative.................. 1,387 1,321 1,175 1,466 1,360
Interest.................................... 24,225 12,650 7,836 6,361 5,909
Depreciation and amortization............... 20,885 13,762 10,333 10,319 7,146
Write-down of real estate assets (1)........ -- -- -- 1,361 10,284
Other (2)................................... -- -- 5,233 -- --
--------- --------- --------- --------- ---------
Total expenses................................ 82,821 53,517 45,374 37,326 38,162
--------- --------- --------- --------- ---------
Income (loss) before minority interest and
extraordinary item.......................... 18,805 21,014 11,585 6,612 (6,709)
Minority interest (3)......................... (75) (89) (42) -- --
Extraordinary item-gain on extinguishment of
debt (1).................................... -- -- -- 6,061 12,569
--------- --------- --------- --------- ---------
Net income.................................... $ 18,730 $ 20,925 $ 11,543 $ 12,673 $ 5,860
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per unit (4)....................... $ 0.84 $ 1.02
--------- ---------
--------- ---------
Earnings per unit for the period August 17 to
December 31, 1994 (4)....................... $ 0.38
---------
---------
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AND PROPERTY
INFORMATION)
<S> <C> <C> <C> <C> <C>
OTHER INFORMATION:
Cash flows from:
Operating activities.................... $ 38,721 $ 36,983 $ 21,998 $ 20,897 $ 13,271
Investing activities.................... (129,461) (118,061) (211,651) (79,511) (61,829)
Financing activities.................... 89,674 82,273 189,614 57,417 50,792
Ratio of Annual Debt Service Charge (5)... 2.64x 3.76x 4.48x N/A N/A
Ratio of Debt to Total Assets (5)......... 46.78% 39.19% 22.39% N/A N/A
Ratio of Secured Debt to Total Assets
(5)..................................... 30.36% 33.84% 22.39% N/A N/A
Percentage of Total Unencumbered Assets to
Unsecured Debt.......................... 248% 233% N/A N/A N/A
Total rental communities (end of
period)................................. 49 41 32 31 27
Total number of apartments (end of
period)................................. 13,905 11,053 7,924 7,695 6,502
Physical occupancy (end of period) (6).... 93% 96% 97% 97% 97%
Weighted average number of apartments
(7)..................................... 12,887 9,798 7,740 6,641 4,998
Weighted average monthly revenue per unit
(8)..................................... $ 715 $ 641 $ 586 $ 532 $ 498
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.............................. $ 761,550 $ 587,183 $ 399,987 $ 292,513 $ 215,549
Total assets................................ 735,467 579,564 402,486 271,055 204,836
Total debt.................................. 436,172 297,456 127,787 106,545 64,792
Minority interest........................... 827 889 1,247 -- --
Equity...................................... $ 283,954 $ 259,055 $ 253,867 $ 142,886 $ 122,135
</TABLE>
- ------------------------
(1) During 1993, the Operating Partnership negotiated a discounted payoff of a
mortgage loan secured by The Meadows and Promontory Pointe (1992). The
excess of the amounts owed for principal and interest over the amount paid
to pay off the loan is recorded as an extraordinary item-gain on
extinguishment of debt. The Operating Partnership determined that the
carrying values of the communities were in excess of net realizable value.
The excess of $1,361 and $10,284 was charged to write down of real estate
assets.
(2) In connection with the repayment of existing indebtedness at the time of the
IPO, prepayment penalties and lender participation (additional interest)
totaling $2,594 were paid. Prior to the IPO, an Executive Incentive Deferred
Compensation Plan was canceled and the $2,639 that was funded by the
Operating Partnership was expensed during 1994.
(3) Net income includes an adjustment for Evans Withycombe Finance, Inc.'s one
percent interest in the Financing Partnership for the years ended December
31, 1996 and 1995 and the period from August 17 to December 31, 1994,
respectively.
(4) Net income per Unit is based on 22,184,395, 20,590,873 and 20,086,884
weighted average number of Units outstanding for the years ended December
31, 1996 and 1995 and the period from August 17 to December 31, 1994,
respectively.
(5) For a definition of these terms, see "Description of the Notes--Additional
Covenants of the Operating Partnership."
S-12
<PAGE>
(6) Physical Occupancy is defined as the number of apartments occupied or leased
(including models and employee apartments) divided by the total number of
leaseable apartments within the community, expressed as a percentage.
Physical occupancy has been calculated using the average of the occupancy
that existed on the last day of each month over each period.
(7) Weighted average number of apartments is the average of all apartments
during the period. For stabilized properties, all apartments are included in
the calculation of the weighted average. For communities in the lease-up
phase, only apartments that are completed and occupied are included in the
weighted average calculation.
(8) Weighted average monthly revenue per apartment is derived by dividing rental
income by the weighted average number of apartments.
S-13
<PAGE>
BUSINESS AND PROPERTIES
OVERVIEW
The Operating Partnership is managed by its general partner, the Company, a
self-administered and self-managed equity REIT that was founded in 1977 (Evans
Withycombe's initial public offering (the "IPO") was in August 1994; its
predecessor entities were founded in 1977). Since its inception, the Company has
focused on the development, acquisition, management and ownership of upscale
multifamily apartment communities in Phoenix and Tucson, Arizona. During the
last two years, the Operating Partnership has expanded its focus to include
selected sub-markets in Southern California. Since 1977, the Company, through
the Operating Partnership and its predecessor entities, has developed 47
properties consisting of 10,663 apartments and acquired 38 properties consisting
of an additional 10,160 apartments, some of which were selectively sold over the
past several years.
The Operating Partnership's current portfolio consists of the following
Stabilized Communities and Communities Under Construction and in Lease Up:
- STABILIZED COMMUNITIES. The Operating Partnership owns and manages 44
Stabilized Communities located in the Phoenix and Tucson metropolitan
areas, containing a total of 12,125 apartments. In addition, the Company
owns and manages seven Stabilized Communities in the Southern California
submarkets of San Bernardino/Riverside and San Diego, which contain a
total of 2,398 apartments.
- COMMUNITIES UNDER CONSTRUCTION AND IN LEASE UP. The Operating Partnership
owns five apartment Communities Under Construction in Arizona with a total
of 1,198 apartments. Four of these communities are new developments and
one is an expansion of an existing Community owned by the Operating
Partnership.
BUSINESS STRATEGIES
The Operating Partnership's business strategy is to improve cash flow from
Stabilized Communities through intensive management focusing on maintaining
resident satisfaction and retention, increasing rents, maintaining high
community occupancy levels and controlling operating expenses. The Operating
Partnership's strategy is also to develop and acquire multifamily properties
which will provide both favorable initial returns and long-term growth
prospects.
- - MANAGEMENT OF EXISTING PROPERTIES. The Operating Partnership believes that
favorable supply and demand conditions will result in improving cash flow from
existing properties in Phoenix, Tucson and Southern California and through the
Operating Partnership's property management programs. The property management
team for each apartment community includes on-site management and maintenance
personnel. The property management teams perform leasing and rent collection
functions and coordinate resident services. All personnel are extensively
trained and are encouraged to continue their education through both Operating
Partnership-sponsored and outside training. Property management personnel
utilize state-of-the-art on-site computer management systems to assist in the
timely leasing of vacant apartments, collection of rents, maintenance
management and delivery of services to the apartment residents.
- - CUSTOMER SERVICE FOCUS. The focus of the Operating Partnership's on-site
management program is on providing prompt, courteous and responsive service to
its residents. The Operating Partnership believes that a strong resident
retention program emphasizing customer service reduces the Operating
Partnership's turnover rate and encourages residents to refer new customers.
The Operating Partnership solicits resident feedback and responds to
maintenance requests on a same day basis and provides 24-hour-a-day emergency
maintenance services.
- - PREVENTIVE MAINTENANCE PROGRAMS. The Operating Partnership conducts periodic
capital and preventive maintenance programs at each Community. In addition,
periodic preventive maintenance checks are
S-14
<PAGE>
made in each apartment pursuant to which appliances, heating and cooling
systems and apartment interiors are inspected and serviced as necessary. The
Operating Partnership believes that these programs lower operating costs over
the life of the Communities, increase the long-term value and maintain the
upscale market position of the Communities.
- - DEVELOPMENT STRATEGY. The Operating Partnership seeks to develop properties in
markets where it discerns a strong demand and where it anticipates attractive
rates of return. The Operating Partnership develops its Communities in markets
where resident profiles justify the development of high quality apartments
offering extensive resident amenities and services. In evaluating whether to
develop an apartment community in a particular location, the Operating
Partnership analyzes relevant demographic, economic and financial data.
Specifically, the Operating Partnership considers the following factors, among
others, in determining the viability of a potential new apartment community:
(i) income levels and employment growth trends in the relevant market, (ii)
uniqueness of location, (iii) household growth and net migration of the
relevant market's population, (iv) supply/demand ratio, competitive housing
alternatives, sub-market occupancy and rent levels and (v) barriers to entry
which would limit competition. The development risk is minimized by having
fixed price construction contracts in place before starting construction;
acquiring land only after entitlements are in place; maintaining adequate
contingency reserves; and underwriting new projects at current market rents.
The Operating Partnership currently intends to develop apartment communities
in select sub-markets in Phoenix and intends to develop communities in its
California sub-markets when economic conditions warrant. See "--Communities
Under Construction."
- - ACQUISITION STRATEGY. The Operating Partnership believes that it is well
positioned to take advantage of market timing opportunities in certain
Southern California markets, including San Diego and Riverside/ San
Bernardino, which will permit it to acquire existing apartment properties at
favorable prices. The Operating Partnership focuses on properties with below
market occupancies and rents, so that it can benefit both from property
repositioning and market improvements. The target acquisition properties will
often be under-managed, but fundamentally sound properties. Improvements to
landscaping, recreational amenities, and apartment interiors, coupled with
more effective management and marketing may result in significant revenue
increases over revenue levels at the time of acquisition. Such repositioning
may require substantial expenditures for capital improvements, refurbishments
and marketing.
The Operating Partnership believes that the Company's status as a publicly
traded REIT will enhance its ability to acquire properties or development
sites by providing property sellers a means to defer federal income taxes on
gains through the issuance of units of partnership interest in the Operating
Partnership ("Units") as consideration for the acquisition. Units were
utilized in the acquisition of Acacia Creek during the first quarter of 1995
and The Ashton during the fourth quarter of 1995. In addition, the Operating
Partnership's and the Company's access to the capital market allows for
additional financing flexibility for acquisitions.
- - DISPOSITION STRATEGY. The Operating Partnership may, from time to time, elect
to sell certain of its properties or exchange such properties for other
properties in a tax-free exchange when it believes that such resources could
be better allocated elsewhere.
- - THIRD PARTY FEE MANAGEMENT BUSINESS. The Operating Partnership succeeded to
the third party property management activities of its predecessor. Although it
contributes a small part of the Operating Partnership's revenues, the
Management Company continues to manage multifamily properties owned by third
parties. The fee management business is highly competitive and fragmented. The
Operating Partnership's competitors include a variety of local, regional and
national firms with no one firm controlling a significant market share in the
Operating Partnership's markets. The Operating Partnership will take advantage
of its reputation and experience as a property manager and accept property
management assignments that it expects to be profitable and which complement
the Operating Partnership's property portfolio.
S-15
<PAGE>
Effective March 1, 1997, the Operating Partnership entered into agreements
to manage four apartment communities located in Phoenix, Arizona containing
approximately 570 units increasing the third party fee managed portfolio to nine
apartment communities containing approximately 1,800 units.
The Operating Partnership's business strategies stated above include
estimates and forward-looking statements and prospects regarding, among other
things, the stability of occupancy and rent levels in the Operating
Partnership's markets and its ability to acquire existing apartment communities
at favorable prices. This forward-looking information involves risks and
uncertainties that could significantly impact the Operating Partnership's
ability to successfully implement these strategies. Among the factors that could
cause actual results to differ materially from the forward-looking statements
above are: the timing of the Operating Partnership's acquisitions and planned
development of new, and expansion of existing, communities; the actual costs
associated with such acquisitions and developments; the demand for apartments in
its markets; the strength of the local economies; and the Operating
Partnership's ability to successfully expand its operations into selected
submarkets of Southern California, markets in which it did not have any
operating experience prior to 1995. See "Risk Factors" in the accompanying
Prospectus.
COMMUNITIES
REGIONAL FOCUS
The Operating Partnership has focused on becoming a major presence in each
of its markets, allowing it to capitalize on its superior customer service,
product design and property locations while establishing and maintaining a
strong brand identity. The Operating Partnership seeks to operate in markets
where population and employment growth rates are expected to exceed the national
averages and where it believes it can become one of the regionally significant
owners and managers of multifamily apartment properties. The Communities are
located in growing sub-markets in Phoenix and Tucson, Arizona and Southern
California. The Communities are in sub-markets close to areas of employment,
transportation and shopping and in master planned communities.
- - Arizona. The Operating Partnership's size and prominence in its primary
Arizona markets provide it with a number of competitive advantages, including
superior market knowledge resulting in choice site selection, product
differentiation, economies of scale in operations and the ability to utilize
specialized marketing techniques.
- - California. After conducting an extensive study of a number of potential
markets within its region, the Operating Partnership has determined that
certain markets in Southern California present significant opportunities for
growth and attractive investment opportunities. The Operating Partnership has
acquired 2,398 units in this market and believes that properties continue to
be available for purchase in the market at prices below replacement costs
which could result in growth and attractive yields for the Operating
Partnership.
EXPANSION INTO SOUTHERN CALIFORNIA
OVERVIEW. The Operating Partnership has expanded its operations into
Sourthern California while continuing to grow within Arizona. The Operating
Partnership's geographic growth goal is to establish a major market presence in
each of its metropolitan areas, rather than entering additional markets for
portfolio diversification alone. Consistent with that goal, the Operating
Partnership has carefully analyzed the real estate investment potential of a
number of major Western metropolitan areas and has selected the Southern
California market.
GEOGRAPHIC EXPANSION. The Operating Partnership believes that selective
geographic expansion with the intent of establishing a significant market
presence in each market it enters presents a number of advantages, as summarized
below.
S-16
<PAGE>
- - BROADER INVESTMENT OPPORTUNITIES. The Operating Partnership intends to
enter only those additional markets that provide significant investment
opportunities. Operating in these nearby markets would allow the Operating
Partnership to allocate its resources efficiently to those specific markets
that presented the greatest opportunities at any given time.
- - MANAGEMENT SYSTEMS. The Operating Partnership's strong management team and
systems give the Operating Partnership the capabilities for this expansion.
The Operating Partnership has excellent management and marketing systems
which it believes have allowed it to achieve high quality and value
throughout its operations and can be duplicated in other markets. The
Operating Partnership's expertise give it a significant advantage in
successfully entering other markets, particularly those that are fragmented
and do not have a leading apartment company that provides a differentiated
product.
- - DIVERSIFICATION. Although the markets that the Operating Partnership is
evaluating are all in relatively close proximity within the Western United
States, expansion beyond Arizona provides diversification relative to the
Arizona market and economy.
CRITERIA FOR EXAMINING NEW MARKETS. When evaluating potential markets for
expansion, the Operating Partnership considered, among other things, the
following factors:
- - MARKET SIZE. The Operating Partnership believes that an expansion market
needs to be large enough to provide economic diversity and to allow the
Company to build a large apartment portfolio.
- - ACCESSIBILITY. The Operating Partnership intends to maintain a centralized
corporate structure rather than a regional subsidiary structure, allowing it
to centralize control and communication, asset allocation, maintenance of
the brand image, human resource allocation and standardized operating
procedures. Therefore it seeks expansion markets that are easily accessible
from the Operating Partnership's Scottsdale, Arizona headquarters.
- - STRONG INVESTMENT CHARACTERISTICS. The Operating Partnership's expansion
markets must have near-term and long-term investment potential and economic
stability.
- - FRAGMENTED COMPETITION. The Operating Partnership believes it has
successfully differentiated its product from those of its competitors in
Phoenix and Tucson. Therefore, the Operating Partnership seeks markets where
the competition is fragmented, allowing it to replicate such product
differentiation.
EXPANSION INTO SOUTHERN CALIFORNIA MARKETS. Because acquisitions at low
prices below replacement cost are available in these target markets, the
Operating Partnership's initial growth in these markets will occur through
property acquisitions. The Operating Partnership plans no development and
construction of properties in these markets in the near term, except for the
potential expansion of existing properties. The Operating Partnership
anticipates that it will begin building in these markets at such time after
economic occupancy and rent levels have risen to justify new construction.
REPUTATION FOR QUALITY
As a long-term investor, the Operating Partnership develops and acquires its
communities for long-term value. The properties developed by the Operating
Partnership share an innovative design approach characterized by high-quality
construction, architectural detail, attractive landscaping, extensive amenities
and interior features. Similarly, in seeking acquisition properties, the
Operating Partnership identifies properties which after refurbishment meet the
same standards. The Operating Partnership's reputation for quality in its
markets has led to success in obtaining development entitlements and brand name
identification in its primary markets.
The Operating Partnership's goal is for each Community to be a market leader
in its property type and geographical sub-market. Each Community is individually
designed to suit the specific site characteristics and anticipated needs and
desires of the residents. The Communities have been designed and constructed
S-17
<PAGE>
in an attempt to integrate them with the natural surroundings and architectural
character of the neighborhood. The Communities are landscaped to create an
inviting atmosphere starting with the first approach to the properties.
Landscaping is designed to complement the building architecture, and provide
residents with attractive open spaces. The objectives of the site layout and
building design are to provide residents with premium views, convenient parking,
easy access to amenities and a comfortable living environment. After completion
of the Communities Under Construction, the average age of the Communities will
be seven years.
STABILIZED COMMUNITIES
The following sets forth certain information regarding the current
Stabilized Communities. All of the Communities are owned 100% in fee by the
Operating Partnership. For a description of liens on certain of the Communities
listed below, see "Schedule III--Real Estate Investments and Accumulated
Depreciation" on page F-19 of the Form 10/A incorporated by reference into the
accompanying Prospectus.
<TABLE>
<CAPTION>
AVERAGE AVERAGE
UNIT PHYSICAL PHYSICAL
SIZE OCCUPANCY OCCUPANCY AS
NUMBER OF DEVELOPED/ YEAR DEVELOPED (SQUARE DURING OF DECEMBER
STABILIZED COMMUNITIES CITY APARTMENTS ACQUIRED OR ACQUIRED FEET) 1996(1) 31, 1996(1)
- ------------------------------ ------------ ---------- ----------- -------------- ------- --------- ------------
<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 (2)............. Chandler 396 Acq/Dev 1991/1993/1996 961 93% 92%
Deer Creek Village............ Phoenix 308 Acquired 1991 819 97% 92%
Gateway Villas................ Phoenix 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 (3)............... 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 (2)............... Gilbert 224 Acq/Dev 1992/1996 880 96% 93%
Preserve at Squaw Peak........ Phoenix 108 Acquired 1991 952 96% 90%
Promontory Pointe (5)......... Phoenix 424 Acq/Dev 1988/1997 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%
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
AVERAGE AVERAGE
UNIT PHYSICAL PHYSICAL
SIZE OCCUPANCY OCCUPANCY AS
NUMBER OF DEVELOPED/ YEAR DEVELOPED (SQUARE DURING OF DECEMBER
STABILIZED COMMUNITIES CITY APARTMENTS ACQUIRED OR ACQUIRED FEET) 1996(1) 31, 1996(1)
- ------------------------------ ------------ ---------- ----------- -------------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Towne Square (2).............. 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%
----------
Total Phoenix............... 9,864
----------
TUCSON:
Harrison Park (4)............. Tucson 172 Acquired 1991/1996 809 87% 85%
La Reserve.................... Oro Valley 240 Developed 1988 900 91% 92%
Orange Grove Village (2)...... Tucson 400 Acs/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%
----------
Total Tucson................ 2,261
----------
Total Arizona: 12,125
----------
----------
CALIFORNIA:
The Ashton.................... Corona Hills 492 Acquired 1995 850 94% 92%
Canyon Crest Views (6)........ Riverside 178 Acquired 1996 1,193 97% 96%
Canyon Ridge (7).............. San Diego 162 Acquired 1997 778 97% 98%
Marquessa (8)................. Corona Hills 336 Acquired 1997 900 96% 98%
Portofino (9)................. Chino Hills 176 Acquired 1996 873 99% 98%
Parkview Terrace Club (9)..... Redlands 558 Acquired 1996 801 96% 95%
Redlands Lawn & Tennis (10)... Redlands 496 Acquired 1996 795 89% 89%
---------- -------
Total California.............. 2,398
----------
----------
TOTAL....................... 14,523
----------
----------
WEIGHTED AVERAGE............ 285 902
---------- -------
---------- -------
</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) A new phase of this Community was completed and reached stabilized occupancy
in 1996.
(3) 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.
(4) Another phase of this Community is currently under development. See
"Development and Construction Activity" below.
(5) A new phase of this Community reached stabilized occupancy in 1997.
(6) Property was acquired in June 1996.
S-19
<PAGE>
(7) Property was acquired in February 1997.
(8) Property was acquired in March 1997.
(9) Property was acquired in July 1996.
(10) Property was acquired in December 1996.
Of the Stabilized Communities included in the table, 37 are located in the
greater Phoenix area, seven are located in the Tucson area and seven are located
in Southern California. All of the Stabilized Communities are managed and
operated by the Operating Partnership and have an average size of 285 units. The
Stabilized Communities are primarily oriented to attract 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 Communities is 902 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.
COMMUNITIES UNDER CONSTRUCTION AND IN LEASE UP.
The Operating Partnership's current development and construction activity is
summarized below:
<TABLE>
<CAPTION>
ACTUAL OR PERCENTAGE OF
ESTIMATED QUARTER OF ESTIMATED ESTIMATED UNITS LEASED AS
NAME & NUMBER OF CONSTRUCTION CONSTRUCTION COMMENCEMENT STABILIZED OF FEBRUARY 28,
METROPOLITAN AREA: CITY UNITS COST COMMENCEMENT OF LEASE-UP OCCUPANCY 1997
- ----------------------- --------- ----------- --------------- ------------- ------------- --------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
PHOENIX:
The Hawthorne.......... Phoenix 276 $ 17 4Q'95 3Q'96 3Q'97 80%
The Isle at Arrowhead
Ranch................ Glendale 256 17 2Q'96 4Q'96 4Q'97 32%
The Retreat (Phase
I)................... Phoenix 240 14 1Q'97 3Q'97 3Q'98 n/a
----- ---
772 48
TUCSON:
Bear Canyon............ Tucson 238 15 3Q'95 2Q'96 2Q'97 75%
Harrison Park II
Expansion............ Tucson 188 10 3Q'95 2Q'96 2Q'97 80%
----- ---
426 25
----- ---
TOTAL................ 1,198 $ 73
----- ---
----- ---
</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 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 forward looking and involves various risks and uncertainties. Such
information is based upon a number of estimates and
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assumptions that are inherently subject to business, economic and competitive
uncertainties and contingencies, many of which are beyond the Operating
Partnership's control. While all apartment communities previously developed by
the Operating Partnership have been developed on schedule and within budget, 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 Operating
Partnership including, for example, labor and other personnel costs, material
costs, weather conditions, government fees and leasing rate. See "Risk Factors"
in the accompanying Prospectus. The inclusion of estimates herein should not be
regarded as a representation by the Operating Partnership or the Underwriters or
any other person that the estimates will be achieved.
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 Operating Partnership 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
Operating Partnership 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 properties.
EMPLOYEES
As of February 28, 1997, the Operating Partnership, 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
and construction businesses of the Company. The Operating Partnership 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 Operating Partnership
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.
LEGAL PROCEEDINGS
None of the Company, the Operating Partnership, any of the Communities or
Evans Withycombe is presently subject to any material litigation nor, to the
Operating Partnership's knowledge, is any litigation threatened against the
Company, the Operating Partnership, any of the Communities or Evans Withycombe,
other than routine litigation and administrative proceedings arising in the
ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the business, financial condition or results of
operations of the Operating Partnership.
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<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The 2004 Notes and the 2007 Notes offered hereby constitute separate series
of Debt Securities (which are more fully described in the accompanying
Prospectus), each to be issued pursuant to an indenture (the "Indenture"),
between the Operating Partnership and Bank One, Columbus, N.A., as trustee (the
"Trustee"), and will be limited in aggregate principal amount to $75,000,000 and
$50,000,000, respectively. The following description of the particular terms of
the Notes supplements the description of the general terms and provisions of the
Debt Securities set forth in the accompanying Prospectus, to which description
reference is hereby made. The terms of the Notes include those provisions
contained in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Notes are subject to all such terms, and holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to and qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
Indenture and the Notes are available for inspection at the office of the
Trustee located at Bank One, Columbus, N.A., Corporate Trust Department, 100
East Broad Street, Columbus, Ohio 43215. As used in this section "Description of
the Notes," the "Operating Partnership" refers to Evans Withycombe Residential,
L.P. and the "Company" refers to Evans Withycombe Residential, Inc., in each
case, exclusive of their respective subsidiaries and affiliates.
The Notes will be direct, unsecured and unsubordinated obligations of the
Operating Partnership and will rank PARI PASSU with (I.E., the Notes will
generally rank equally with) each other and with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. The Notes will be effectively subordinated to mortgage and other
secured indebtedness of the Operating Partnership and to secured and unsecured
indebtedness and other liabilities of Subsidiaries of the Operating Partnership.
As of December 31, 1996, such secured indebtedness and indebtedness of
Subsidiaries of the Operating Partnership aggregated approximately $284.2
million, and such unsecured and unsubordinated indebtedness of the Operating
Partnership aggregated approximately $152 million. See "Capitalization" and "Use
of Proceeds." Subject to certain limitations set forth in the Indenture, and as
described under "Additional Covenants of the Operating Partnership" below, the
Indenture will permit the Operating Partnership and its Subsidiaries to incur
additional secured and unsecured indebtedness.
The 2004 Notes will mature on April 15, 2004 and the 2007 Notes will mature
on April 15, 2007, (each a "Maturity Date"). The Notes are not subject to any
sinking fund provisions. The Notes are subject to redemption at the Operating
Partnership's option. See "--Optional Redemption." The Notes will be issued only
in fully registered, book-entry form without coupons, in denominations of $1,000
and integral multiples thereof, except under the limited circumstances described
below under "Book-Entry System."
Except as described under "Additional Covenants of the Operating
Partnership" below and under "Description of Debt Securities--Merger,
Consolidation or Sale" in the accompanying Prospectus, the Indenture does not
contain any provisions that would limit the ability of the Operating Partnership
to incur indebtedness or that would afford holders of the Notes protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any of them, (ii) a change of control of the
Operating Partnership or the Company, or (iii) a reorganization, restructuring,
merger or similar transaction involving the Operating Partnership or the Company
that may adversely affect the holders of the Notes. In addition, subject to the
limitations set forth under "Description of Debt Securities--Merger,
Consolidation or Sale" in the accompanying Prospectus, the Operating Partnership
may, in the future, enter into certain transactions such as the sale of all or
substantially all of its assets or the merger or consolidation of the Operating
Partnership that would increase the amount of the Operating Partnership's
indebtedness or substantially reduce or eliminate the Operating Partnership's
assets, which may have an adverse effect on the Operating
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Partnership's ability to service its indebtedness, including the Notes. The
Operating Partnership and its management have no present intention of engaging
in a highly leveraged or similar transaction involving the Operating
Partnership.
PRINCIPAL AND INTEREST
The 2004 and 2007 Notes will bear interest at the rates set forth on the
cover page of this Prospectus Supplement from the date of issuance or from the
immediately preceding Interest Payment Date (as defined below) to which interest
has been paid, payable semi-annually in arrears on each April 15 and October 15,
commencing October 15, 1997 (each, an "Interest Payment Date"), and on the
applicable Maturity Date, to the persons (the "Holders") in whose names the
Notes are registered in the security register applicable to the Notes at the
close of business on the date 15 calendar days prior to such payment day
regardless of whether such day is a Business Day, as defined below (each, a
"Regular Record Date"). Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.
If any Interest Payment Date or a Maturity Date falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or such Maturity Date, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, on which banking institutions in The City of New York
are open for business.
ADDITIONAL COVENANTS OF THE OPERATING PARTNERSHIP
Reference is made to the section entitled "Description of Debt Securities"
in the accompanying Prospectus for a description of the covenants applicable to
the Notes. In addition to the foregoing, the following covenants of the
Operating Partnership will apply to the Notes for the benefit of the Holders.
LIMITATION ON INCURRENCE OF TOTAL DEBT. The Operating Partnership will not,
and will not permit any Subsidiary to, incur any Debt (as defined below), other
than Intercompany Debt (as defined below) if, immediately after giving effect to
the incurrence of such additional Debt, the aggregate principal amount of all
outstanding Debt of the Operating Partnership and its Subsidiaries is greater
than 60% of Total Assets (as defined below).
LIMITATION ON INCURRENCE OF SECURED DEBT. In addition to the foregoing
limitation on the incurrence of Debt, the Operating Partnership will not, and
will not permit any Subsidiary to, incur any Secured Debt (as defined below) if,
immediately after giving effect to the incurrence of such additional Secured
Debt, the aggregate principal amount of all outstanding Secured Debt of the
Operating Partnership and its Subsidiaries is greater than 40% of Total Assets.
DEBT SERVICE COVERAGE. In addition to the foregoing limitation on the
incurrence of Debt, the Operating Partnership will not, and will not permit any
Subsidiary to, incur any Debt, other than Intercompany Debt, if the ratio of
Consolidated Income Available for Debt Service to Annual Debt Service Charge (in
each case as defined below) for the period consisting of the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred is less than 1.5 to 1, on a pro forma basis after giving
effect to the incurrence of such Debt and to the application of the proceeds
therefrom, and calculated on the assumption that (i) such Debt and any other
Debt incurred since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
occurred at the beginning of such period, (ii) the repayment or retirement of
any other Debt since the first day of such four-quarter period had occurred at
the beginning of such period (except that, in making such computation under this
subsection (ii) or subsection (i) above, the amount of Debt under any revolving
credit facility shall be computed based upon the average daily balance of such
Debt during such period), and (iii) any increase or decrease in Total Assets, or
any other acquisition or disposition by the Operating Partnership or any
Subsidiary of any asset or group of assets, since the first
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day of such four-quarter period, including, without limitation, by merger, stock
purchase or sale, or asset purchase or sale, had occurred at the beginning of
such period, in each case with the appropriate adjustments to net income and
Debt levels with respect to such increase, decrease or other acquisition or
disposition being included in such pro forma calculation. For purposes of the
adjustments referred to in clause (iii) of the preceding sentence, any income
earned (or loss incurred) as a result of any such increase, decrease or other
acquisition or disposition referred to in clause (iii) for a period less than
such four-quarter period shall be annualized for such four-quarter period.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating Partnership shall
maintain at all times Total Unencumbered Assets (as defined below) of not less
than 150% of the aggregate outstanding principal amount of Unsecured Debt (as
defined below) of the Operating Partnership and its Subsidiaries.
As used herein:
"Annual Debt Service Charge" for any period means the amount which is
expensed for interest on Debt.
"Annualized EBITDA" means earnings before interest, taxes, depreciation and
amortization for the 12-month period ending on the last day of each month for
all properties owned by the Operating Partnership and its Subsidiaries,
excluding the effect of items classified as extraordinary items in accordance
with generally accepted accounting principles, and adjusted to reflect the
assumption that any acquisition or disposition by the Operating Partnership or
any Subsidiary of any assets since the first day of such period and any related
repayment of Debt had occurred as of the first day of such period with
appropriate adjustments with respect to such acquisition or disposition.
"Annualized EBITDA After Minority Interest" means Annualized EBITDA after
minority interest, if any, in Subsidiaries of the Operating Partnership.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted in determining
Consolidated Net Income during such period for (i) Consolidated Interest
Expense, (ii) provision for taxes of the Operating Partnership and its
Subsidiaries based on income, (iii) amortization (other than amortization of
debt discount) and depreciation, (iv) provisions for losses from sales or joint
ventures, (v) increases in deferred taxes and other non-cash charges, (vi)
charges resulting from a change in accounting principles, and (vii) charges for
early extinguishment of debt, and less amounts which have been added in
determining Consolidated Net Income during such period for (a) provisions for
gains from sales or joint ventures, and (b) decreases in deferred taxes and
other non-cash credits.
"Consolidated Interest Expense" means, for any period, and without
duplication, all interest (including the interest component of rentals on
capitalized leases, letter of credit fees, commitment fees and other like
financial charges) and all amortization of debt discount on all Debt (including,
without limitation, payment-in-kind, zero coupon and other like securities), but
excluding legal fees, title insurance charges, and other out-of-pocket fees and
expenses incurred in connection with the issuance of Debt and the amortization
of any such debt issuance costs that are capitalized, all determined in
accordance with generally accepted accounting principles.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Debt" means any indebtedness of the Operating Partnership or any Subsidiary
whether or not contingent, in respect of (i) borrowed money or evidenced by
bonds, notes, debentures or similar instruments, (ii) indebtedness secured by
any mortgage, pledge, lien, charge, encumbrance or any security interest
existing on property owned by the Operating Partnership or any Subsidiary (iii)
the reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts
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representing the balance deferred and unpaid of the purchase price of any
property except any such balance that constitutes an accrued expense or trade
payable or (iv) any lease of property by the Operating Partnership or any of its
Subsidiaries as lessee which is reflected in the Operating Partnership's
consolidated balance sheet as a capitalized lease in accordance with generally
accepted accounting principles, and (v) to the extent not otherwise included in
(i) through (iv) above, any obligation by the Operating Partnership or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Operating Partnership or any
Subsidiary).
"Intercompany Debt" means indebtedness owed by the Operating Partnership or
any Subsidiary solely to the Operating Partnership or any Subsidiary.
"Secured Debt" means Debt secured by any mortgage, lien, charge,
encumbrance, trust deed, deed of trust, deed to secure debt, security agreement,
pledge, conditional sale or other title retention agreement, capitalized lease,
or other security interest or agreement granting or conveying security title to
or a security interest in real property or other tangible assets.
"Senior Executive Group" means, collectively, those individuals holding the
offices of Chairman, President, Chief Executive Officer, Chief Operating
Officer, or any Executive Vice President of the Company.
"Subsidiary" means (i) any corporation, partnership, limited liability
company or other entity the majority of the shares of the non-voting capital
stock or other equivalent ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Operating
Partnership, and the majority of the shares of the voting capital stock or other
equivalent ownership interests of which (except directors' qualifying shares)
are at the time directly or indirectly owned by the Operating Partnership or by
the Operating Partnership and the Company, any other Subsidiary, and/or one or
more individuals of the Senior Executive Group (or, in the event of death or
disability of any of such individuals, his/her respective legal
representative(s)), or such individuals' successors in office as an officer of
the Company, and (ii) any other entity (other than the Company) the accounts of
which are consolidated with the accounts of the Operating Partnership.
"Total Assets" as of any date means the sum of (i) the amount determined by
multiplying the sum of the shares of common stock of the Company issued in the
initial public offering of the Company ("IPO") and the units of the Operating
Partnership not held by the Company outstanding on the date of the IPO, by
$20.00 (the "IPO Price"), (ii) the principal amount of the outstanding
consolidated debt of the Company on the date of the IPO, (iii) the purchase
price or cost of any real estate assets acquired (including the value, at the
time of such acquisition, of any units of the Operating Partnership or shares of
common stock of the Company issued in connection therewith) or developed after
the IPO by the Operating Partnership or any Subsidiary, and (iv) cash and
restricted cash on the Operating Partnership's balance sheet, HOWEVER, Total
Assets shall be reduced by the amount of the proceeds of any real estate assets
disposed of after the IPO by the Operating Partnership or any Subsidiary.
"Total Unencumbered Assets" as of any date means Total Assets as of such
date multiplied by a fraction, the numerator of which is Unencumbered Annualized
EBITDA After Minority Interest and the denominator of which is Annualized EBITDA
After Minority Interest.
"Unencumbered Annualized EBITDA After Minority Interest" means Annualized
EBITDA after minority interest, if any, in Subsidiaries of the Operating
Partnership less any portion thereof attributable to assets that are mortgaged,
pledged or otherwise hypothecated as collateral for Secured Debt.
"Unsecured Debt" means Debt that is not Secured Debt.
Reference is made to the section entitled "Description of Debt
Securities--Certain Covenants" in the accompanying Prospectus for a description
of additional covenants applicable to the Notes. Compliance
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with the covenants described herein and such additional covenants with respect
to the Notes generally may not be waived by the Board of Directors of the
Company, as general partner of the Operating Partnership, or by the Trustee
unless the Holders of at least a majority in principal amount of all outstanding
Notes consent to such waiver; provided, however, that the defeasance and
covenant defeasance provisions of the Indenture described under "Description of
Debt Securities--Discharge, Defeasance and Covenant Defeasance" in the
accompanying Prospectus will apply to the Notes, including with respect to the
covenants described in this Prospectus Supplement.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or from time to time in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon to the redemption date and (ii) the Make-Whole Amount (as
defined below), if any, with respect to such Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of the Operating
Partnership, the Operating Partnership will notify the Trustee at least 45 days
prior to giving notice of redemption (or such shorter period as is satisfactory
to the Trustee) of the aggregate principal amount of Notes to be redeemed and
their redemption date. The Trustee shall select, in such manner as it shall deem
fair and appropriate, Notes to be redeemed in whole or in part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption of any
Notes, the excess, if any, of (i) the aggregate present value as of the date of
such redemption of each dollar of principal being redeemed and the amount of
interest (exclusive of interest accrued to the date of redemption) that would
have been payable in respect of each such dollar if such redemption had not been
made, determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of redemption is given) from the respective dates
on which such principal and interest would have been payable if such redemption
had not been made to the date of redemption, over (ii) the aggregate principal
amount of the Notes being redeemed.
"Reinvestment Rate" means .25% plus the arithmetic mean of the yields under
the heading "Week Ending" published in the most recent Statistical Release under
the caption "Treasury Constant Maturities" for the maturity (rounded to the
nearest month) corresponding to the remaining life to maturity, as of the
payment date of the principal being redeemed. If no maturity exactly corresponds
to such maturity, yields for the two published maturities most closely
corresponding to such maturity shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in each of such
relevant periods to the nearest month. For the purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not
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published at the time of any determination under the Indenture, then such other
reasonably comparable index which shall be designated by the Operating
Partnership.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of DTC
that affect the payment of principal and interest and transfers of interests in
the Global Notes. Upon issuance, each series of Notes will only be issued in the
form of a Global Note which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC. Unless and until it is
exchanged in whole or in part for Notes in definitive form under the limited
circumstances described below, a Global Note may not be transferred except as a
whole (i) by DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or another
nominee of DTC or (iii) by DTC or any such nominee to a successor of DTC or a
nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Notes represented by such Global Note beneficially owned by such participants.
Ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by DTC (with respect to interests of participants) and on the records
of participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may limit or impair the ability to own, transfer or pledge beneficial
interests in the Global Notes.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the procedures
of DTC and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a Holder under the Indenture. The Operating Partnership understands that
under existing industry practices, if the Operating Partnership requests any
action of Holders or if an owner of a beneficial interest in a Global Note
desires to give or take any action that a Holder is entitled to give or take
under the Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal and interest payments on interests represented by a Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of such Global Note. None of the Operating Partnership, the Trustee or any other
agent of the Operating Partnership or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership of interests in the Global
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. The Operating Partnership expects that DTC, upon
receipt of any payment of principal or interest in respect of a Global Note,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Global Note as
shown on the records of DTC. The Operating Partnership also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing customer
instructions and customary practice, as is now the case with securities held
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for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Exchange Act within 90 days, the
Operating Partnership will issue the Notes in definitive form in exchange for
the respective Global Notes. Any Notes issued in definitive form in exchange for
the Global Notes will be registered in such name or names, and will be issued in
denominations of $1,000 and such integral multiples thereof, as DTC shall
instruct the Trustee. It is expected that such instructions will be based upon
directions received by DTC from participants with respect to ownership of
beneficial interests in the Global Notes.
DTC is a limited-purpose trust company organized under the Banking Law of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities of its participants and to
facilitate the clearance and settlement of transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own DTC. Access to the DTC book-entry
system is also available to others, such as banks, brokers and dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. All payments of principal and interest
in respect of the Notes will be made by the Operating Partnership in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
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UNDERWRITING
Subject to the terms and conditions contained in a purchase agreement (the
"Underwriting Agreement"), the Operating Partnership has agreed to sell to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Goldman,
Sachs & Co. and J.P. Morgan Securities Inc. (collectively, the "Underwriters"),
and the Underwriters have severally agreed to purchase, the principal amount of
Notes set forth opposite their names below. The Underwriting Agreement provides
that the obligations of the Underwriters are subject to certain conditions
precedent, and that the Underwriters will be obligated to purchase all of the
Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
UNDERWRITER 2004 NOTES 2007 NOTES
- --------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................... $ $
Goldman, Sachs & Co............................................
J. P. Morgan Securities Inc....................................
------------- -------------
Total................................................ $ 75,000,000 $ 50,000,000
------------- -------------
------------- -------------
</TABLE>
The Underwriters have advised the Operating Partnership that they propose
initially to offer each series of Notes to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of % (in the case of
the 2004 Notes) and % (in the case of the 2007 Notes) of the principal amount
thereof. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of % of the principal amount thereof on sales to certain other
dealers. After the initial public offering of the Notes, the public offering
price, concession and discount may be changed.
The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.
Each series of Notes is a new issue of securities with no established
trading market. The Operating Partnership has not applied for and does not
intend to apply for listing of the Notes on any securities exchange. The
Operating Partnership has been advised by the Underwriters that the Underwriters
intend to make a market in the Notes as permitted by applicable laws and
regulations, but the Underwriters are not obligated to do so and may discontinue
market-making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
Rules of the Securities and Exchange Commission permit the Underwriters to
engage in certain transactions that stabilize the price of the Notes. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this Offering (i.e., if they sell more Notes than are set forth on the cover
page of this Prospectus Supplement) the Underwriters may reduce that short
position by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on selling group members.
This means that if the Underwriters purchase Notes in the open market to reduce
the Underwriters' short position or to stabilize the price of the Notes, they
may reclaim the amount of the selling concession from the selling group members
who sold those Notes as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The
S-29
<PAGE>
imposition of a penalty bid might also have an effect on the price of a security
to the extent that it were to discourage resales of the security.
Neither the Operating Partnership nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Notes. In
addition, neither the Operating Partnership nor any of the Underwriters makes
any representation that the Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
In the ordinary course of their respective businesses, certain of the
Underwriters or their affiliates from time to time have provided investment
banking, financial advisory or commercial banking services to the Company and
the Operating Partnership, for which they have received usual and customary
fees. Merrill Lynch acted as a representative of various underwriters in
connection with public offerings of the Company's Common Stock in 1994, 1996 and
1997.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Operating Partnership by Gibson, Dunn & Crutcher LLP, Los Angeles, California.
Certain legal matters relating to the Offering will be passed upon for the
Underwriters by Latham & Watkins, Los Angeles, California. Gibson, Dunn &
Crutcher LLP and Latham & Watkins will rely as to certain matters of Maryland
law on the opinion of Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland.
S-30
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 25, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
[LOGO]
$125,000,000
EVANS WITHYCOMBE RESIDENTIAL, INC.
PREFERRED STOCK, COMMON STOCK, WARRANTS AND GUARANTEES
$200,000,000
EVANS WITHYCOMBE RESIDENTIAL, L.P.
DEBT SECURITIES
---------------------
Evans Withycombe Residential, Inc. (the "Company") may offer and issue from
time to time (i) shares of its Common Stock, par value $.01 per share (the
"Common Stock"), (ii) shares of its Preferred Stock, par value $.01 per share
(the "Preferred Stock"), (iii) warrants to purchase Common Stock or Preferred
Stock (the "Warrants"), or (iv) unconditional guarantees (the "Guarantees") of
unsecured Debt Securities (as defined below), with an aggregate public offering
price of up to $125,000,000 (or its equivalent in another currency based on the
exchange rate at the time of sale) in amounts, at prices and on terms to be
determined at the time of offering. Evans Withycombe Residential, L.P. (the
"Operating Partnership") may from time to time offer in one or more series
unsecured non-convertible debt securities ("Debt Securities"), with an aggregate
public offering price of up to $200,000,000 (or its equivalent in another
currency based on the exchange rate at the time of sale) in amounts, at prices
and on terms to be determined at the time of offering. The Debt Securities may
be guaranteed by Guarantees of the Company as to payment of principal, premium,
if any, and interest. The Common Stock, Preferred Stock, Warrants and Debt
Securities (collectively, the "Securities") may be offered, separately or
together, in more separate classes or series, in amounts, at prices and on terms
to be set forth in one or more supplements to this Prospectus (each, a
"Prospectus Supplement"). Any Securities may be offered with other Securities or
separately. Preferred Stock may be convertible into shares of Common Stock.
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Debt Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Operating
Partnership or repayment at the option of the holder, terms for sinking fund
payments, covenants and any initial public offering price. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Securities, in each case as may be appropriate
to preserve the status of the Company as a real estate investment trust ("REIT")
for Federal income tax purposes.
The applicable Prospectus Supplement will contain information, where
appropriate, about all material United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculated from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such series of Securities.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
RELATING TO AN INVESTMENT IN THE SECURITIES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
<PAGE>
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
Certain persons participating in an offering of Securities may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Securities. Such transactions may include stabilizing, the purchase of
Securities to cover syndicate short positions and the imposition of penalty
bids. For a description of those activities, see "Underwriting" in the
accompanying Prospectus Supplement.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus or any Prospectus Supplement, and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or the Operating Partnership or by any underwriter,
agent or dealer. This Prospectus and any Prospectus Supplement shall not
constitute an offer to sell or a solicitation of an offer to buy any of the
Securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus and any Prospectus Supplement nor any sale made
thereunder shall, under any circumstances, create any implication that the
information therein is correct as of the time subsequent to the date thereof.
Unless otherwise indicated or as the context otherwise requires, (a)
references to the "Company" shall include the Company's predecessor, Evans
Withycombe, Inc., and its affiliates, predecessors and partners (collectively,
"Evans Withycombe"), the Operating Partnership and Evans Withycombe Finance
Partnership, L.P. (the "Financing Partnership") and Evans Withycombe Management,
Inc. (the "Management Company"), and (b) references to the Operating Partnership
shall include the Financing Partnership.
------------------------
AVAILABLE INFORMATION
The Company and the Operating Partnership have filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-3 (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Securities Act"), covering the Securities offered hereby. This Prospectus omits
certain information and exhibits included in the Registration Statement, copies
of which may be obtained upon payment of a fee prescribed by the Commission or
may be examined free of charge at the principal office of the Commission in
Washington, D.C. Statements contained in this Prospectus as to the content of
any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of the contract or other document filed
as an exhibit to the Registration Statement, each statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding the Company, the Operating Partnership and the
Securities offered hereby, reference is hereby made to the Registration
Statement, including the exhibits and schedules thereto, which may be inspected
without charge at the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. and copies of the Registration Statement or any part thereof
may be obtained from such office, upon payment of the fees prescribed by the
Commission.
The Company is and the Operating Partnership will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith the Company files and the
Operating Partnership will file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information filed
with the Commission by the Company and the Operating Partnership can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at 500 West Madison Street, Room
1400, Chicago, Illinois 60661-2511 and at 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Company's Common Stock is listed on the New York
Stock Exchange (the "NYSE") and the reports, proxy and information statements
and other information filed by the Company with the NYSE can also be inspected
at the offices of the NYSE at 20 Broad Street, New York,
2
<PAGE>
New York 10005. The Commission maintains a website that contains reports, proxy
and information statements and other information filed electronically with the
Commission at http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company (File No. 1-13256) and the
Operating Partnership (File No. 0-22109) with the Commission pursuant to the
Exchange Act are incorporated herein by reference.
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 filed with the Commission on February 6, 1997, as
amended on Forms 10-K/A filed on March 11, 1997, on March 20, 1997 and on
March 25, 1997;
(2) the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on August 1,
1994;
(3) the Company's Current Report on Form 8-K filed with the Commission on
February 13, 1997;
(4) the Operating Partnership's Registration Statement on Form 10 filed with
the Commission on February 6, 1997, as amended on Forms 10/A filed on
March 11, 1997, on March 20, 1997 and on March 25, 1997; and
(5) all other documents filed by the Company and/or the Operating
Partnership pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the filing of
a post-effective amendment which indicates that all Securities offered
hereby have been sold or which deregisters all Securities then remaining
unsold.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents or into this Prospectus) will be
provided without charge to each person, including any beneficial owner, to whom
this Prospectus is delivered, upon a written or oral request to Evans Withycombe
Residential, Inc., Attention: Secretary, 6991 East Camelback Road, Suite A-200,
Scottsdale, Arizona 85251, telephone number: (602) 840-1040.
RISK FACTORS
This Prospectus, including the documents incorporated by reference herein,
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"). Also, documents
subsequently filed by the Company or the Operating Partnership with the
Commission and incorporated herein by reference, as well as the Prospectus
Supplements accompanying this Prospectus, will contain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
the matters set forth or incorporated in this Prospectus or any Prospectus
Supplement. The Company and the Operating Partnership caution the reader,
however, that this list of factors may not be exhaustive, particularly with
respect to future filings. Prospective investors should carefully consider,
among other factors, the matters described below before purchasing any of the
Securities offered hereby.
3
<PAGE>
GENERAL REAL ESTATE INVESTMENT RISKS
Real property investments are subject to varying degrees of risk. The yields
available from equity investments in real estate depend on the amount of income
generated and expenses incurred. If the Company's Communities do not generate
revenues sufficient to meet operating expenses, including debt service and
capital expenditures, the Company's cash flow and ability to make distributions
to its shareholders will be adversely affected.
A multifamily apartment community's revenues and value may be adversely
affected by a number of factors including: the national economic climate; the
local economic climate (which may be adversely impacted by plant closings,
industry slowdowns, changing demographics and military base closings); local
real estate conditions (such as oversupply of or reduced demand for apartments);
the perceptions by prospective residents of the safety, convenience and
attractiveness of the communities or neighborhoods in which they are located and
the quality of local schools and other amenities; the ability of the owner to
provide adequate management, maintenance and insurance; and increased operating
costs (including real estate taxes and utilities). Certain significant
expenditures associated with each equity investment (such as mortgage payments,
if any, real estate taxes, insurance and maintenance costs) are generally not
reduced when circumstances cause a reduction in income from the investment. If a
property is mortgaged to secure payment of indebtedness, and if the Company is
unable to meet its mortgage payments, a loss could be sustained as a result of
foreclosure on the property or the exercise of other remedies by the mortgagee.
In addition, real estate values and income from properties are also affected by
such factors as applicable laws, including tax laws, interest rate levels and
the availability of financing.
DEPENDENCE ON PRIMARY MARKETS
The Communities are located in Arizona and selected sub-markets in Southern
California, and the Company's performance could be adversely affected by
economic conditions in these geographic areas, including supply and demand for
apartments in these areas, zoning or other regulatory conditions and competition
from other available apartments and alternative forms of housing. These factors
or a decline in the economy or real estate values in the Arizona markets and
selected sub-markets of Southern California may adversely affect the ability of
the Company to make distributions to its shareholders.
OPERATING RISKS
The Communities are subject to all operating risks common to multifamily
apartment communities in general, any and all of which might adversely affect
apartment occupancy or rental rates. Increases in unemployment in the areas in
which the communities owned or managed by the Company are located might
adversely affect multifamily apartment occupancy or rental rates. Increases in
operating costs due to inflation may not necessarily be offset by increased
rents. Residents may be unable or unwilling to pay rent increases. If operating
expenses increase, the local rental market may limit the extent to which rents
may be increased to meet increased expenses without decreasing occupancy rates.
If any of the above occurs, the Company's ability to make distributions to
shareholders could be adversely affected.
RISKS OF DEVELOPMENT ACTIVITIES
The Company intends to continue to actively pursue development projects,
including the expansion of existing apartment communities. Such projects
generally require the expenditure of capital as well as various forms of
government and other approvals, the receipt of which cannot be assured.
Consequently, there can be no assurance that any such projects will be completed
or that such projects will prove to be profitable. The failure of the Company to
complete or to profitably operate planned development projects may have a
material adverse effect on the Company's financial position and results of
operations.
4
<PAGE>
RISKS RELATED TO COMPETITION
There are numerous housing alternatives that compete with the Communities in
attracting residents. The Communities compete directly with other multifamily
rental apartments and single family homes that are available for rent in the
markets in which the Communities are located. The Communities also compete for
residents with new and existing homes and condominiums. In addition, other
competitors for development and acquisitions of properties may have greater
resources than the Company. If such competition results in a reduced demand for
the Company's Communities or if the Company's competitors develop and/or acquire
competing communities on a more cost-effective basis than the Company, the
Company may experience a drop in rental rates, which may have a material adverse
effect on the Company's financial position and results of operations.
ENVIRONMENTAL RISKS
Under various federal, state and local laws, ordinances and regulations, the
Company may be considered an owner or operator of real property or may have
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, may become liable for the costs of removal or remediation of certain
hazardous substances released on or in its property or disposed of by it, as
well as certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
Such liability may be imposed whether or not the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances. Any such
liability could materially adversely affect the Company and its ability to make
distributions.
RISK OF UNINSURED LOSS
The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of the Communities, with policy
specifications, insured limits and deductibles customarily carried for similar
properties. There are, however, certain types of losses (such as losses arising
from acts of war or from earthquakes) that are not generally insured because
they are either uninsurable or not economically insurable. Should an uninsured
loss or a loss in excess of insured limits occur, the Company could lose its
capital invested in a property, as well as the anticipated future revenues from
such property and would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any such loss would adversely affect
the Company and its ability to make distributions.
NO LIMITATION ON INCURRENCE OF DEBT
The Company currently has a policy of incurring debt only if upon such
incurrence the ratio of debt to total market capitalization (I.E., the total
consolidated debt of the Company as a percentage of the market value of issued
and outstanding Common Stock and Units plus total consolidated debt) would be
50% or less, but the organizational documents of the Company do not contain any
limitation on the amount of indebtedness the Company may incur. Accordingly, the
Board of Directors could alter or eliminate this policy. If this policy were
changed, the Company could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the Company's cash
available for distribution to shareholders and could increase the risk of
default on the Company's indebtedness.
LIMITATIONS ON ACQUISITION AND CHANGE IN CONTROL
In addition to the Ownership Limit, certain provisions contained in the
Company's Charter and under Maryland law may have the effect of discouraging a
third party from making an acquisition proposal for the Company and may thereby
inhibit a change in control of the Company. For example, such provisions may (i)
deter tender offers for the Common Stock, which offers may be beneficial to
shareholders or (ii) deter purchases of large blocks of Common Stock, thereby
limiting the opportunity for shareholders to receive a premium for their Common
Stock over then-prevailing market prices. See "Description of the
5
<PAGE>
Capital Stock--Common Shares" and "Certain Provisions of Maryland Law and of the
Company's Charter and Bylaws."
ADVERSE IMPACT ON DISTRIBUTIONS OF FAILURE TO QUALIFY AS A REIT
Since the Company's commencement of operations in 1994, the Company has
operated in a manner to qualify as a REIT under the Code, and the Company
intends to continue to operate in such a manner so as to permit the Company to
qualify as a REIT under the Code. Although the Company believes that it will
continue to operate in such a manner, no assurance can be given that the Company
will remain qualified as a REIT. If in any taxable year the Company were to fail
to qualify as a REIT, the Company would not be allowed a deduction for
distributions to shareholders in computing taxable income and would be subject
to Federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates.
ABSENCE OF PUBLIC MARKET AND POTENTIAL VOLATILITY OF DEBT SECURITIES
Prior to any offering of Debt Securities pursuant to an applicable
prospectus supplement, there has not been a public market for the Debt
Securities, and there can be no assurance that an active trading market will
develop or be sustained or that the Debt Securities will trade at or above the
price at which they are initially offered to the public. Furthermore, except as
otherwise described in the applicable prospectus supplement, the Operating
Partnership does not currently intend to apply for listing of Debt Securities on
any securities exchange. Therefore, no assurance can be given as to the
liquidity of the trading market for the Debt Securities. Furthermore, the market
value of the Debt Securities could be substantially affected by general market
conditions, including changes in interest rates. Moreover, numerous other
factors, such as government regulatory action and changes in tax laws, could
have a significant impact on the future market price of the Debt Securities.
6
<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
The Company operates as a self-administered and self-managed real estate
investment trust (a "REIT") and conducts all of its operations through the
Operating Partnership, either directly or through subsidiaries. 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 is one of the largest developers and managers of upscale
apartment communities in Arizona and has expanded its operation into selected
sub-markets in Southern California. The Company owns and manages 51 stabilized
multifamily apartment communities containing 14,523 units, of which 44
stabilized multifamily apartment communities are located in Phoenix and Tucson,
Arizona, containing a total of 12,125 units and seven stabilized multifamily
apartment communities are located in Southern California and contain a total of
2,398 units (the "Stabilized Communities"). The Company considers an apartment
community stabilized when it reaches the average occupancy level of its
respective sub-market. The Company is also in the process of developing or
expanding five multifamily apartment communities comprising 1,198 units in its
Arizona markets (the "Communities under Construction," and together with the
Stabilized Communities the "Communities"). The Company is fully integrated with
expertise in development, acquisitions, construction and management of apartment
communities. The Company had approximately 583 employees at January 15, 1997.
For further information about the properties of the Company and the Operating
Partnership, see "Item 2. Properties" in the Company's Annual Report on Form
10-K/A for the year ended December 31, 1996, incorporated herein by reference.
All of the Communities and other assets of the Company are held by, and all
of the Company's operations are conducted through, the Operating Partnership
(either directly or through subsidiaries). The Company is the sole general
partner of, and controls a majority of the limited partnership interests in, the
Operating Partnership. As of December 31, 1996, the Company owned 79.7% of the
outstanding partnership interests in the Operating Partnership. 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 management
agreements with the Operating Partnership and the Financing Partnership. The
Management Company also provides other services to third parties, including
construction, development and related services.
As of December 31, 1996, the Company and the Operating Partnership had
outstanding indebtedness of $436.2 million. Any applicable Prospectus Supplement
relating to securities offered thereby will set forth the outstanding
indebtedness of the issuer and its subsidiaries as of a recent date. The Company
has been advised by certain rating agencies that any Debt Securities issued
hereunder by the Operating Partnership rather than the Company would be rated
more favorably by such agencies because, in the view of such agencies, Debt
Securities issued by the entity that holds title to the Communities involves
less risk.
The Company was incorporated in Maryland in May 1994. The Operating
Partnership is a Delaware limited partnership that was formed in June 1994. The
principal executive offices of the Company and the Operating Partnership are
located at 6991 East Camelback Road, Suite A-200, Scottsdale, Arizona 85251,
telephone number: (602) 840-1040.
USE OF PROCEEDS
The Company is required, by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock,
Preferred Stock or Warrants in the Operating Partnership in exchange for
additional Units. Unless otherwise set forth in the applicable Prospectus
Supplement, the Company and the Operating Partnership anticipate that the
proceeds from the sale of Securities will be used primarily by the Company
and/or the Operating Partnership for the repayment of existing indebtedness.
Such proceeds may also be used for the development of new apartment communities
and the acquisition of additional apartment communities. A more detailed
description of the use of
7
<PAGE>
proceeds from any such sale of Securities shall be set forth in the applicable
Prospectus Supplement. Proceeds from the sales of Securities initially may be
temporarily invested in short-term securities.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to fixed
charges of the Company and the Operating Partnership.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................ 1.59x 1.89x 1.83(1)(4) 1.78x(2) (0.08x)(3)
</TABLE>
- ------------------------
(1) In connection with the repayment of existing indebtedness at the time of the
initial public offering, prepayment penalties and lender participation
(additional interest) totaling $2,594,000 were paid. Prior to the offering,
an Executive Incentive Deferred Compensation Plan was canceled and the
$2,639,000 that was funded by the Company was expensed during 1994.
(2) During 1993, the Company negotiated a discounted payoff of a mortgage loan
secured by an apartment community, the excess of the amount owed for
principal and interest over the amount paid to payoff the loan was recorded
as an extraordinary item-gain on extinguishment of debt. The Company
determined that the carrying value of the community was in excess of net
realizable value. The excess of $1,361,000 was charged to write down of real
estate assets and was recorded in the income (loss) before minority interest
and extraordinary item.
(3) In 1992, the predecessor to the Company had a loss before minority interest
and extraordinary item of $6,709,000, which included a non-cash write down
of real estate assets of $10,284,000 related to one of the Communities. The
predecessor wrote down the carrying value of such Community in conjunction
with the negotiated discounted payoff of the Community's mortgage. The
computation of the ratio of earnings to fixed charges for such year
indicates that earnings were inadequate to cover fixed charges by
approximately $6,801,000.
(4) Ratios of earnings to fixed charges from the period prior to August 17, 1994
relate to the predecessor of the Company and the Operating Partnership.
For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income before minority interest and extraordinary items, and
fixed charges reduced by the amount of interest capitalized during the period.
Fixed charges consist of interest expense, capitalized interest and amortization
of deferred financing costs. To date, the Company has not issued any Preferred
Stock; therefore, the ratios of earnings to combined fixed charges and preferred
stock dividend requirements are the same as the ratios of earnings to fixed
charges presented above.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture"),
between the Operating Partnership and a Trustee (the "Trustee") chosen by the
Operating Partnership and qualified to act as Trustee under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part and will be
available for inspection at the corporate trust office of the trustee or as
described above under "Available Information." The Indenture is subject to, and
governed by, the TIA. The statements made hereunder relating to the Indenture
and the Debt Securities to be issued thereunder are summaries of all material
provisions thereof and do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indenture and
such Debt Securities, including the definitions therein of certain terms used
below. All section references appearing herein are to sections of the Indenture.
As used in this
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section "Description of Debt Securities," the "Operating Partnership" refers to
Evans Withycombe Residential, L.P. and the "Company" refers to Evans Withycombe
Residential, Inc., in each case, exclusive of their respective subsidiaries and
affiliates.
GENERAL
The Debt Securities may be issued without limit as to aggregate principal
amount, in one or more series, in each case as established from time to time in
or pursuant to authority granted by a resolution of the Board of Directors of
the Company as sole general partner of the Operating Partnership or as
established in one or more indentures supplemental to the Indenture. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301). The Indenture provides that there may
be more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under the Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series (Section 608). In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a trustee of a trust under the
Indenture separate and apart from the trust administered by any other Trustee
(Section 609), and, except as otherwise indicated herein, any action described
herein to be taken by a Trustee may be taken by each such Trustee with respect
to, and only with respect to, the one or more series of Debt Securities for
which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities offered thereby for the specific terms thereof, including:
(1) the title of such Debt Securities and whether such Debt Securities are
guaranteed by the Company or any of its subsidiaries and, if such Debt
Securities are so guaranteed, the terms and conditions of such
guarantee;
(2) any limit on the aggregate principal amount of such Debt Securities that
may be authenticated and delivered under the Indenture;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(5) the rate or rates, or the method by which such rate or rates shall be
determined, at which such Debt Securities will bear interest, if any,
the date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which any such date shall be determined, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(6) the place or places where the principal of (and premium, if any),
interest, if any, and additional amounts, if any, on such Debt
Securities will be payable, such Debt Securities may be surrendered for
registration of transfer or exchange and notices or demands to or upon
the Operating Partnership in respect of such Debt Securities and the
Indenture may be served;
(7) the period or periods within which, the price or prices at which, the
currency or currencies, currency unit or units or composite currency or
currencies in which, and the terms and conditions upon which such Debt
Securities may be redeemed, as a whole or in part, at the option of the
Operating Partnership, if the Operating Partnership is to have such an
option;
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(8) the obligation, if any, of the Operating Partnership to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, upon the occurrence of
certain events (such as a change of control) or otherwise, and the
period or periods within which, the price or prices at which, the
currency or currencies, currency unit or units or composite currency or
currencies in which, and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any registered Debt Securities ("Registered
Securities") shall be issuable and, if other than denominations of
$5,000 and any integral multiple thereof, the denomination or
denominations in which any bearer Debt Securities ("Bearer Securities")
shall be issuable;
(10) if other than the Trustee, the identity of each security registrar
and/or paying agent;
(11) if other than the principal amount thereof, the portion of the principal
amount of the Debt Securities that shall be payable upon declaration of
acceleration of the maturity thereof or the method by which such portion
shall be determined;
(12) if other than U.S. dollars, the currency or currencies in which payment
of the principal of (and premium, if any) or interest or additional
amounts, if any, on the Debt Securities shall be payable or in which the
Debt Securities shall be denominated;
(13) whether the amount of payments of principal of (and premium, if any) or
interest, if any, on the Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on one or more currencies,
currency units, composite currencies, commodities, equity indices or
other indices), and the manner in which such amounts shall be
determined;
(14) whether the principal of (and premium, if any) or interest or additional
amounts, if any, on the Debt Securities are to be payable, at the
election of the Operating Partnership or a holder (a "Holder") thereof,
in a currency or currencies, currency unit or units or composite
currency or currencies other than that in which such Debt Securities are
denominated or stated to be payable, the period or periods within which,
and the terms and conditions upon which, such election may be made, and
the time and manner of, and identity of the exchange rate agent with
responsibility for, determining the exchange rate between the currency
or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are denominated or stated to be
payable and the currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are to be
so payable;
(15) provisions, if any, granting special rights to the Holders of the Debt
Securities upon the occurrence of such events as may be specified;
(16) any deletions from, modifications of or additions to the events of
default (the "Events of Default") or covenants in the Indenture with
respect to Debt Securities of such series;
(17) whether the Debt Securities will be in certificated or book-entry form
and, if certificated, whether the Debt Securities are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or
both, any restrictions applicable to the offer, sale or delivery of
Bearer Securities and the terms upon which Bearer Securities may be
exchanged for Registered Securities and vice versa (if permitted by
applicable laws and regulations), whether any Debt Securities are to be
issuable initially in temporary global form and whether any Debt
Securities are to be issuable in permanent global form with or without
coupons and, if so, whether beneficial owners of interests in any such
permanent global Debt Security may exchange such interests for Debt
Securities of such series and of like tenor of any authorized form and
denomination and the circumstances
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under which any such exchanges may occur, and, if Registered Securities
are to be issuable as a global Debt Security, the identity of the
depositary for such series;
(18) the date as of which any Bearer Securities and any temporary global Debt
Security representing Outstanding Debt Securities shall be dated if
other than the date of original issuance of the first Debt Security of
the series to be issued;
(19) the person to whom any interest on any Registered Security shall be
payable, if other than the person in whose name that Debt Security is
registered at the close of business on the applicable record date (the
"Regular Record Date") for such interest, the manner in which, or the
person to whom any interest on any Bearer Security shall be payable, if
otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature, and the extent to which,
or the manner in which, any interest payable on a temporary global Debt
Security on an interest payment date (an "Interest Payment Date") will
be paid;
(20) if the defeasance and covenant defeasance provisions described herein
are to be inapplicable or any modification of such provisions;
(21) if the Debt Securities to be issuable in definitive form (whether upon
original issue or upon exchange of a temporary Debt Security) only upon
receipt of certain certificates or other documents or satisfaction of
other conditions, then the form and/or terms of such certificates,
documents or conditions;
(22) whether and under what circumstances the Operating Partnership will pay
additional amounts on the Debt Securities to any Holder who is not a
United States person (including any modification to the definition of
such term) in respect of any tax, assessment or governmental charge and,
if so, whether the Operating Partnership will have the option to redeem
such Debt Securities rather than pay such additional amounts (and the
terms of any such option); and
(23) any other terms of such Debt Securities not inconsistent with the terms
of the Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). If material or applicable, special U.S.
Federal income tax, accounting and other considerations applicable to Original
Issue Discount Securities will be described in the applicable Prospectus
Supplement.
If the terms of a series of Debt Securities provide for the redemption or
repurchase of such Debt Securities at the option of a holder thereof upon the
occurrence of certain events, the Operating Partnership will comply, if
applicable, with Rule 14e-1 under the Exchange Act and any other applicable
provisions of the federal securities laws in connection with any such redemption
or repurchase.
Except as described under "Merger, Consolidation or Sale" or as may be set
forth in any Prospectus Supplement, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the Debt Securities protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, management of the Operating Partnership or the Company,
or any affiliate of any such party, (ii) a change of control or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its assets
or the merger or consolidation of the Operating Partnership, that would increase
the amount of the Operating Partnership's indebtedness or substantially reduce
or eliminate the Operating Partnership's assets, which may have an adverse
effect on the Operating Partnership's ability to service its indebtedness,
including the Debt Securities. Under the New York Business Corporation Law, the
term "substantially all of the Company's assets" is not defined and is,
therefore, subject to New York common law and to judicial interpretation and
review in the context of the unique facts and circumstances of any particular
transaction. In light of the fact
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that such term is not defined, there may be uncertainty as to whether a given
transaction relates to "substantially all of the assets of the Company" and as
to whether a Holder of Debt Securities is entitled to the benefits of the
provisions set forth under "--Merger, Consolidation or Sale" below. In addition,
restrictions on ownership and transfers of the Company's Common Stock and
Preferred Stock are designed to preserve its status as a REIT and, therefore,
may act to prevent or hinder a change of control. See "Description of the
Capital Stock--Restrictions on Ownership." Reference is made to the applicable
Prospectus Supplement for information with respect to any deletions from,
modifications of or additions to the events of default or covenants that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
The applicable Prospectus Supplement will summarize the nature and scope of
any event risk provisions contained in any offered Debt Security, including the
types of events protected by such provisions and any limitations on the
Operating Partnership's ability to satisfy its obligations under such
provisions. The applicable Prospectus Supplement will also summarize
anti-takeover provisions in other securities of the Operating Partnership or the
General Partner, which could have a material effect on the offered Debt
Securities. Such summary will contain a detailed and quantifiable definition of
any "change in control" provision. In the event that the Operating Partnership
failed to make a required payment of principal or interest or otherwise failed
to comply with any of its obligations with respect to the Debt Securities and
the maturity of the Debt Securities was accelerated as a result of such failure,
it is likely that all or a substantial portion of the Operating Partnership's
debt for borrowed money also would be subject to an acceleration of time for
required payment. If such indebtedness were accelerated, it is likely that the
Operating Partnership would not have sufficient liquidity to satisfy its payment
obligations with respect to its Debt Securities and such other indebtedness and
that such acceleration would have a material adverse effect on the financial
condition and results of operations of the Operating Partnership.
Reference is made to "--Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities by the Board of
Directors of the Company as sole general partner of the Operating Partnership or
by the Trustee unless the Holders of at least a majority in principal amount of
all outstanding Debt Securities of such series consent to such waiver, except to
the extent that the defeasance and covenant defeasance provisions of the
Indenture described under "--Discharge, Defeasance and Covenant Defeasance"
below apply to such series of Debt Securities. See "--Modification of the
Indenture."
GUARANTEES
Any series of Debt Securities may be guaranteed by the Company or any of its
subsidiaries. The applicability and terms of any such Guarantee relating to a
series of Debt Securities will be set forth in the Prospectus Supplement
relating to such Debt Securities.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series which are Registered Securities, other than Registered
Securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $1,000 and any integral multiple thereof and the
Debt Securities which are Bearer Securities, other than Bearer Securities issued
in global form (which may be of any denomination), shall be issuable in
denominations of $5,000 (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, provided that, at
the option of the Operating Partnership, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable Security Register or by wire transfer of funds to such Person at an
account maintained within the United States (Sections 301, 307 and 1002).
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Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the Regular Record Date and may
either be paid to the Person in whose name such Debt Security is registered at
the close of business on a special record date (the "Special Record Date") for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Holder of such Debt Security not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee. In addition, subject to
certain limitations imposed upon Debt Securities issued in book entry form, the
Debt Securities of any series may be surrendered for registration of transfer
thereof at the corporate trust office of the Trustee. Every Debt Security
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer. No service charge will be made
for any registration of transfer or exchange of any Debt Securities, but the
Trustee or the Operating Partnership may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith
(Section 305). If the applicable Prospectus Supplement refers to any transfer
agent (in addition to the Trustee) initially designated by the Operating
Partnership with respect to any series of Debt Securities, the Operating
Partnership may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
except that the Operating Partnership will be required to maintain a transfer
agent in each place of payment for such series. The Operating Partnership may at
any time designate additional transfer agents with respect to any series of Debt
Securities (Section 1002).
Neither the Operating Partnership nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (A) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (B) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof not to be
redeemed, or (iii) to exchange any Bearer Security so selected for redemption
except that such a Bearer Security may be exchanged for a Registered Security of
that series and like tenor, provided that such Registered Security shall be
simultaneously surrendered for redemption, or (iv) to issue, register the
transfer of or exchange any Debt Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such Debt
Security not to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey all
or substantially all of its assets (see "--General" above) to, or merge with or
into, any other entity, provided that (a) the Operating Partnership shall be the
continuing entity, or the successor entity (if other than the Operating
Partnership) formed by or resulting from any such consolidation or merger or
which shall have received the transfer of such assets shall be organized and
existing under the laws of the United States or a state thereof and shall
expressly assume the due and punctual payment of the principal of (and premium,
if any) and interest (including all additional amounts, if any) on all the Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in the Indenture; (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes an
obligation of the
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Operating Partnership or any subsidiary of the Operating Partnership (a
"Subsidiary") as a result thereof as having been incurred by the Operating
Partnership or such Subsidiary at the time of such transaction, no Event of
Default under the Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee (Sections 801 and 803).
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "Merger, Consolidation or Sale," the
Operating Partnership is required to do or cause to be done all things necessary
to preserve and keep in full force and effect its existence, rights and
franchises; provided, however, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1006).
MAINTENANCE OF PROPERTIES. The Operating Partnership is required to cause
all of its material properties used or useful in the conduct of its business or
the business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Operating Partnership and its Subsidiaries shall not be prevented from selling
or otherwise disposing for value their respective properties (Section 1007).
INSURANCE. The Operating Partnership is required to, and is required to
cause each of its Subsidiaries to, maintain insurance coverage on its property
against loss or damage with financially sound and reputable insurance companies
in amounts and covering such contingencies that are customary for similarly
situated companies in its industry (Section 1008).
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership is required to
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Operating Partnership or any Subsidiary; provided, however, that the Operating
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings (Section
1009).
PROVISION OF FINANCIAL INFORMATION. The Holders of Debt Securities will be
provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act and for so long as any Debt Securities
are outstanding, the Operating Partnership will, to the extent permitted under
the Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which the Operating Partnership would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if the Operating Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Operating Partnership would have been
required so to file such documents if the Operating Partnership were so subject.
The Operating Partnership will also in any event (a) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders of Debt Securities, as
their names and addresses appear in the security register for the Debt
Securities (the "Security Register"), without cost to such Holders, copies of
the annual reports and quarterly reports which the Operating Partnership would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Operating Partnership were subject to such Sections
and (ii) file with the Trustee copies of the annual reports, quarterly reports
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and other documents which the Operating Partnership would have been required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if
the Operating Partnership were subject to such Sections and (b) if filing such
documents by the Operating Partnership with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder (Section 1010). Such written request may be directed to
Evans Withycombe Residential, L.P., 6991 East Camelback Road, Suite A-200,
Scottsdale, Arizona 85251, Attention: Secretary, facsimile (602) 423-8843.
ADDITIONAL COVENANTS. Any additional or different covenants of the
Operating Partnership with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of the
Operating Partnership contained in the Indenture with respect to any Debt
Security of that series (other than a covenant or a default in the performance
or the breach of which is elsewhere specifically dealt with in the Events of
Default provisions), such default having continued for 60 days after written
notice as provided in the Indenture; (e) a default under any evidence of
Recourse Indebtedness of the Operating Partnership, or under any mortgage,
indenture or other instrument of the Operating Partnership under which there may
be issued or by which there may be secured any Recourse Indebtedness of the
Operating Partnership (or by any Subsidiary, the repayment of which the
Operating Partnership has guaranteed or for which the Operating Partnership is
directly responsible or liable as obligor or guarantor), which default shall
constitute a failure to pay an aggregate principal amount exceeding $5,000,000
of such indebtedness when due and payable after the expiration of any applicable
grace period with respect thereto and shall have resulted in such indebtedness
in an aggregate principal amount exceeding $5,000,000 becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of 10 days after
there shall have been given to the Operating Partnership by the Trustee or to
the Operating Partnership and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities of that series, a written notice
specifying such default and requiring the Operating Partnership to cause such
indebtedness to be discharged or to cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" under the
Indenture; (f) certain events of bankruptcy, insolvency or reorganization of the
Operating Partnership or a Significant Subsidiary, or court appointment of a
Custodian of the Operating Partnership or any Significant Subsidiary for all or
substantially all of any of their respective property; and (g) any other Event
of Default provided with respect to a particular series of Debt Securities. The
term "Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act) of the Operating
Partnership.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities or Securities, the terms of which provide that the principal amount
thereof payable at maturity may be more or less than the principal face amount
thereof at original issuance ("Indexed Securities"), such portion of the
principal amount as may be specified in the terms thereof) of all of the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Operating Partnership (and to the Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities
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of such series has been made, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of not less than a
majority in principal amount of Outstanding Debt Securities of such series may
rescind and annul such declaration and its consequences if (a) the Operating
Partnership shall have deposited with the applicable Trustee all required
payments of the principal of (and premium, if any) and interest on the Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be), plus certain fees, expenses, disbursements and
advances of the Trustee and (b) all Events of Default, other than the nonpayment
of accelerated principal of (or specified portion thereof), or premium (if any)
or interest on the Debt Securities of such series have been cured or waived as
provided in the Indenture (Section 502). The Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) may waive any past default with respect to such
series and its consequences, except a default (x) in the payment of the
principal of (or premium, if any) or interest on any Debt Security or such
series or (y) in respect of a covenant or provision contained in the Indenture
that cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby (Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; provided, however, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
holders of Debt Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Operating Partnership
must deliver to the Trustee a certificate, signed by one of several specified
officers of the Operating Partnership, stating whether or not such officer has
knowledge of any default under the Indenture and, if so, specifying each such
default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership only with the consent of the Holders of not less
than a majority in principal amount of all
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Outstanding Debt Securities or series of Outstanding Debt Securities which are
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holders of each such
Debt Security affected thereby, (a) change the Stated Maturity of the principal
of, or premium (if any) on or any installment of principal of or interest on or
any additional amounts with respect to, any such Debt Security; (b) reduce the
principal amount of, or the rate or amount of interest on or any additional
amounts payable in respect of, or any premium payable on redemption of any such
Debt Security, or change any obligation of the Operating Partnership to pay
additional amounts except as otherwise permitted, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon a declaration of acceleration of the maturity thereof or would be provable
in bankruptcy, or adversely affect any right of repayment at the option of the
holder of any such Debt Security; (c) change the place of payment, or the coin
or currency, for payment of principal of, premium, if any, or interest on any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or after the Stated Maturity thereof (or, in the case of
redemption or repayment at the option of the Holder, on or after the Redemption
Date or the Repayment Date, as the case may be); (e) reduce the percentage in
principal amount of Outstanding Debt Securities of any series necessary to
modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holders of such Debt Security
(Section 902). A Debt Security shall be deemed Outstanding ("Outstanding") if it
has been authenticated and delivered under the Indenture unless, among other
things, such Debt Security has been canceled or redeemed.
The Indenture provides that the Holders of not less than a majority in
principal amount of a series of Outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating to
such series of Debt Securities in the Indenture (Section 1014). Modifications
and amendments of the Indenture will be permitted to be made by the Operating
Partnership and the Trustee without the consent of any Holder of Debt Securities
for any of the following purposes: (i) to evidence the succession of another
Person to the Operating Partnership as obligor under the Indenture; (ii) to add
to the covenants of the Operating Partnership for the benefit of the Holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Operating Partnership in the Indenture; (iii) to add Events
of Default for the benefit of the Holders of all or any series of Debt
Securities; (iv) to add or change any provisions of the Indenture to facilitate
the issuance of, or to liberalize certain terms of, Debt Securities in bearer
form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided, that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect; (v) to change or eliminate any provisions of the Indenture, provided
that any such change or elimination shall become effective only when there are
no Debt Securities Outstanding of any series created prior thereto which are
entitled to the benefit of such provision; (vi) to secure the Debt Securities;
(vii) to establish the form or terms of Debt Securities of any series; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture, provided
that such action shall not adversely affect the interests of Holders of Debt
Securities of any series in any material respect; or (x) to supplement any of
the provisions of the Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding
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shall be the amount of the principal thereof that would be due and payable as of
the date of such determination upon declaration of acceleration of the maturity
thereof, (ii) the principal amount of a Debt Security denominated in a foreign
currency that shall be deemed Outstanding shall be the U.S. dollar equivalent,
determined on the issue date for such Debt Security, of the principal amount
(or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent on the issue date of such Debt Security of the amount determined as
provided in (i) above), (iii) the principal amount of an Indexed Security that
shall be deemed Outstanding shall be the principal face amount of such Indexed
Security at original issuance, unless otherwise provided with respect to such
Indexed Security pursuant to the Indenture; and (iv) Debt Securities owned by
the Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
Outstanding Debt Securities of such series, in any such case upon notice given
as provided in the Indenture (Section 1502). Except for any consent that must be
given by the Holder of each Debt Security affected by certain modifications and
amendments of the Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present will be permitted to be
adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Debt Securities of that series; provided, however, that,
except as referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of the Outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if
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any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be (Section 401).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Operating Partnership may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under sections 1004 to 1011, inclusive, of the
Indenture (including the restrictions described under "Certain Covenants") and
its obligations with respect to any other covenant, and any omission to comply
with such obligations shall not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance") (Section 1403), in
either case upon the irrevocable deposit by the Operating Partnership with the
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at the stated maturity date specified thereon ("Stated Maturity"), or
Government Obligations (as defined below), or both, applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
A trust will only be permitted to be established in accordance with the
preceding paragraph if, among other things, the Operating Partnership has
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to U.S. Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred, and such
Opinion of Counsel, in the case of defeasance, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable United States
Federal income tax law occurring after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged or (ii) obligations of a person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series; (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
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currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
Conversion Event based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the European
Currency Unit, as defined and revised from time to time by the Council of the
European Community ("ECU"), both within the European Monetary System and for the
settlement of transactions by public institutions of or within the European
Community or (iii) any currency unit or composite currency other than the ECU
for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest on any Debt Security
that is payable in a foreign currency that ceases to be used by its government
of issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "Events of Default, Notice and Waiver"
with respect to Sections 1004 to 1011, inclusive, of the Indenture (which
sections would no longer be applicable to such Debt Securities) or described in
clause (g) under "Events of Default, Notice and Waiver" with respect to any
other covenant as to which there has been covenant defeasance, the amount in
such currency, currency unit or composite currency in which such Debt securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such event of Default.
However, the Operating Partnership would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
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DESCRIPTION OF THE CAPITAL STOCK
GENERAL
The Articles of Incorporation of the Company, as amended and supplemented
from time to time (the "Charter"), provide that the Company may issue up to
110,000,000 shares of capital stock, consisting of 100,000,000 shares of Common
Stock, par value $.01 per share (the "Common Shares"), and 10,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Shares"). Under
Maryland law, shareholders generally are not liable for the corporation's debts
or obligations.
The following summary does not purport to be complete and is qualified in
its entirety by reference to the applicable provisions of Maryland law and the
Company's Charter.
COMMON SHARES
Subject to the preferential rights of any class of Preferred Shares, and to
the provision of the Company's Charter regarding the consequences of actually or
constructively owning Common Shares in violation of the Ownership Limit
Provision (as discussed below), holders of Common Shares are entitled to receive
distributions on such Common Shares if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its shareholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company. The Company intends to continue to make quarterly
distributions to holders of Common Shares.
Subject to the provisions of the Company's Charter regarding the
consequences of actually or constructively owning Common Shares in violation of
the Ownership Limit Provision and to the matters discussed under "Certain
Provisions of Maryland Law and of the Company's Charter and Bylaws--Control
Share Acquisitions," each outstanding Common Share entitles the holder to one
vote on all matters submitted to a vote of shareholders, including the election
of directors, and, except as otherwise required by law or except as provided
with respect to any other class or series of stock, the holders of such shares
will possess the exclusive voting power. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding Common Shares can elect all of the directors then standing for
election and the holders of the remaining shares will not be able to elect any
directors.
Holders of Common Shares have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company. See
"--Restrictions on Ownership."
Subject to the provisions of the Company's Charter regarding the
consequences of actually or constructively owning Common Shares in violation of
the Ownership Limit Provision, all Common Shares will have equal dividend,
distribution, liquidation and other rights and will have no preference,
appraisal or exchange rights.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a corporation
generally cannot dissolve, amend its charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business unless approved by the affirmative vote
of shareholders holding at least two-thirds of the shares entitled to vote on
the matter unless a lesser percentage (but not less than a majority of all of
the votes to be cast on the matter) is set forth in the corporation's charter.
Under the MGCL, the terms "substantially all of the Company's assets" is not
defined and is, therefore, subject to Maryland common law and to judicial
interpretation and review in the context of the unique facts and circumstances
of any particular transaction. In light of the fact that such term is not
defined, there may be uncertainty as to whether a given transaction relates to
"substantially all of the assets of the Company." The Company's Charter provides
that a majority of all of the votes to be cast is the required vote of
shareholders in such situations, except that any proposal (i) to permit
cumulative voting in the election of directors, (ii) to alter provisions of the
Company's Charter with respect to the classified Board, removal of directors,
amendment of the Company's Bylaws, as amended (the
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"Bylaws"), preemptive rights, indemnification of corporate agents and limitation
of liability of officers and directors, or (iii) that would jeopardize the
Company's status as a REIT for tax purposes, requires, in each case, the
approval of two-thirds of the Common Shares entitled to vote. In addition, a
number of other provisions of the MGCL could have a significant effect on the
Common Shares and the rights and obligations of holders thereof. See "Certain
Provisions of Maryland Law and of the Company's Charter and Bylaws."
PREFERRED SHARES
Preferred Shares may be issued from time to time, in one or more classes, as
authorized by the Board of Directors. Prior to issuance of shares of each class,
the Board of Directors is required by the MGCL and the Company's Charter to fix
for each such class, the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted by
Maryland law. The Board could authorize the issuance of Preferred Shares with
terms and conditions which could have the effect of discouraging a takeover or
other transaction which holders of some, or a majority, of the Company's
outstanding shares might believe to be in their best interests or in which
holders of some, or a majority, of shares might receive a premium for their
shares over the market price of such shares. As of the date hereof, no Preferred
Shares are outstanding. If and when issued, the Preferred Shares will be subject
to the restrictions on ownership set forth below.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Shares in respect of which this Prospectus is being delivered (to
the extent applicable to such Preferred Shares): (1) the specific designation,
number of shares, seniority and purchase price; (2) any liquidation preference
per share; (3) any date of maturity; (4) any redemption, repayment or sinking
fund provisions; (5) any dividend rate or rates and the dates on which any such
dividends will be payable (or the method by which such rates or dates will be
determined); (6) any voting rights; (7) whether the Preferred Shares are
convertible and, if so, the securities or rights into which such Preferred
Shares are convertible (which may include other Preferred Shares) and the terms
and conditions upon which such conversions will be effected including the
initial conversion prices or rates, the conversion period and any other related
provisions; (8) the place or places where dividends and other payments on the
Preferred Shares will be payable; (9) any additional voting, dividend,
liquidation, redemption and other rights, preferences, privileges, limitations
and restrictions, including restrictions directed at maintaining the Company's
REIT status; and (10) all material federal income tax considerations applicable
to such Preferred Shares. The Preferred Shares offered hereby will, when issued,
be fully paid and nonassessable.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
shares may be owned, actually or constructively, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year and the shares must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (or during a
proportionate part of a shorter taxable year). In addition, certain income
received by the Company from related parties will not be treated as "rents from
real property" in determining whether the Company satisfies the REIT income
tests. Because the Board of Directors believes it is essential for the Company
to qualify as a REIT, the Board of Directors has adopted, and the shareholders
have approved, a provision in the Charter restricting the acquisition of shares
of the Company's capital stock (the "Ownership Limit Provision").
The Ownership Limit Provision provides that, subject to certain exceptions,
no shareholder may actually own, beneficially own (within the meaning of Section
13(d)(3) of the Exchange Act), or be deemed to own by virtue of the constructive
ownership provisions of the Code, more than the Ownership Limit, which is equal
to 9.8% of the lesser in value of the total number or value of the outstanding
Common
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Shares or Preferred Shares (or such other number or value of Preferred Shares as
the Board of Directors may determine in fixing the terms of the Preferred
Shares). The constructive ownership rules of the Code are complex and may cause
shares owned actually or constructively by two or more related individuals and/
or entities to be constructively owned by one individual or entity. As a result,
the acquisition of less than 9.8% of the outstanding Common Shares or 9.8% (or
such other number or value) of the Preferred Shares (or the acquisition of an
interest in an entity which owns shares) by an individual or entity could cause
that individual or entity (or another individual or entity) to own
constructively in excess of 9.8% of the outstanding Common Shares or 9.8% (or
such other number or value) of the outstanding Preferred Shares, and thus
subject such shares to the Ownership Limit Provision. The Ownership Limit
Provision also prohibits the acquisition or transfer of Common Shares and
Preferred Shares if the acquisition or transfer would result in the outstanding
shares of capital stock of the Company being owned by fewer than 100 persons,
and prohibits actual or constructive ownership of capital stock if as a result
of such ownership the Company would violate the "five or fewer" rule discussed
above or would otherwise cause the Company to fail to qualify as a REIT.
The Board of Directors may in its sole discretion waive the Ownership Limit
with respect to a particular acquisition of actual or constructive ownership of
the Company's shares, provided certain conditions are met. The Board of
Directors is not required to consider a request for such waiver, and, as a
condition for granting such a waiver, the Board of Directors may require
opinions of counsel or rulings satisfactory to it and/or an undertaking from the
applicant with respect to preserving the REIT status of the Company.
Except as provided below, in the event of a transfer, acquisition or other
ownership of the Company's capital stock (including any constructive acquisition
or transfer or ownership) in violation of the Ownership Limit Provision, such
transfer, acquisition or ownership shall be null and void from inception, as
though it had not occurred, and the intended transferee or owner will acquire no
rights to, or economic interest in, the shares.
The Charter provides that, if the Board of Directors requests and receives a
ruling from the IRS or an opinion of counsel satisfactory to the Board of
Directors and is otherwise satisfied such actions can be taken without
jeopardizing the Company's REIT status, shares of the Company's capital stock
owned, actually or constructively, or transferred to or otherwise acquired,
actually or constructively, by a person in violation of the Ownership Limit
Provision ("Prohibited Shares") will become subject to a mechanism that, in
effect, is designed to prohibit the person who purported to acquire those shares
from voting, receiving dividends or other distributions, and participating in
the appreciation in value of those shares. In general, pursuant to this
mechanism, the Prohibited Shares would automatically be transferred to a trustee
of a trust, the beneficiary of which would be one or more charitable
organizations, at the close of business on the day preceding the violative
transaction. The intended owner of the Prohibited Shares would have no right to
vote or receive distributions on the Prohibited Shares, and generally would be
entitled to receive only the net proceeds from a sale of the Prohibited Shares,
or the purchase price paid by such person for the Prohibited Shares (or value as
of the date of the acquisition, in the case of an acquisition other than a
purchase), whichever is less. The Company will have a right to purchase the
Prohibited Shares for fair market value during a specified period. Until the
Board of Directors requests and receives a ruling from the IRS or an opinion of
counsel and is otherwise satisfied that implementation of these provisions will
not jeopardize the Company's REIT status, these provisions will not take effect
and attempted transfers or ownership of shares in violation of the Ownership
Limit Provision will be void from inception, as though they had not occurred.
The Ownership Limitation Provision contains an exception for Common Shares
acquired by affiliates of Aldrich, Eastman and Waltch, L.P. ("AEW") and funds
managed by an affiliate of Copley Real Estate Advisors, Inc. ("Copley") in the
transactions undertaken in connection with the formation of the Company (the
"Formation Shares"), that are intended to prevent such entities from violating
the Ownership Limitation Provision as a result of participating in such
transactions. This exception continues to apply to
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Formation Shares in the hands of a direct and indirect transferee of these
entities, provided the transferee is a qualified pension fund and other
conditions are met.
The Ownership Limit Provision will not be automatically removed even if the
REIT provisions of the Code are changed so as to remove any ownership
concentration limitation. Except as otherwise described above, any change of the
Ownership Limit Provision would require an amendment to the Charter. Such
amendment to the Charter requires the affirmative vote of holders owning a
majority of the outstanding shares entitled to vote, unless such amendment would
cause the Company to lose its status as a REIT for tax purposes, in which event
the affirmative vote of holders of two-thirds of the outstanding shares entitled
to vote would be required. In addition to preserving the Company's status as a
REIT, the Ownership Limit Provision may have the effect of precluding an
acquisition of control of the Company without the approval of the Board of
Directors.
All certificates representing Common Shares bear a legend referring to the
restrictions described above.
All persons who own a specified percentage (or more) of the outstanding
shares of the Company's capital stock must file a statement with the Company
containing information regarding their ownership of Common Shares, as set forth
in the income tax regulations promulgated under the Code (the "Treasury
Regulations").
TRANSFER AGENT AND REGISTRAR
The Company has appointed Norwest Bank, Minnesota, National Association as
its transfer agent and registrar.
CERTAIN PROVISIONS OF MARYLAND LAW
AND OF THE COMPANY'S CHARTER AND BYLAWS
The following paragraphs summarize certain provisions of Maryland law and
the Company's Charter and Bylaws. The summary does not purport to be complete
and is subject to and qualified in its entirety by reference to the Company's
Charter and Bylaws, copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part, and to Maryland law.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Company's Charter provides that the initial number of directors of the
Company was three (3), which number may be increased or decreased pursuant to
the Bylaws of the Company but in no event shall be less than the minimum number
required by the MGCL, which in the case of the Company is three (3). The
Company's Bylaws currently provide that the number of directors of the Company
may be established by the Board of Directors but may not be fewer than the
minimum number required by the MGCL nor more than fifteen (15). The Company has
set the number of directors to seven (7). Any vacancy will be filled, at any
regular meeting or at any special meeting called for that purpose, by a majority
of the remaining directors, except that a vacancy resulting from an increase in
the number of directors will be filled by a majority of the entire board of
directors. Pursuant to the terms of the Charter, the directors are divided into
three classes. One class was re-elected to a term expiring in 1998, another
class was re-elected to a term expiring in 1999 and the remaining class holds
office initially for a term expiring at the annual meeting of shareholders to be
held in 1997. As the term of each class expires, directors in that class will be
elected for a term of three years and until their successors are duly elected
and qualify. The Company believes that classification of the Board of Directors
will help to assure the continuity and stability of the Company's business
strategies and policies as determined by the Board of Directors.
The classified director provision could have the effect of making the
removal of incumbent directors more time-consuming and difficult, which could
discourage a third party from making a tender offer or
24
<PAGE>
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its shareholders. At least two
annual meetings of shareholders, instead of one, will generally be required to
effect a change in a majority of the Board of Directors. Thus, the classified
board provision could increase the likelihood that incumbent directors will
retain their positions. Holders of voting shares will have no right to
cumulative voting for the election of directors. Consequently, at each annual
meeting of shareholders, the holders of a majority of shares entitled to vote
will be able to elect all of the successors of the class of directors whose term
expires at that meeting.
REMOVAL OF DIRECTORS
The Charter provides that a director may be removed with or without cause by
the affirmative vote of at least two-thirds of the votes entitled to be cast in
the election of directors, and by the vote required to elect a director, the
shareholders may fill a vacancy on the Board resulting from removal. Section
2-406(b) of the MGCL permits a director to be removed with cause, but neither
the MGCL nor the Company's charter defines "cause" in connection therewith. This
provision, when coupled with the provision in the Bylaws authorizing the Board
of Directors to fill vacant directorships, could preclude shareholders from
removing incumbent directors except upon a substantial affirmative vote and
filling the vacancies created by such removal with their own nominees.
Additionally, because the term "cause" is not defined, there may be uncertainty
as to the circumstances in which shareholders have the right to remove a
director.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Charter limits the liability of the Company's directors and
officers to the Company and its shareholders to the fullest extent permitted
from time to time by Maryland law. Maryland law presently permits the liability
of directors and officers to a corporation or its shareholders for money damages
to be limited, except (i) to the extent that it is proved that the director or
officer actually received an improper benefit or profit, or (ii) to the extent
that a judgment or other final adjudication is entered in a proceeding based on
a finding that the director's or officer's action, or failure to act, was the
result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. This provision does not limit the ability
of the Company or its shareholders to obtain other relief, such as an injunction
or rescission.
The Company's Charter and Bylaws require the Company to indemnify its
directors, officers and certain other parties to the fullest extent permitted
from time to time by Maryland law. The Charter also permits the Company to
indemnify employees, agents and other persons acting on behalf of or at the
request of the Company. The MGCL permits a corporation to indemnify its
directors, officers and certain other parties against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service to or at the request of the corporation, unless it is established
that: (i) the act or omission of the indemnified party was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty; (ii) the indemnified party actually
received an improper personal benefit; or (iii) in the case of any criminal
proceeding, the indemnified party had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be made against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by the
director or officer in connection with the proceeding; provided, however, that
if the proceeding is one by or in the right of the corporation, indemnification
may not be made with respect to any proceeding in which the director or officer
has been adjudged to be liable to the corporation. In addition, a director or
officer may not be indemnified with respect to any proceeding charging improper
personal benefit to the director or officer in which the director or officer was
adjudged to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, or upon a plea of
nolo contendere or its equivalent, or an entry of any order of probation prior
to judgment, creates a rebuttable presumption that the director or officer did
not meet the requisite standard of conduct required for indemnification to be
permitted. It is
25
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the position of the Commission that indemnification of directors and officers
for liabilities arising under the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities Act.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who directly or indirectly beneficially owns ten
percent or more of the voting power of the corporation's shares or an affiliate
of the corporation who, at any time within the two-year period prior to the date
in question, was the beneficial owner of ten percent or more of the voting power
of the then-outstanding voting stock of the corporation (an "Interested
Shareholder") or an affiliate thereof are prohibited for five years after the
most recent date on which the Interested Shareholder became an Interested
Shareholder. Thereafter, any such business combination must be recommended by
the Board of Directors of such corporation and approved by the affirmative vote
of at least (a) 80% of the votes entitled to be cast by holders of outstanding
voting shares of the corporation and (b) two-thirds of the votes entitled to be
cast by holders of outstanding voting shares of the corporation other than
shares held by the Interested Shareholder with whom the business combination is
to be effected, unless, among other things, the corporation's shareholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Shareholder for its shares. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
Board of Directors of the corporation prior to the time that the Interested
Shareholder becomes an Interested Shareholder. The Board of Directors has
exempted from these provisions of the MGCL any business combination with certain
officers of the Company including Stephen O. Evans and F. Keith Withycombe, and
Evans Withycombe, certain institutional investors that participated in the
formation of the Company and all present or future affiliates or associates of,
or any other person acting in concert or as a group with, any of the foregoing
persons.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation. "Control Shares" are voting shares of stock
which, if aggregated with all other such shares of stock previously acquired by
such person, or in respect of which such person is able to exercise or direct
the exercise of voting power, would entitle the acquiror directly or indirectly
to exercise voting power in electing directors within one of the following
ranges of voting power: (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority or (iii) a majority of all voting
power. Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained shareholder approval.
A "control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the Board of Directors to call a special meeting of shareholders to
be held within 50 days of demand to consider the voting rights of the shares. If
no request for a meeting is made, the corporation may itself present the
question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined without regard to the absence of voting
rights for control shares, as of the date of the last control share acquisition
or of any meeting of shareholders at which the voting rights of such shares are
considered and not approved. If voting rights for control shares
26
<PAGE>
are approved at a shareholders meeting and, as a result, the acquiror becomes
entitled to vote a majority of the then outstanding shares entitled to vote, all
other shareholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of such appraisal rights may not be less than the
highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws of
the corporation.
The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions of Shares by any officer or
director of the Company and by Stephen O. Evans, F. Keith Withycombe, Evans
Withycombe, certain institutional investors and all present or future affiliates
or associates of, or any other person acting in concert or as a group with, any
of the foregoing persons. There can be no assurance that such provision will not
be amended or eliminated at any point in the future.
AMENDMENTS TO THE CHARTER
The Company's Charter may be amended only by the affirmative vote of the
holders of not less than a majority of all of the votes entitled to be cast on
the matter, except that any proposal (i) to permit cumulative voting in the
election of directors; (ii) to alter provisions of the Company's Charter with
respect to the classified Board, removal of directors, amendment of the Bylaws,
preemptive rights, indemnification of corporate agents and limitation of
liability of officers and directors; or (iii) that would jeopardize the
Company's status as a REIT for tax purposes, requires, in each case, the
approval of two-thirds of the shares entitled to vote. The Company's Bylaws may
be amended by the affirmative vote of holders of not less than two-thirds of all
of the votes entitled to be cast on the matter. Subject to the right of the
shareholders to adopt, alter and repeal Bylaws, the Board of Directors is
authorized to adopt, alter or repeal the Bylaws.
DISSOLUTION OF THE COMPANY
The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than a majority of all of the votes entitled to be cast
on the matter.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (a) with respect to an annual meeting
of shareholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by shareholders may be made only
(i) pursuant to the Company's notice of the meeting, (ii) by the Board of
Directors or (iii) by a shareholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws, and (b)
with respect to special meetings of shareholders, only the business specified in
the Company's notice of meeting may be brought before the meeting of
shareholders, and nominations of persons for election to the Board of Directors
may be made only (i) pursuant to the Company's notice of the meeting, (ii) by
the Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by a shareholder who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.
The provisions in the Charter on classification of the Board of Directors,
the business combination provisions of the MGCL and, control share acquisition
provisions of the MGCL, and the advance notice provisions of the Bylaws could
have the effect of discouraging a takeover or other transaction in which holders
of some, or a majority, of the shares might receive a premium for their shares
over the then prevailing market price or which such holders might believe to be
otherwise in their best interests.
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<PAGE>
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Preferred Stock (the "Preferred
Stock Warrants") or Common Stock (the "Common Stock Warrants," together with the
Preferred Stock Warrants, the "Warrants"). Warrants may be issued independently
or together with any Securities and may be attached to or separate from such
Securities. The Warrants are to be issued under warrant agreements (each, a
"Warrant Agreement") to be entered into between the Company and a bank or trust
company, as warrant agent (the "Warrant Agent"), all as shall be set forth in
the Prospectus Supplement relating to the Warrants being offered pursuant
thereto.
WARRANTS
The applicable Prospectus Supplement will describe the following terms of
Preferred Stock Warrants and Common Stock Warrants in respect of which this
Prospectus is being delivered: (1) the title of such Warrants; (2) the
Securities for which such Warrants are exercisable; (3) the price or prices at
which such Warrants will be issued; (4) the number of such Warrants issued with
each share of Preferred Stock or Common Stock: (5) any provisions for adjustment
of the number or amount of shares of Preferred Stock or Common Stock receivable
upon exercise of such Warrants or the exercise price of such Warrants; (6) if
applicable, the date on and after which such Warrants and the related Preferred
Stock or Common Stock will be separately transferable; (7) if applicable, a
discussion of material federal income tax considerations; (8) any other terms of
such Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Warrants; (9) the date on which the right to
exercise such Warrants shall commence, and the date on which such right shall
expire; and (10) the maximum or minimum number of such Warrants which may be
exercised at any time.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of Warrants to purchase for cash such
shares of Preferred Stock or Common Stock at such exercise price as shall in
each case be set forth in, or be determinable as set forth in, the Prospectus
Supplement relating to the Warrants offered thereby. Warrants may be exercised
at any time up to the close of business on the expiration date set forth in the
Prospectus Supplement relating to the Warrants offered thereby. After the close
of business on the expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the Prospectus Supplement,
the Company will, as soon as practicable, forward the shares of Preferred Stock
or Common Stock purchasable upon such exercise. If less than all of the Warrants
represented by such warrant certificate are exercised, a new warrant certificate
will be issued for the remaining Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief and general summary of all material provisions that
currently govern the federal income tax treatment of the Company and its
stockholders. Investors are urged to consult their own tax advisors with respect
to the appropriateness of an investment in the Securities and with respect to
the tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction, including tax consequences resulting
from such investor's own tax characteristics. In particular, foreign investors
should consult their own tax advisors concerning (i) income taxes on effectively
connected income, (ii) withholding taxes on dividends or interest, (iii) branch
profits taxes, (iv) taxes imposed under the Foreign Investment in Real Property
Tax Act and (v) other tax consequences that may arise under federal, state or
local law.
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<PAGE>
TAXATION OF THE COMPANY
The Company believes it has operated, and the Company intends to continue to
operate, in such a manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify. The provisions of
the Code pertaining to REITs are highly technical and complex. For the
particular provisions that govern the federal income tax treatment of the
Company and its stockholders, reference is made to Section 856 through 860 of
the Code and the regulations thereunder. The following summary is qualified in
its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. If the Company fails to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, which could have a material adverse
effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholders' capital
stock with respect to which the distribution is paid and, to the extent that
they exceed such basis, will be taxed in the same manner as gain from the sale
of those shares of capital stock.
PLAN OF DISTRIBUTION
The Securities may be sold (i) through agents, (ii) through underwriters,
(iii) through dealers or (iv) directly to purchasers. The distribution of
Securities may be effected from time to time in one or more transactions at a
fixed price or prices, which may be changed, or at market prices prevailing at
the time of sale, at prices relating to such prevailing market prices or at
negotiated prices.
Offers to purchase the Securities may be solicited by agents designated by
the Company or the Operating Partnership, from time to time. Any such agent
involved in the offer or sale of the Securities will be named, and any
commissions payable by the Company or the Operating Partnership to such agent
will be set forth in the Prospectus Supplement. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the Securities so
offered and sold.
If an underwriter or underwriters are utilized in the sale of Securities,
the Company or the Operating Partnership, as the case may be, will execute an
underwriting agreement with such underwriter or underwriters at the time an
agreement for such sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms of
the transactions, including compensation of the underwriters and dealers, if
any, will be set forth in the Prospectus Supplement, which will be used by the
underwriters to make resales of the Securities.
If a dealer is utilized in the sale of the Securities, the Company or the
Operating Partnership, as the case may be, will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale. The
name of the dealer and the terms of the transactions will be set forth in the
Prospectus Supplement relating thereto.
Offers to purchase the securities may be solicited directly by the Company
or the Operating Partnership and sales thereof may be made by the Company or the
Operating Partnership directly to institutional investors or others. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
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<PAGE>
Agents, underwriters and dealers may be entitled under agreements which may
be entered into with the Company or the Operating Partnership to indemnification
by the Company or the Operating Partnership, as the case may be, against certain
liabilities, including liabilities under the Securities Act, and any such
agents, underwriters or dealers, or their affiliates may be customers of, engage
in transactions with or perform services for the Company or the Operating
Partnership in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership will authorize dealers acting as the Company's agents and
underwriters to solicit offers by certain institutions to purchase Securities
from the Company or the Operating Partnership at the public offering price set
forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated in
such Prospectus Supplement. Each Contract will be for an amount not less than,
and the aggregate principal amount of Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the applicable
Prospectus Supplement. Institutions with whom Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Company or
the Operating Partnership, as the case may be. Contracts will not be subject to
any conditions except (i) the purchase by an institution of the Securities
covered by its Contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject and (ii) if the Securities are being sold to underwriters, the Company
or the Operating Partnership, as the case may be, shall have sold to such
underwriters the total principal amount of the Securities less the principal
amount thereof covered by Contracts.
EXPERTS
The financial statements of Evans Withycombe Residential, Inc. (the Company)
appearing in the Company's Annual Report (Form 10-K/A) for the year ended
December 31, 1996 and the financial statements of Evans Withycombe Residential,
L.P. (the Operating Partnership) appearing in the Operating Partnership's
Registration Statement on Form 10/A, incorporated herein by reference, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the Debt Securities offered hereby will be passed upon for
the Operating Partnership by Gibson, Dunn & Crutcher LLP, Los Angeles,
California and the validity of the Common Stock, Preferred Stock and Warrants
offered hereby will be passed upon for the Company by Ballard Spahr Andrews &
Ingersoll, Baltimore, Maryland. Gibson, Dunn & Crutcher LLP will rely as to
certain matters of Maryland law, including the legality of the Common Stock, on
the opinion of Ballard Spahr Andrews & Ingersoll.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE UNDERWRITERS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY JURISDICTION IN
WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE OPERATING PARTNERSHIP OR THE COMPANY SINCE
THE DATE AS OF WHICH INFORMATION IS FURNISHED.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.................. S-3
Recent Developments............................ S-7
Use of Proceeds................................ S-8
Capitalization................................. S-9
Selected Financial Information................. S-11
Business and Properties........................ S-14
Description of the Notes....................... S-22
Underwriting................................... S-29
Legal Matters.................................. S-30
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 3
Risk Factors................................... 3
The Company and the Operating Partnership...... 7
Use of Proceeds................................ 7
Consolidated Ratios of Earnings to Fixed
Charges....................................... 8
Description of Debt Securities................. 8
Description of the Capital Stock............... 21
Certain Provisions of Maryland Law and of the
Company's Charter and Bylaws.................. 24
Description of Warrants........................ 28
Federal Income Tax Considerations.............. 28
Plan of Distribution........................... 29
Experts........................................ 30
Legal Matters.................................. 30
</TABLE>
[LOGO]
EVANS WITHYCOMBE RESIDENTIAL, L.P.
$75,000,000
% NOTES DUE 2004
$50,000,000
% NOTES DUE 2007
----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
, 1997
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- ------------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated fees and expenses in connection
with the issuance and distribution of the Securities registered hereby (all
amounts except the registration fee are estimated).
<TABLE>
<S> <C>
Registration fee............................................ $ 98,485
NYSE listing fee............................................ 40,000
Trustee's fees.............................................. 6,500
Printing, duplicating and engraving expenses................ 100,000
Legal fees and expenses (other than Blue Sky)............... 150,000
Accounting fees and expenses................................ 60,000
Blue sky fees and expenses.................................. 5,000
Miscellaneous............................................... 40,115
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Total................................................... $ 500,000
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---------
</TABLE>
- ------------------------
*To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Charter limits the liability of the Company's directors and
officers the Company and its shareholders to the fullest extent permitted from
time to time by Maryland law. Maryland law presently permits the liability of
directors and officers to a corporation or its shareholders for money damages to
be limited, except (i) to the extent that it is proved that the director or
officer actually received an improper benefit or profit or (ii) if a judgment or
other final adjudication is entered in a proceeding based on a finding that the
director's or officer's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding. This provision does not limit the ability of the Company or its
shareholders to obtain other relief, such as an injunction or rescission.
The Company's Charter and Bylaws require the Company to indemnify its
directors and officers to the fullest extent permitted from time to time by
Maryland law. The Charter also permits the Company to indemnify employees,
agents and other persons acting on behalf of or at the request of the Company.
The MGCL permits a corporation to indemnify its directors, officers and certain
other parties against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their service to or at the request of the
corporation, unless it is established that the act or omission of the
indemnified party was material to the matter giving rise to the proceeding and
(i) was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) the indemnified party actually received an improper personal
benefit or (iii) in the case of any criminal proceeding, the indemnified party
had reasonable cause to believe that the act or omission was unlawful.
Indemnification may be made against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by the director or officer in connection
with the proceeding; provided, however, that if the proceeding is one by or in
the right of the corporation, indemnification may not be made with respect to
any proceeding in which the director or officer has been adjudged to be liable
to the corporation. In addition, a director or officer may not be indemnified
with respect to any proceeding charging improper personal benefit to the
director or officer in which the director or officer was adjudged to be liable
on the basis that personal benefit was improperly received. The termination of
any proceeding by conviction, or upon a plea of nolo contendere or its
equivalent, or an entry of any order of probation prior to judgment, creates a
rebuttable presumption that the director or officer did not meet the requisite
II-1
<PAGE>
standard of conduct required for indemnification to be permitted. It is the
position of the Securities and Exchange Commission that indemnification of
directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.
The Agreement of Limited Partnership of the Operating Partnership also
provides for indemnification of the Company, or any director or officer of the
Company, in its capacity as general partner of the Partnership, from and against
all losses, claims, damages, liabilities, joint or several, expenses (including
legal fees), fines, settlements and other amounts incurred in connection with
any actions relating to the operations of the Operating Partnership as set forth
in the Operating Partnership Agreement.
The Company entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require, among
other things, that the Company indemnify its officers and directors to the
fullest extent permitted by the MGCL, and advance to the officers and directors
all related expenses, subject to reimbursement if it is subsequently determined
that indemnification is not permitted. The Company must also indemnify and
advance all expenses incurred by officers and directors seeking to enforce their
rights under the indemnification agreements, and cover officers and directors
under the Company's directors and officers' liability insurance. Although the
form of indemnification agreement offers substantially the same scope of
coverage afforded by provisions in the Charter and the Bylaws, it provides
greater assurance to directors and officers that indemnification will be
available, because, as a contract, it cannot be modified unilaterally in the
future by the Board of Directors or by the shareholders to eliminate the rights
it provides.
II-2
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement relating to the Debt Securities
*1.2 Form of Underwriting Agreement relating to the capital stock
1.3 Form of Underwriting Agreement relating to the 2004 Notes and the 2007 Notes
4.1+ Articles of Amendment and Restatement of the Company (previously filed as Exhibit No. 3.1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by
reference).
4.2+ Amended and Restated Bylaws of the Company (previously filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
4.3+ Form of Indenture
4.4+ Amended and Restated Agreement of Limited Partnership of Evans Withycombe Residential, L.P.
(previously filed as an exhibit to the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1995 and 1994 and incorporated herein by reference).
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of Securities to be issued
5.2+ Opinion of Ballard Spahr Andrews & Ingersoll
12 Statement re: Computation of Consolidated Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.3+ Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5.2)
24+ Powers of Attorney
25.1+ Statement of Eligibility and Qualification of Trustee under the Trust Indenture Act
</TABLE>
- ------------------------
*To be filed by amendment when necessary or incorporated by reference as may be
required with the offering of Securities.
+Previously filed.
ITEM 17. UNDERTAKINGS.
Each of the undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change in such information in this registration statement;
II-3
<PAGE>
PROVIDED, HOWEVER, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrants pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrants hereby further undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrants' respective annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the provisions set forth or
described in Item 15 of this Registration Statement, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person, in connection with the securities
registered hereby, the Registrants will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.
With respect to offerings of Warrants or rights, the undersigned Registrants
hereby undertake to supplement the Prospectus, after the expiration of the
subscription period, to set forth the results of the subscription offer, the
transactions by the underwriters during the subscription period, the amount of
unsubscribed securities to be purchased by the underwriters, and the terms of
any subsequent reoffering thereof. If any public offering by the underwriters is
to be made on terms differing from those set forth on the cover page of the
applicable prospectus supplement, a post-effective amendment will be filed to
set forth the terms of such offering.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
II-4
<PAGE>
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 3 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Scottsdale, State of Arizona, on this 24th day
of March, 1997.
EVANS WITHYCOMBE RESIDENTIAL, INC.
By: /s/ STEPHEN O. EVANS
-------------------------------------------
Stephen O. Evans,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
EVANS WITHYCOMBE RESIDENTIAL, L.P.
By: EVANS WITHYCOMBE RESIDENTIAL, INC.,
as General Partner
By: /s/ STEPHEN O. EVANS
-------------------------------------------
Stephen O. Evans,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------------
<C> <S> <C>
Chairman of the Board of
Directors and Chief
/s/ STEPHEN O. EVANS Executive Officer of the
------------------------------------ Company (Principal Executive March 24, 1997
Stephen O. Evans Officer); Director of the
general partner of the
Operating Partnership
President, Chief Operating
* Officer and Director of the
------------------------------------ Company; Director of the March 24, 1997
Richard G. Berry general partner of the
Operating Partnership
Director of the Company;
* Director of the general
------------------------------------ partner of the Operating March 24, 1997
F. Keith Withycombe Partnership
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------------
<C> <S> <C>
Senior Vice President and
Chief Financial Officer,
/s/ PAUL R. FANNIN Secretary and Treasurer of
------------------------------------ the Company (Principal March 24, 1997
Paul R. Fannin Financial and Accounting
Officer)
Director of the Company;
Director of the general
------------------------------------ partner of the Operating March , 1997
Joseph F. Azrack Partnership
Director of the Company;
* Director of the general
------------------------------------ partner of the Operating March 24, 1997
G. Peter Bidstrup Partnership
Director of the Company;
Director of the general
------------------------------------ partner of the Operating March , 1997
Joseph W. O'Connor Partnership
Director of the Company;
* Director of the general
------------------------------------ partner of the Operating March 24, 1997
John O. Theobald II Partnership
*By: /s/ PAUL R. FANNIN
------------------------------------
Paul R. Fannin
Attorney-in-fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement relating to the Debt Securities
*1.2 Form of Underwriting Agreement relating to the capital stock
1.3 Form of Underwriting Agreement relating to the 2004 Notes and the 2007 Notes
4.1+ Articles of Amendment and Restatement of the Company (previously filed as Exhibit No. 3.1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by
reference).
4.2+ Amended and Restated Bylaws of the Company (previously filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
4.3+ Form of Indenture
4.4+ Amended and Restated Agreement of Limited Partnership of Evans Withycombe Residential, L.P.
(previously filed as an exhibit to the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1995 and 1994 and incorporated herein by reference).
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of Securities to be issued
5.2+ Opinion of Ballard Spahr Andrews & Ingersoll
12 Statement re: Computation of Consolidated Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.3+ Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5.2)
24+ Powers of Attorney
25.1+ Statement of Eligibility and Qualification of Trustee under the Trust Indenture Act
</TABLE>
- ------------------------
*To be filed by amendment when necessary or incorporated by reference as may be
required with the offering of Securities.
+Previously filed
II-8
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, L.P.
(a Maryland corporation)
___% Notes due 2004
___% Notes due 2007
PURCHASE AGREEMENT
March ___, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
J.P. Morgan Securities Inc.
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters - North Tower
250 Vesey Street
World Financial Center
New York, New York 10281-1209
Ladies and Gentleman:
Evans Withycombe Residential, L.P., a Delaware limited partnership
(the "Operating Partnership") and Evans Withycombe Residential, Inc., a Maryland
corporation (the "Company") each confirms its respective agreement with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Goldman, Sachs & Co. ("Goldman Sachs"), J.P. Morgan & Co. and J.P.
Morgan Securities ("J.P. Morgan" and together with Merrill Lynch and Goldman
Sachs, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), with respect to the
issue and sale by the Operating Partnership and the purchase by the
Underwriters, acting severally and not jointly, of the respective principal
amounts set forth in Schedule A hereto of $75,000,000 aggregate principal amount
of the Operating Partnership's ___% Notes due 2004 (the "2004 Notes"), and ___%
Notes due 2007 (the "2007 Notes" and together with the 2004 Notes, the
"Securities"). The Securities are to be issued pursuant to an indenture, dated
as of March ___, 1997 (the "Indenture"), between the Operating Partnership and
Bank One, Columbus, N.A., as trustee (the "Trustee"). The term "Indenture," as
used herein, includes the Officer's Certificate (as defined in the Indenture)
establishing the form and terms of the Securities pursuant to Section 301 of the
Indenture.
The Operating Partnership and the Company understand that the
Underwriters propose to make a public offering of the Securities as soon as they
deem advisable after this Agreement has been executed and delivered.
<PAGE>
A registration statement on Form S-3 (No. 333-19879) and amendments
No. 1 , No. 2 and No. 3 thereto dated March 11, 1997 , March 20, 1997 and
March __, 1997, respectively, with respect to the Securities has (i) been
prepared by the Operating Partnership and the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities Act" or
the "1933 Act"), and the rules and regulations (the "Rules and Regulations" or
the "1933 Act Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated thereunder for the offering from time to time of the
Operating Partnership's debt securities, including the Securities, and the
Company's equity securities and guarantees of debt securities, in accordance
with Rule 415 of the Rules and Regulations (the "Shelf Securities"), (ii) been
filed with the Commission under the Securities Act and (iii) become effective
under the Securities Act. Copies of such registration statement and
Amendments No. 1, 2 and 3 thereto have been delivered by the Operating
Partnership and the Company to the Underwriters. The Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
In addition, a registration statement on Form 10 (No. 0-22109) and amendments
dated _________________________, thereto (the "Form 10"), has (i) been prepared
by the Operating Partnership in conformity with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act" or the (1934
Act") and the rules and regulations of the Commission thereunder (the "1934 Act
Regulations"), (ii) been filed with the Commission under the 1934 Act, and (iii)
become effective under the 1934 Act. Such registration statement on Form S-3,
as amended through the date of this Agreement, is, on the one hand, and the
prospectus constituting a part thereof and each prospectus supplement relating
to the offering of Securities to the Underwriters for use (whether or not such
prospectus supplement is required to be filed by the Company pursuant to Rule
424(b) of the Rules and Regulations) (the "Prospectus Supplement"), on the other
hand, including all documents incorporated therein by reference, including,
but not limited to, the Form 10, as from time to time amended or supplemented
pursuant to the Securities Act, the 1934 Act and the 1934 Act Regulations, or
otherwise, are referred to herein as the "Registration Statement" and the
"Prospectus," respectively; PROVIDED, HOWEVER, that the Prospectus Supplement
shall be deemed to have supplemented the Prospectus only with respect to the
offering of Shelf Securities to which it relates; and PROVIDED FURTHER, that if
any revised prospectus shall be provided to the Underwriters by the Company for
use in connection with the offering of the Securities which differs from the
prospectus on file (whether or not such revised prospectus is required to be
filed by the company pursuant to Rule 424(b) of the 1933 Act Regulations), the
term "Prospectus" shall refer to such revised prospectus from and after the time
it is first provided to the Underwriters for such use. Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. For purposes of this Agreement, all references to the Registration
Statement, the Prospectus , the Form 10 or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
2
<PAGE>
All references in this Agreement to financial statements and schedules
and other information which is "described," "disclosed," "contained," "included"
or "stated" in the Registration Statement or the Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement or the Prospectus,
as the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall be deemed to
mean and include the filing of any document under the 1934 Act, which is or is
deemed to be incorporated by reference in the Registration Statement or the
Prospectus, as the case may be. If the Operating Partnership elects to rely on
Rule 434 under the 1933 Act Regulations, all references to the Prospectus shall
be deemed to include, without limitation, the form of prospectus and the term
sheet (the "Term Sheet"), taken together, provided to the Underwriters by the
Operating Partnership in reliance on Rule 434 under the 1933 Act (the "Rule 434
Prospectus").
Section 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE OPERATING PARTNERSHIP AND
THE COMPANY. The Operating Partnership and the Company jointly and severally
represent and warrant to the Underwriters as of the date hereof and as of the
Closing Time referred to in Section 2(b) hereof, and agree with the
Underwriters, as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. At the
respective times the Registration Statement, the Form 10, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective, and at the Closing Time, the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not (taking into account any
applicable prospectus supplement) contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements thereto, at
the time the Prospectus or any such amendment or supplement was issued
and at the Closing Time included or will include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus or any
amendments or supplements thereto made in reliance upon and in
conformity with information contained in the last paragraph of the
cover page of the Prospectus Supplement, the first paragraph on the
inside cover page of the Prospectus Supplement and the third sentence
of the fourth full paragraph under the heading "Underwriting" in the
Prospectus Supplement and furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the Prospectus
Supplement. The Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the 1933 Act, complied
3
<PAGE>
when so filed in all material respects with the 1933 Act
Regulations and, if applicable, the Prospectus delivered to the
Underwriters for use in connection with this offering was identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T promulgated by the Commission ("Regulation S-T").
(ii) FORM S-3 REGISTRATION STATEMENT. The Operating Partnership
and the Company each meet the requirements for use of Form S-3 under
the 1933 Act. Each of the Registration Statement, the Form 10 and
any Rule 462(b) Registration Statement has become effective under the
1933 Act and no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement or,
in each case, any part thereof has been issued and no proceeding for
that purpose has been instituted or is pending or, to the knowledge of
the Operating Partnership or the Company, is contemplated by the
Commission or the state securities authority of any jurisdiction and
any request on the part of the Commission for additional information
has been complied with. No order preventing or suspending the use of
the Prospectus has been issued and no proceeding for that purpose has
been instituted or is pending before or, to the knowledge of the
Operating Partnership or the Company, is contemplated by, the
Commission or the state securities authority of any jurisdiction.
(iii) INCORPORATED DOCUMENTS. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, including the Form 10, when they became effective
or at the time they were or hereafter are filed with the Commission,
complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations, as applicable, and, when read
together with the other information in the Prospectus, at the date of
the Prospectus and at the Closing Time will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(iv) INDEPENDENT ACCOUNTANTS. Ernst & Young LLP, the accounting
firm that certified the financial statements and supporting schedules
included or incorporated by reference in the Registration Statement
and the Prospectus, are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(v) FINANCIAL STATEMENTS. The financial statements included or
incorporated by reference in the Registration Statement and the
Prospectus, together with the related schedules and notes, present
fairly the financial position of the respective entity or entities
presented therein at the dates indicated, and the results of their
operations for the respective periods specified, and except as
otherwise stated in the Registration Statement, said financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent
4
<PAGE>
basis ("GAAP") throughout the periods involved. The supporting
schedules, if any, included or incorporated by reference in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The financial
information and data included in the Registration Statement and the
Prospectus present fairly the information included therein and have
been prepared on a basis consistent with that of the audited
financial statements incorporated by reference in the Registration
Statement. The pro forma financial information included in the
Registration Statement and the Prospectus presents fairly the
information shown therein, has been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma
financial statements and has been properly compiled on the bases
described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein. Other than the financial information and
statements and supporting schedules included or incorporated
therein, no other historical or pro forma financial information or
supporting schedule is required by the 1933 Act or the 1933 Act
Regulations to be included in the Registration Statement.
(vi) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change or, to the knowledge of the
Operating Partnership and the Company, any development involving a
prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, assets or business affairs of the
Operating Partnership, the Company and their respective subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business (a "Material Adverse Effect"), (B) there have been
no transactions entered into by the Operating Partnership, the Company
or any of the Subsidiaries (as defined below), other than those in the
ordinary course of business, which are material with respect to the
Operating Partnership, the Company and the Subsidiaries considered as
one enterprise, or would result, upon consummation, in any inaccuracy
in the representations contained in Section 1(a)(v) above, (C) there
has been no casualty, loss or condemnation or other adverse event with
respect to any Community (as defined in the Prospectus), or any site
owned by the Company and intended for development as so defined in the
Prospectus (the "Development Sites"), that is material with respect to
the Operating Partnership, the Company and the Subsidiaries considered
as one enterprise, (D) except for regular quarterly dividends on the
Company's Common Stock, par value $.01 per share ("Common Stock"), in
amounts per share that are consistent with past practice, there has
been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock and (E) there has been
no material change in the capital stock or the partnership interests,
as applicable, of the Operating Partnership, the Company or any of the
Subsidiaries or any material change in the short-term debt or long-term
debt of the Operating Partnership, the Company or any Subsidiary.
5
<PAGE>
(vii) GOOD STANDING OF OPERATING PARTNERSHIP. The Operating
Partnership has been duly organized and is validly existing as a
limited partnership in good standing under the Delaware Revised
Uniform Limited Partnership Act, as amended (the "Delaware Act"), with
full partnership power and authority to own, lease and operate its
properties, to conduct the business in which it is engaged or proposes
to engage as described in the Prospectus and to enter into and perform
its obligations under this Agreement. The Operating Partnership is
duly qualified or registered as a foreign partnership to transact
business and is in good standing in each jurisdiction in which such
qualification or registration is required, whether by reason of the
ownership, leasing or registration of property or the conduct of
business, except where the failure to so qualify or register would not
result in, either singly or in the aggregate, a Material Adverse
Effect. The Operating Partnership and the Subsidiaries are the only
subsidiaries of the Company. Except as described below, neither the
Operating Partnership, the Company nor any of the Subsidiaries own any
shares of stock or any other equity securities of any corporation or
has any equity interest in any firm, partnership, association or other
entity.
(viii) GOOD STANDING OF THE COMPANY. The Company has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Maryland and has the corporate
power and authority to own, lease and operate its properties and to
conduct the business in which it is engaged or proposes to engage as
described in the Prospectus and to enter into and perform its
obligations under this Agreement. The Company is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not, either
singly or in the aggregate, result in a Material Adverse Effect.
(ix) GOOD STANDING OF PARTNERSHIPS. Evans Withycombe Finance
Partnership, L.P. (the "Financing Partnership") has been duly
organized and is validly existing as a limited partnership in good
standing under the laws of the State of Delaware, E.W. Chandler L.P.
(the "Chandler Partnership"), has been duly organized and is validly
existing as a limited partnership in good standing under the laws of
the State of Arizona, and McKinley Hill Partners-85, L.P. (the
"McKinley Partnership") has been duly organized and is validly
existing as a limited partnership in good standing under the laws of
the State of California. Each of the Financing Partnership, the
Chandler Partnership and the McKinley Partnership has full
partnership power and authority to own, lease and operate its
properties and to conduct the business in which it is engaged or
proposes to engage as described in the Prospectus. Each of the
Financing Partnership, the Chandler Partnership and the McKinley
Partnership is duly qualified or registered as a foreign partnership
and is in good standing in each jurisdiction in which such
qualification or registration is required, whether by reason of the
ownership, leasing or registration of property or the conduct of
business, except where the failure to so qualify or register would
not, either singly or in the aggregate, result in a Material Adverse
Effect. Evans Withycombe Finance, Inc., a wholly owned subsidiary of
6
<PAGE>
the Company, is the sole general partner of the Financing Partnership
and is the holder of a 1% general partnership interest therein, and
the Operating Partnership is the holder of the remaining 99%
partnership interest therein. The Operating Partnership owns 83.99%
of the limited partnership interests of the Chandler Partnership and
Evans Withycombe Management, Inc. (the "Management Company") owns
1.01% of the general partnership interests therein and the remaining
15% limited partnership interest is owned by an individual third party
investor. The Operating Partnership owns 99% of the partnership
interests of the McKinley Partnership and the Company is the holder
of the remaining 1% partnership interest therein. All of the
partnership interests of the Financing Partnership, the Chandler
Partnership and the McKinley Partnership are validly issued and
fully paid and are free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
(x) GOOD STANDING OF THE SUBSIDIARIES. Each of the Management
Company (together with Evans Withycombe Finance, Inc., the Chandler
Partnership, the McKinley Partnership and the Financing Partnership,
the "Subsidiaries"), and Evans Withycombe Finance, Inc. has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of its incorporation, with corporate power
and authority to own, lease and operate its properties and to conduct
the business in which it is engaged or proposes to engage as described
in the Prospectus. Each of the Management Company and Evans
Withycombe Finance, Inc. is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify, either singly or in the aggregate,
would not result in a Material Adverse Effect. All of the issued and
outstanding capital stock of each of the Management Company and Evans
Withycombe Finance, Inc. has been duly authorized and validly issued,
is fully paid and nonassessable and is free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, and
none of such outstanding shares of capital stock was issued in
violation of preemptive or similar rights of any securityholder of
such Subsidiary. The ownership of the shares of capital stock of each
of the Management Company and Evans Withycombe Finance, Inc. is as
described in the prospectus for the Company's initial public offering
dated August 10, 1994. All of the capital stock of Evans Withycombe
Finance, Inc. has been owned by the Company since the formation of
Evans Withycombe Finance, Inc. and such corporation is a "qualified
REIT subsidiary" as defined in Section 856(i)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
(xi) AUTHORIZATION OF DEBT SECURITIES. The Securities to be
purchased from the Operating Partnership have been duly authorized by
the Operating Partnership for issuance and sale to the Underwriters
pursuant to this Agreement and, at the Closing Time, will have ben
duly executed by the Operating Partnership. Such Securities, when
issued and authenticated in the manner provided for in the Indenture
and delivered by the Operating Partnership
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pursuant to this Agreement against payment of the consideration set
forth herein, will constitute valid and legally binding obligations
of the Operating Partnership, enforceable against the Operating
Partnership in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles and will be in the form contemplated by, and entitled
to the benefits of, the Indenture.
(xii) CAPITALIZATION. All of the issued and outstanding
shares of Common Stock, par value $.01 per share of the Company (the
"Common Shares") have been duly authorized and are validly issued,
fully paid and nonassessable, and have been offered and sold in
compliance with all applicable laws, including, without limitation,
federal and state securities laws. None of the outstanding Common
Shares were issued in violation of the preemptive or other similar
rights of any securityholder of the Company. The ownership thereof is
as set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, which is included in the
Prospectus by reference. No shares of capital stock of the Company
are reserved for any purpose except in connection with (A) the 1994
Stock Option Plan of the Company as described in the Prospectus (B)
the possible issuance of Common Shares upon the redemption of Units of
the Operating Partnership pursuant to the Partnership Agreement of the
Operating Partnership. Except for options under the 1994 Stock Option
Plan and Units of the Operating Partnership, there are no outstanding
options, rights (preemptive or otherwise) or warrants to purchase or
to subscribe for such shares or any other securities of the Company.
(xiii) OPERATING PARTNERSHIP UNITS. The Units issued by the
Operating Partnership, including, without limitation, the Units issued
to the Company, have been duly authorized for issuance by the
Operating Partnership to the holders thereof and are validly issued,
fully paid and nonassessable. Immediately after the Closing Time,
__________ Units will be issued and outstanding, and the Company will
be the sole general partner of the Operating Partnership and will be
the holder of __________ Units representing ____% of the outstanding
Units in the Operating Partnership, including the Company's 1% general
partner interest therein. The _________ Units and any Common Shares
issued upon conversion of Units have been offered and sold in
compliance with all applicable laws, including, without limitation,
federal and state securities laws. The Company has duly reserved a
sufficient number of Common Shares for issuance upon redemption of
outstanding Units and exercise of options under the 1994 Stock Option
Plan, as described in the Partnership Agreement of the Operating
Partnership.
(xiv) DESCRIPTION OF THE SECURITIES AND THE INDENTURE. The
Securities and the Indenture will conform in all material respects to
the respective statements relating thereto contained in the Prospectus
and will be in substantially the respective
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forms filed or incorporated by reference, as the case may be, as
exhibits to the Registration Statement.
(xv) AUTHORIZATION OF THE INDENTURE. The Indenture has been
duly authorized by the Operating Partnership and has been duly
qualified under the 1939 Act and, when duly executed and delivered by
the Operating Partnership and the Trustee, will constitute a valid and
binding agreement of the Operating Partnership, enforceable against
the Operating Partnership in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws relating to or
affecting creditor's rights generally or by general equitable
principles.
(xvi) AUTHORIZATION OF AGREEMENT. This Agreement has been
duly and validly authorized, executed and delivered by the Operating
Partnership and the Company, and assuming due authorization, execution
and delivery by the Underwriters, is a valid and binding agreement of
each of the Operating Partnership and the Company, enforceable against
each of the Operating Partnership and the Company, in accordance with
its terms; PROVIDED, HOWEVER, that the enforceability of this
Agreement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and by
general equitable principles, and the unenforceability under certain
circumstances of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy or
prohibited by law.
(xvii) ABSENCE OF DEFAULTS AND CONFLICTS. (A) None of the
Operating Partnership, the Company or any Subsidiary is in violation
of its charter, bylaws, certificate of limited partnership,
partnership agreement or other governing document, as the case may be,
and none of such entities is or will be in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which such entity is a party or by which such entity may be bound or
affected, or to which any of the property or assets of such entity is
subject (collectively, "Agreements and Instruments"), except for such
violations or defaults that would not result in a Material Adverse
Effect; (B) the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein and in
the Registration Statement (including the issuance and sale of the
Securities and the use of proceeds from the sale of the Securities as
described in the Prospectus Supplement under the caption "Use of
Proceeds") and compliance by each of the Operating Partnership and the
Company with its obligations hereunder have been duly authorized by
all necessary corporate or partnership action on the part of the
Operating Partnership and the Company or any Subsidiary, as the case
may be, and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or
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encumbrance upon any property or assets of the Operating Partnership,
the Company or any of the Subsidiaries pursuant to, any Agreement or
Instrument, nor will such action result in any violation of the
charter, bylaws, certificate of limited partnership, partnership
agreement or other governing document, as the case may be, of such
entity or any applicable law, statute, rule, regulation, judgment,
order, writ or administrative or court decree. As used herein, a
"Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Operating Partnership, the Company or any of the
Subsidiaries.
(xviii) ABSENCE OF PROCEEDINGS. There is no action, suit or
proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the
Operating Partnership or the Company, threatened, against or
affecting the Operating Partnership, the Company or any Subsidiary, or
of which any of their respective property or assets is the subject,
which is required to be disclosed in the Registration Statement, other
than as disclosed therein, or which might result in a Material Adverse
Effect or which might materially and adversely affect the consummation
of the transactions contemplated by this Agreement or the performance
by the Operating Partnership or the Company of its obligations
hereunder. All pending legal or governmental proceedings to which the
Operating Partnership, the Company or any Subsidiary is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, are, considered in the
aggregate, not material to the earnings, assets, business affairs or
business prospects of the Operating Partnership, the Company and the
Subsidiaries considered as one enterprise and could not reasonably be
expected to result in a Material Adverse Effect. There are no
contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments or documents of the Operating Partnership, the
Company or any of the Subsidiaries which are required to be described
or referred to in the Registration Statement, the Prospectus or other
documents incorporated by reference therein or to be filed as exhibits
to the Registration Statement by the 1933 Act or by the 1933 Act
Regulations other than those described or referred to therein or filed
as exhibits thereto, and the descriptions thereof or references
thereto in the Registration Statement and the Prospectus are true and
correct in all material respects.
(xix) TAX STATUS OF THE COMPANY. The Company has been and is
organized in conformity with the requirements for qualification as a
real estate investment trust ("REIT") under the Code, and its method
of operation has at all times enabled, and its proposed method of
operation will enable, the Company to satisfy the requirements for
taxation as a REIT under the Code.
(xx) POSSESSION OF INTELLECTUAL PROPERTY. The Operating
Partnership, the Company and the Subsidiaries own or possess, or can
acquire on reasonable terms, the licenses, inventions, copyrights,
know-how (including trade
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secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks,
service marks and trade names (collectively, the "Proprietary
Rights") presently employed by them or necessary to carry on the
business now operated by them, and neither the Operating
Partnership, the Company nor any of the Subsidiaries has received
any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Proprietary
Rights, or of any facts which would render any Proprietary Rights
invalid or inadequate to protect the interests of the Operating
Partnership, the Company or any of the Subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy,
individually or in the aggregate, would result in a Material
Adverse Change.
(xxi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Operating
Partnership, the Company or any Subsidiary in connection with the
offering, issuance or sale of the Securities hereunder or the
consummation of the transactions contemplated by this Agreement,
except such as may be required under the 1933 Act or the 1933 Act
Regulations or securities laws of any state or other jurisdiction and
except for such as have been obtained.
(xxii) POSSESSION OF LICENSES AND PERMITS. Each of the
Operating Partnership, the Company and the Subsidiaries possesses, or
can acquire on reasonable terms, such certificates, licenses,
approvals, consents, authorizations or permits ("Governmental
Licenses") issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them; the Operating Partnership, the Company and the
Subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse Effect;
all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and none of the
Operating Partnership, the Company or any Subsidiary has received any
notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xxiii) ABSENCE OF LABOR DISPUTE. No material labor dispute
with the employees of the Operating Partnership, the Company or any of
the Subsidiaries exists or, to the knowledge of the Operating
Partnership, the Company or any of the Subsidiaries, is imminent; and
the Company is not aware of any existing or imminent labor disturbance
by the employees of any of its principal contractors which might be
expected to result in a Material Adverse Effect.
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(xxiv) INVESTMENT COMPANY ACT. None of the Operating
Partnership, the Company or any Subsidiary is, or upon the issuance
and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus will be,
an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms
are defined under the Investment Company Act of 1940, as amended (the
"1940 Act"), or is or will be required to be registered under the 1940
Act.
(xxv) ENVIRONMENTAL LAWS. (A) Except as has been disclosed
in the Prospectus, the Communities, the properties managed by the
Management Company (the "Managed Properties") and any other real
property owned, occupied or operated by the Operating Partnership, the
Company or any Subsidiary, are presently operated in compliance with
all Environmental Laws (as defined below), except where a failure to
comply would not, either singly or in the aggregate, result in a
Material Adverse Effect.
(B) Except as has been disclosed in the Prospectus, there
are no Environmental Laws requiring any remediation, clean up,
repairs, construction or capital expenditures (other than normal
maintenance) with respect to the Communities, the Development Sites or
the Managed Properties which would have, either singly or in the
aggregate, a Material Adverse Effect.
(C) No notices of any violation or alleged violation of any
Environmental Laws relating to the Communities, the Managed Properties
or the Development Sites or their uses have been received by any of
the Operating Partnership, the Company, any Subsidiary or, to the best
knowledge of the Operating Partnership, and the Company, by any prior
owner, operator or occupant of such properties, except for such
violations which would not, either singly or in the aggregate, result
in a Material Adverse Effect, and (ii) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions,
suits, claims, proceedings or investigations pending or, to the best
knowledge of the Operating Partnership and the Company, threatened,
relating to the ownership, use, maintenance or operation of the
Communities, the Managed Properties or the Development Sites.
(D) Except as has been disclosed in the Prospectus, all
material permits and licenses required under any Environmental Laws in
respect of the operations of the Communities or the Managed Properties
have been obtained, and such properties and the owners and operators
thereof are in compliance, in all material respects, with the terms
and conditions of such permits and licenses.
(E) All written reports of environmental surveys, audits,
investigations and assessments in the possession or control of the
Operating Partnership and the Company relating to the Communities and
the Development Sites (the "Environmental Reports") have been
disclosed or made available to the Underwriter or its counsel.
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(F) Except as set forth in the Environmental Reports, no
Community, Managed Property or Development Site (i) is included or, to
the best knowledge of the Company and the Operating Partnership,
proposed for inclusion on the National Priorities List issued pursuant
to CERCLA (as defined below) by the United States Environmental
Protection Agency (the "EPA") or on the Comprehensive Environmental
Response, Compensation, and Liability Information System database
maintained by the EPA as a potential CERCLA removal, remedial or
response site or (ii) is included or, to the best knowledge of the
Company, proposed for inclusion on any similar list of potentially
contaminated sites pursuant to any other applicable Environmental Law
and none of the Operating Partnership, the Company or any Subsidiary
has received any written notice from the EPA or any other Governmental
Authority proposing the inclusion of any Community or Managed Property
on such list.
(G) Except as disclosed in the Environmental Reports, there
currently are no underground or above-ground storage tanks located on
or in any Community, Managed Property or Development Site.
(H) "Environmental Law" means all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders,
demands, approvals, authorizations and similar items of all
governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative and
regulatory decrees, judgments and orders relating to the protection of
human health or the environment as in effect as of the date hereof,
including but not limited to those pertaining to reporting, licensing,
permitting, investigation and remediation of emissions, discharges,
releases or threatened releases of "Hazardous Materials," substances,
pollutants, contaminants or hazardous or toxic substances, materials
or wastes whether solid, liquid or gaseous in nature, into the air,
surface water, ground water or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of substances, pollutants, contaminants or hazardous or
toxic substances, materials, or wastes, whether solid, liquid or
gaseous in nature, including by way of illustration and not by way of
limitation, (x) the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Sections 9601 ET SEQ.) ("CERCLA"), the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 ET
SEQ.), the Clean Air Act (42 U.S.C. Sections 7401 ET SEQ.), the
Federal Water Pollution Control Act (33 U.S.C. Sections 1251), the
Safe Drinking Water Act (42 U.S.C. Sections 300f ET SEQ.), the Toxic
Substances Control Act (15 U.S.C. Sections 2601 ET SEQ.), the
Endangered Species Act (16 U.S.C. Sections 1531 ET SEQ.), the
Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C.
Sections 11001 ET SEQ.), the Hazardous Materials Transportation Act,
as amended (49 U.S.C. Section 1801 ET SEQ.), the Clean Water Act, as
amended (33 U.S.C. Section 1251 ET SEQ.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), and the
Occupational Safety and Health Act, as amended (29 U.S.C. Section 651
ET SEQ.), and (y) analogous state and local provisions.
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(I) "Hazardous Material" means any chemical substance:
(i) the presence of which requires investigation or
remediation under any federal, state or local statute,
regulation, ordinance, order, action or policy, administrative
request or civil complaint under any of the foregoing or under
common law; or
(ii) which is defined as a "hazardous waste" or
"hazardous substance" under any federal, state or local statute,
regulation or ordinance or amendments thereto as in effect as of
the date hereof, or as hereafter amended, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.)
and or the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 ET SEQ.); or
(iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is regulated by any governmental
authority, agency, department, commission, board, agency or
instrumentality of the United States, or any state or any
political subdivision thereof having or asserting jurisdiction
over any of the Communities, the Managed Properties or the
Development Sites; or
(iv) the presence of which on any of the Communities,
the Managed Properties or the Development Sites causes a nuisance
upon such properties or to adjacent properties or poses a hazard
to the health or safety of persons on or about any of the
Communities, the Managed Properties or the Development Sites; or
(v) the presence of which on adjacent properties
constitutes a trespass by any owner or operator of the
Communities, the Managed Properties, the Development Sites or any
Other Property; or
(vi) which contains gasoline, diesel fuel or other
petroleum hydrocarbons, polychlorinated biphenyls (PCBs) or
asbestos or asbestos-containing materials or urea formaldehyde
foam insulation; or
(vii) radon gas.
(J) "Governmental Authority" shall mean any federal, state
or local governmental office, agency or authority having the duty or
authority to promulgate, implement or enforce any Environmental Law.
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(xxvi) TITLE TO PROPERTY. The Operating Partnership, the
Financing Partnership or the Chandler Partnership or the McKinley
Partnership has good and marketable fee simple title to the land
underlying each of the Communities and the Development Sites and good
and marketable title to the improvements thereon (in each case with
title insurance thereon in full force and effect and which is adequate
in accordance with industry standards) and all other assets that are
required for the effective operation of such Communities in the manner
in which they are currently operated, subject only to Permitted
Exceptions (as herein defined); (B) all liens, charges or encumbrances
on or affecting any of the Communities or the other property and
assets of the Operating Partnership, the Company or any of the
Subsidiaries which are required to be disclosed in the Prospectus are
disclosed therein; (C) the Operating Partnership or the Financing
Partnership (or the Management Company as agent for the Operating
Partnership or the Financing Partnership) is the lessor of all tenant
leases at each of the Communities; (D) each of the Communities
complies in all material respects with all applicable federal, state
and local codes, laws and regulations (including, without limitation,
building and zoning codes, laws and regulations and laws relating to
handicapped access to the Communities); (E) there are in effect for
the property and assets of the Operating Partnership, the Company and
the Subsidiaries insurance policies covering risks and in amounts that
are commercially reasonable for the types of assets owned by them and
that are consistent with the types and amounts of insurance typically
maintained by prudent owners of similar assets, and none of the
Operating Partnership, the Company or any Subsidiary has received from
any insurance company notice of any material defects or deficiencies
affecting the insurability of any such assets or any notices of
cancellation or intent to cancel any such policies; (F) none of the
Operating Partnership, the Company or any of the Subsidiaries has
knowledge of any pending or threatened condemnation proceedings,
zoning change, or other proceeding or action that will materially
adversely affect the size of, use of, improvements on, construction on
or access to the Communities; and (G) none of the Operating
Partnership, the Company nor any of the Subsidiaries has received from
any governmental authority notice of any violation of any federal,
state or municipal law, rule or regulation (including relating to
environmental matters) concerning the Communities or any part thereof
which has not heretofore been cured, except where a failure to cure
would not result in a Material Adverse Effect. As used in this
Agreement, "Permitted Exceptions" means: (i) real estate taxes and
assessments not yet delinquent; (ii) covenants, restrictions,
easements and other similar agreements, provided that the same are not
violated by existing improvements or the current use and operation of
a Community; (iii) zoning laws, ordinances and regulations, building
codes, rules and other governmental laws, regulations, rules and
orders affecting each Community, provided that the same are not
violated by existing improvements or the current use and operation of
a Community; (iv) any state of facts disclosed by the surveys relating
to the Communities previously provided to the Underwriters;
(v) mortgage financing as described in the Prospectus.
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(xxvii) RIGHT OF FIRST REFUSAL. No person or entity has any
option or right of first refusal to purchase all or any part of any
Community or Development Site or any interest therein.
(xxviii) TAX RETURNS. Each of the Operating Partnership, the
Company and the Subsidiaries has filed all federal, state, local and
foreign income, franchise, sales and other tax returns which have been
required to be filed and has paid all taxes required to be paid and
any other assessment, fine or penalty levied against it, to the extent
that any of the foregoing is due and payable, except, in all cases,
for any such tax, assessment, fine or penalty that is being contested
in good faith through appropriate proceedings and as to which
appropriate reserves have been established.
(xxix) REGULATION M. None of the Operating Partnership, the
Company, the Subsidiaries or any of their respective directors,
officers or controlling persons, has taken or will take, directly or
indirectly, any action resulting in a violation of Regulation M under
the 1934 Act, or designed to cause or result in, or that has
constituted or that reasonably might be expected to constitute, the
stabilization or manipulation of the price of any security of the
Operating Partnership or the Company to facilitate the sale or resale
of the Securities.
(xxx) REGISTRATION RIGHTS. There are no persons with
registration or other similar rights to have any securities registered
pursuant to the Registration Statement other than AEW Partners, L.P. a
Delaware limited partnership, CIIF Associates II Limited Partnership,
a Delaware limited partnership, Stephen O. Evans and F. Keith
Withycombe, who have waived such rights, and there are no other
persons with registration or other similar rights to have any
securities otherwise registered by the Company under the 1933 Act,
except, in the latter case, holders of Units issued in connection with
the Company's purchase of the Ashton Apartments in Corona Hills,
California and Acacia Creek in Scottsdale, Arizona, Messrs. Evans and
Withycombe and the Continuing Investors (as defined in the Company's
initial public offering prospectus).
(xxxi) BROKER'S FEES. Neither the Operating Partnership nor
the Company has incurred any liability for finder's or broker's fees
or agent's commissions (other than those payable to the Underwriters)
in connection with the execution and delivery of this Agreement, the
offer and sale of the Securities or the transactions contemplated
hereby.
(xxxii) REGISTRATION AS BROKER. Neither the Operating
Partnership, the Company nor any Subsidiary is required to register as
a "broker" or "dealer" in accordance with the provisions of the 1934
Act or the rules and regulations promulgated thereunder.
(xxxiii) COMPLIANCE WITH CUBA ACT. The Operating Partnership
has complied with, and is and will be in compliance with, the
provisions of that certain
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Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules
and regulations thereunder (collectively, "Cuba Act") or is exempt
therefrom.
(xxxiv) INVESTMENT GRADE RATING. The Company has received an
investment grade rating of BBB- from Standard & Poor's Corporation and
Baa3 from Moody's Investors Service, Inc. with respect to the
Securities.
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITER; CLOSING.
(a) SECURITIES. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Operating Partnership agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Operating Partnership, at the prices set forth in Schedule B hereto
(which is a part hereof), the aggregate principal amount of Securities set forth
in Schedule A hereto, opposite the name of such Underwriter, plus any additional
principal amount of Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof. The initial public
offering price, the purchase price to be paid by the Underwriters for the
Securities, and the interest rate on the Securities are set forth on Schedule B
hereto.
(b) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of Gibson, Dunn &
Crutcher LLP, 333 South Grand Avenue, Los Angeles, California 90071; or at such
other place as shall be agreed upon by the Underwriters and the Company, at
7:00 a.m. (Los Angeles time), on the third (fourth, if the pricing occurs after
4:30 p.m. Eastern Time on any given day) business day after the date hereof, or
such other time not later than seven business days after such date as shall be
agreed upon by the Underwriters and the Operating Partnership (such time and
date of payment and delivery being herein called the "Closing Time").
Payment shall be made to the Operating Partnership, by wire transfer
of immediately available funds or similar same day funds payable to the order of
the Operating Partnership against delivery to the Underwriters of certificates
for the Securities to be purchased by them. Certificates for the Securities
shall be in such denominations ($1,000 or integral multiples thereof) and
registered in such names as the Underwriters may request in writing at least one
full business day before the Closing Time. It is understood that each
Underwriter has authorized the other Underwriter, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for Securities
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the Securities to be purchased by any
Underwriter whose funds have not been received by the Closing Time, but such
payment shall not relieve such Underwriter from its obligations hereunder. The
certificates for the Securities will be made available for examination and
packaging by the Underwriters in the City of New York not later than 10:00 a.m.
(Eastern time) on the last business day prior to the Closing Time.
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SECTION 3. COVENANTS OF THE OPERATING PARTNERSHIP. Each of the
Operating Partnership and the Company, jointly and severally, covenants with
each Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
REQUESTS. Subject to Section 3(b), the Operating Partnership or the Company
will notify the Underwriters immediately, and confirm the notice in writing,
(i) when any post-effective amendment to the Registration Statement or Form
10 becomes effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from
the Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement, the Form 10 or any amendment or supplement to the
Prospectus or for additional information and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of the Prospectus,
or of the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, or the initiation or threatening of any proceedings
for any of such purposes. The Operating Partnership or the Company, as
applicable, will promptly effect the filings necessary pursuant to Rule
424(b) and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Operating Partnership or the Company
will make every reasonable effort to prevent the issuance of any stop order
and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment. If the Operating Partnership or the Company elects
to rely on Rule 434, the Company will provide the Underwriters with copies of
the form of Rule 434 Prospectus, in such number as the Underwriters may
reasonably request, and file or transmit for filing with the Commission the
form of Prospectus complying with Rule 434 of the 1933 Act in accordance with
Rule 424(b) of the 1933 Act Regulations by the close of business in New York
on the business day immediately succeeding the date of this Agreement.
(b) FILING OF AMENDMENTS. The Operating Partnership and the Company,
as applicable, will give the Underwriter notice of its intention to file or
prepare any amendment to the Registration Statement (including any filing under
Rule 462(b)), the Form 10, any Term Sheet or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, whether pursuant to the 1933 Act,
the 1934 Act or otherwise, will furnish the Underwriters with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such documents to which the Underwriters
or counsel for the Underwriters shall reasonably object.
(c) RULE 434. If the Operating Partnership uses Rule 434, it will
comply with the requirements of Rule 434.
(d) DELIVERY OF REGISTRATION STATEMENT. The Operating Partnership
and the Company will deliver to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents
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incorporated or deemed to be incorporated by reference therein) and signed
copies of all consents and certificates of experts, and will also deliver to
the Underwriters, without charge, conformed copies of the Registration
Statement as originally filed and of each amendment thereto (excluding
exhibits). The copies of the Registration Statement and each amendment
thereto furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(e) DELIVERY OF PROSPECTUSES. The Operating Partnership has
delivered to the Underwriters, without charge, as many copies of the Prospectus
as the Underwriters reasonably requested, and the Operating Partnership hereby
consents to the use of such copies for purposes permitted by the 1933 Act. The
Operating Partnership will furnish to the Underwriters, without charge, during
the period when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as the Underwriters may reasonably request. The Prospectus and
any amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(f) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Operating
Partnership will comply with the 1933 Act and the 1933 Act Regulations, the 1934
Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement and in the
Prospectus. If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Operating Partnership and the Company,
to amend the Registration Statement or amend or supplement the Prospectus in
order that the Prospectus will not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the time it
is delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Operating Partnership or the Company, as
applicable, will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Operating Partnership or the Company will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(g) BLUE SKY QUALIFICATIONS. The Operating Partnership will use its
best efforts, in cooperation with the Underwriters, to qualify the Securities
for offering and sale under the applicable securities laws of such states and
other jurisdictions of the United States as the Underwriters may designate;
PROVIDED, HOWEVER, that the Operating Partnership shall not be obligated to
qualify as a foreign corporation in any jurisdiction in which it is not so
qualified, to file any general consent to service of process or to subject
itself to taxation. In each jurisdiction in which the Securities have been so
qualified, the Operating Partnership
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will file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not
less than one year from the effective date of the Registration Statement and
any Rule 462(b) Registration Statement.
(h) RULE 158. The Operating Partnership will make generally
available to its security holders as soon as practicable, but not later than 90
days after the close of the period covered thereby, an earnings statement (in
form complying with the provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve-month period beginning not later than the first day of the
Operating Partnership's fiscal quarter next following the "effective date" (as
defined in said Rule 158) of the Registration Statement.
(i) USE OF PROCEEDS. The Operating Partnership will use the net
proceeds received by it from the sale of the Securities in the manner specified
in the Prospectus under the heading "USE OF PROCEEDS."
(j) REIT QUALIFICATION. The Company has, since its formation,
operated in such a manner, and will continue to operate in such a manner, as to
qualify for taxation as a "real estate investment trust" under the Code.
(k) ACTION BY THE OPERATING PARTNERSHIP REGARDING PRICE OF
SECURITIES. Except for the authorization of actions permitted to be taken by
the Underwriters as contemplated herein or in the Prospectus, neither the
Operating Partnership nor the Company will (i) take, directly or indirectly, any
action designed to cause or to result in, or that might reasonably be expected
to constitute, the stabilization or manipulation of the price of any security of
the Operating Partnership or the Company to facilitate the sale or resale of the
Securities, (ii) sell, bid for or purchase the Securities or pay any person any
compensation for soliciting purchases of the Securities or (iii) pay or agree to
pay to any person any compensation for soliciting another to purchase any other
securities of the Operating Partnership or the Company.
(l) CUBA ACT. In accordance with the Cuba Act and without limitation
to the provisions of Sections 6 and 7 hereof, the Operating Partnership agrees
to indemnify and hold harmless the Underwriters from and against any and all
loss, liability, claim, damage and expense whatsoever (including fees and
disbursements of counsel), as incurred, arising out of any violation by the
Operating Partnership of the Cuba Act.
(m) REPORTING REQUIREMENTS. The Operating Partnership and the
Company, during the period when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act, will file all documents required to be filed with
the Commission pursuant to the 1934 Act within the time periods required by the
1934 Act and the 1934 Act Regulations.
(n) REPRESENTATIONS AND WARRANTIES. Prior to the Closing Time, the
Operating Partnership and the Company will notify the Underwriters in writing
immediately if (i) any event occurs that renders any of the representations and
warranties of the Operating Partnership and the Company contained herein
inaccurate or incomplete in any material respect or (ii) with respect to the
representations and warranties of the Operating Partnership
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and the Company contained herein that are limited to materiality of the
Operating Partnership and the Company, and the Subsidiaries considered as one
enterprise, any matter or event occurs that would render such representation
or warranty inaccurate or incomplete if given with respect to the Operating
Partnership, the Company or any Subsidiary on an individual basis.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Operating Partnership will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the printing (or reproduction) and filing of the Registration Statement as
originally filed and of each amendment thereto, (ii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any transfer taxes or duties payable upon the sale of the Securities
to the Underwriters, (iii) the fees and other charges of the Operating
Partnership's counsel, accountants and other advisors, (iv) the qualification of
the Securities under securities laws in accordance with the provisions of
Section 3(g) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (v) the printing (or reproduction) and delivery to the Underwriters of
copies of the Registration Statement as originally filed and of each amendment
thereto and of the Prospectus and any amendments or supplements thereto,
(vi) the printing (or reproduction) and delivery to the Underwriters of copies
of the Blue Sky Survey, (vii) the fees of the National Association of Securities
Dealers, Inc. ("NASD"), if any, including the reasonable fees and other charges
of counsel for the Underwriter in connection with the NASD's review of the terms
of the proposed public offering of the Securities, if applicable and (viii) the
fees and expenses of any transfer agent or registrar for the Securities.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Operating Partnership shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and other charges of
counsel for the Underwriters.
SECTION 5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Operating Partnership and the Company
contained in Section 1 hereof or in certificates of any partner of the Operating
Partnership or any officer of the Company or any Subsidiary delivered pursuant
to the provisions hereof, to the performance by the Operating Partnership and
the Company of their respective obligations hereunder, and to the following
further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, shall have become
effective, and at the Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriters.
The
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Prospectus shall have been filed with the Commission pursuant to Rule 424(b)
of the 1933 Act Regulations within the prescribed time period, and prior to
the Closing Time the Operating Partnership and the Company shall have
provided evidence satisfactory to the Underwriters of such timely filing, or
a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
the 1933 Act Regulations. If the Operating Partnership or the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with the
Commission in accordance with Rule 424(b).
(b) OPINION OF COUNSEL FOR THE OPERATING PARTNERSHIP. At the Closing
Time, the Underwriters shall have received:
(i) The favorable opinion, dated as of the Closing Time, of
Gibson, Dunn & Crutcher LLP, counsel for the Operating Partnership and
the Company, in form and substance reasonably satisfactory to counsel
for the Underwriters, to the effect that:
(A) The Operating Partnership has been duly organized and
is validly existing as a limited partnership in good standing
under the Delaware Act. The Operating Partnership has full
partnership power and authority to own, lease and operate its
properties, to conduct the business in which it is engaged or
proposes to engage as described in the Prospectus and to enter
into and perform its obligations under this Agreement.
(B) The Operating Partnership is duly qualified as a
foreign partnership to transact business and is in good standing
in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify would
not have a Material Adverse Effect.
(C) The outstanding Units were duly authorized for issuance
by the Operating Partnership to the holders thereof and are
validly issued. The Company is the sole general partner of the
Operating Partnership and, immediately prior to the sale of the
Securities, is the holder of ________________ of the ____________
issued and outstanding Units.
(D) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business
except where the failure to so qualify would not result in a
Material Adverse Effect.
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(E) Each of Evans Withycombe Finance, Inc. and the
Financing Partnership has been duly organized and is validly
existing as a corporation or partnership in good standing under
the laws of the State of Delaware and the Chandler Partnership
is validly existing as a partnership in good standing under the
laws of the State of California. Each of Evans Withycombe
Finance, Inc., the Financing Partnership, the Chandler
Partnership and the McKinley Partnership has full corporate or
partnership power and authority to own, lease and operate its
properties and to conduct the business in which it is engaged or
proposes to engage as described in the Prospectus. Each of Evans
Withycombe Finance, Inc., the Financing Partnership, the Chandler
Partnership and the McKinley Partnership is duly qualified or
registered as a foreign corporation or partnership to transact
business and is in good standing in each jurisdiction in which
qualification to transact business is required, whether by reason
of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not result
in a Material Adverse Effect. All of the issued shares of
capital stock of Evans Withycombe Finance, Inc. have been duly
authorized and are validly issued, fully paid and nonassessable
and are owned of record by the Company to the best knowledge of
such counsel, free and clear of all liens, charges and
encumbrances. The partnership units of the Financing Partnership
have been authorized for issuance to Evans Withycombe Finance,
Inc. and the Operating Partnership and are validly issued and
fully paid, to the knowledge of such counsel, free and clear of
all liens, charges and encumbrances. To the best knowledge of
such counsel, with the exception of the 15% limited partnership
interest in the Chandler Partnership held by Hoffman an
individual third party investor, all of the partnership interests
of the Chandler Partnership and the McKinley Partnership are
owned by the Operating Partnership and the Company, free and
clear of all liens, charges and encumbrances.
(F) This Agreement has been duly authorized, executed and
delivered by the Operating Partnership.
(G) To the knowledge of such counsel, there is no action,
suit or proceeding before or by any court or governmental agency
or body, domestic or foreign, now pending or threatened against
the Operating Partnership, the Company or any Subsidiary that is
required to be disclosed in the Registration Statement which is
not disclosed therein. To the knowledge of such counsel, there
are no contracts, indentures, mortgages, loan agreements, notes,
lease or other instruments of a character which are required to
be described or referred to in the Registration Statement or to
be filed as exhibits thereto by the 1933 Act or by the 1933 Act
Regulations, other than
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those described or referred to therein or filed as exhibits
thereto, and the descriptions thereof or references thereto
in the Registration Statement are correct and accurate in all
material respects.
(H) No consent, approval, authorization of any governmental
agency or authority or, to the knowledge of such counsel, no
order of any court, is required to be obtained by the Operating
Partnership, the Company or any Subsidiary in connection with the
offering, issuance or sale of the Securities under this
Agreement, except such as may be required under the 1933 Act or
the 1933 Act Regulations or state securities laws of any state or
other jurisdiction and except for such as have been obtained.
(I) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
herein by the Operating Partnership and the Company do not and
will not contravene any provision of the Delaware Act, the
Delaware General Corporation Law, California law or federal laws,
do not and will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the Communities or any
other property or assets of the Operating Partnership, the
Company or any Subsidiary pursuant to any agreement or instrument
filed as an exhibit to the Registration Statement or to the
documents incorporated by reference into the Prospectus, nor has
any such action resulted or will such action result in any
violation of the charter, bylaws, certificate of limited
partnership, partnership agreement or other governing document,
as the case may be, of the Operating Partnership, the Financing
Partnership or Evans Withycombe Finance, Inc. or, to such
counsel's knowledge, any judgment, ruling, order, regulation or
administrative or court decree applicable to the business or
properties of such entities.
(J) The Indenture has been duly qualified under the 1939
Act;
(K) The Indenture has been duly authorized, executed and
delivered by the Operating Partnership and (assuming the due
authorization, execution and delivery thereof by the Trustee)
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constitutes a valid and binding agreement of the Operating
Partnership, enforceable against the Operating Partnership in
accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement
of creditors' rights generally and except as enforcement thereof
is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(L) The Securities are in the form contemplated by the
Indenture and, assuming that the Securities have been duly
authenticated by the Trustee in the manner described in its
certificate delivered to the Operating Partnership at the Closing
Time, the Securities have been duly executed, issued and
delivered by the Operating Partnership and constitute valid and
binding obligations of the Operating Partnership, enforceable
against the Operating Partnership in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except
as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding
in equity or at law), and will be entitled to the benefits of the
Indenture.
(M) The Securities and the Indenture conform in all
material respects to the descriptions thereof contained in the
Prospectus.
(N) Each of the Registration Statement, including any Rule
462(b) Registration Statement and the Form 10, has been declared
effective under the 1933 Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been made in the manner
and within the time period required by Rule 424(b); and, to the
best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued under
the 1933 Act or proceedings therefor initiated before or
threatened by the Commission.
(O) The Registration Statement, including any Rule 462(b)
Registration Statement and the Term Sheet, as applicable, the
Form 10, the Prospectus, excluding the documents incorporated by
reference therein, and each amendment or supplement to the
Registration Statement and Prospectus, excluding the documents
incorporated by reference therein, as of their respective
effective or issue dates (other than the financial statements and
supporting schedules
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and other financial and related statistical data included
therein or omitted therefrom, as to which no opinion need
be rendered) complied as to form in all material respects
with the requirements of the 1933 Act and the 1933 Act
Regulations.
(P) The documents incorporated by reference in the
Prospectus (other than the financial statements and supporting
schedules and other financial and related statistical data
included therein or omitted therefrom, as to which no opinion
need be rendered), when they became effective or were filed with
the Commission, as the case may be, complied as to form in all
material respects with the requirements of the 1933 Act or the
1934 Act, as applicable, and the rules and regulations of the
Commission thereunder.
(Q) The information in the Prospectus under "FEDERAL INCOME
TAX CONSIDERATIONS," to the extent that it constitutes matters of
law, summaries of legal matters, documents, proceedings or legal
conclusions, has been reviewed by such counsel and is correct in
all material respects.
(R) The Company has been and is organized in conformity
with the requirements for qualification as a REIT under the Code,
and its method of operation has at all times enabled, and its
proposed method of operation as described in the Prospectus and
as represented by management will enable, it to meet the
requirements for taxation as a REIT under the Code.
(S) None of the Operating Partnership, the Company or any
Subsidiary is an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined under the 1940 Act, or is or
will be required to be registered under the 1940 Act.
(T) Each of the Operating Partnership and the Financing
Partnership has at all times been treated, and, since its
acquisition by the Company, each of the Chandler Partnership
and the McKinley Partnership has been treated, and each of them
will be treated, for federal income tax purposes as a partnership
and not as an association taxable as a corporation or publicly
traded partnership.
(U) Evans Withycombe Finance, Inc. has at all times been
treated, and will be treated, as a "qualified REIT subsidiary"
under Section 856(i) of the Code.
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(V) To the best knowledge of such counsel, there are no
persons with registration or other similar rights to have any
securities of the Company registered pursuant to the Registration
Statement other than AEW Partners, L.P. a Delaware limited
partnership, CIIF Associates II Limited Partnership, a Delaware
limited partnership, Stephen O. Evans and F. Keith Withycombe,
who, to such counsel's knowledge, have waived such rights.
(ii) The favorable opinion, dated as of the Closing Time, of
Ballard Spahr Andrews & Ingersoll, counsel for the Operating Partnership
and the Company with respect to matters of Maryland law, in form and
substance reasonably satisfactory to counsel for the Underwriters, to the
effect that:
(A) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Maryland.
(B) The Company has the full corporate power and corporate
authority to own, lease and operate its properties, to conduct
the business in which it is engaged or proposes to engage as
described in the Prospectus and to enter into and perform its
obligations under this Agreement.
(C) All of the issued and outstanding Common Shares have
been duly authorized and validly issued and are fully paid and
nonassessable and none of the outstanding shares of capital stock
of the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company arising under
the Maryland General Corporation Law, the charter or bylaws of
the Company or, to such counsel's knowledge, otherwise.
(D) The authorized capital stock of the Company conforms to
the description thereof incorporated by reference into the
Prospectus. Except for options under the 1994 Stock Option Plan
and Units of the Operating Partnership, there are (i) to such
counsel's knowledge no outstanding securities convertible into or
exchangeable for any shares of capital stock of the Company and
(ii) no outstanding options, rights (preemptive or otherwise) or
warrants to purchase or to subscribe for such shares or any other
securities of the Company pursuant to the Company's charter or
bylaws, or to such counsel's knowledge, any agreement or other
instrument to which the Company is a party or by which it is
bound.
(E) The Company has duly authorized and reserved a
sufficient number of Common Shares for issuance upon redemption
of outstanding Units issued by the Operating Partnership as
contemplated by
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the Partnership Agreement and for issuance upon
the exercise of options under the 1994 Stock Option Plan.
(F) This Agreement has been duly authorized, executed and
delivered by the Company, in its individual capacity and in its
capacity as the general partner of the Operating Partnership.
(G) No consent, approval, authorization, order of or
qualification with any court or governmental agency or authority
or other entity is required to be obtained by the Operating
Partnership, the Company or any Subsidiary under the Maryland
General Corporation Law in connection with the offering, issuance
or sale of the Securities under this Agreement except for such as
have been obtained.
(H) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
herein do not and will not contravene any provision of the
Maryland General Corporation Law, nor has any such action
resulted or will such action result in any violation of the
charter or bylaws of the Company, or, to such counsel's
knowledge, any judgment, ruling, order, regulation or
administrative or court decree issued under or pursuant to the
Maryland General Corporation Law and applicable to the business
or properties of the Company.
(iii) The favorable opinion, dated as of the Closing Time, of
Latham & Watkins, counsel for the Underwriters, with respect to such
matters as the Underwriters may reasonably request.
(iv) In giving their opinions required by subsections (b)(i) and
(b)(iii), respectively, of this Section 5, Gibson, Dunn & Crutcher LLP and
Latham & Watkins shall each additionally state that nothing has come to
their attention that would lead them to believe that the Registration
Statement (except for financial statements and schedules and other
financial and related statistical data included or incorporated by
reference therein, as to which counsel need make no statement), at the time
it became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus
(except for financial statements and schedules and other financial and
related statistical data included or incorporated by reference therein, as
to which counsel need make no statement), at the time the Prospectus was
issued (unless the term "Prospectus" refers to a prospectus which has been
provided to the Underwriters by the Operating Partnership and the Company
for use in connection with the offering of Securities which differs from
the Prospectus on file at the Commission at the time the Registration
Statement becomes effective, in which case at the date of such prospectus),
or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the
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circumstances under which they were made, not misleading. In giving its
opinion, Gibson, Dunn & Crutcher LLP and Latham & Watkins may rely as to
matters of Maryland law upon the opinion of Ballard Spahr Andrews &
Ingersoll, which opinions shall be in form and substance reasonably
satisfactory to counsel for the Underwriters. Each such opinion
required by subsections (b)(i) and (b)(iii) shall not state that it is
to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(c) CLOSING MATTERS. At the Closing Time, (i) the Registration
Statement and the Prospectus shall contain all statements that are required to
be stated therein in accordance with the 1933 Act and the 1933 Act Regulations
and in all material respects shall conform to the requirements of the 1933 Act
and the 1933 Act Regulations, and neither the Registration Statement nor the
Prospectus shall contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, (ii) the representations and
warranties in Section 1 hereof shall be true and correct with the same force and
effect as though expressly made at and as of the Closing Time, (iii) there shall
not have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any Material Adverse Effect, whether or
not arising in the ordinary course of business, (iv) no action, suit or
proceedings at law or in equity shall be pending or, to the knowledge of the
Operating Partnership or the Company, threatened against such entity or any
Subsidiary before or by any court or governmental agency wherein an unfavorable
decision, ruling or finding might result in any Material Adverse Effect other
than as set forth in the Prospectus, (v) no stop order suspending the
effectiveness of the Registration Statement or any part thereof has been issued
and no proceedings for that purpose have been instituted or, to the knowledge of
the Operating Partnership or the Company, threatened by the Commission or by the
state securities authority of any jurisdiction and (vi) the Underwriters shall
have received, at the Closing Time, a Certificate of the Chairman of the Board
and Chief Executive Officer and the chief financial or chief accounting officer
of the Company, in its individual capacity and as the general partner of the
Operating Partnership, dated as of the Closing Time, stating its compliance with
subparagraphs (i) through (v) of this subsection (c), and stating that each of
the Operating Partnership and the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time. As used in this Section 5(d) the term "Prospectus" means the
Prospectus in the form first used by the Underwriters to confirm sales of the
Securities.
(d) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of
this Agreement, the Underwriters shall have received from Ernst & Young LLP a
letter dated such date, in form and substance reasonably satisfactory to the
Underwriters, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements, pro forma financial statements and pro forma and adjusted
financial statements and information of the Company and its affiliates and
certain financial information contained in the Registration Statement and the
Prospectus.
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(e) BRING-DOWN COMFORT LETTER. At the Closing Time, the Underwriters
shall have received from Ernst & Young LLP a letter, dated as of the Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (d) of this Section 5, except that the
specified date referred to shall be a date not more than five days prior to the
Closing Time.
(f) NO OBJECTION. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(g) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the
Underwriters shall have been furnished with such documents and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by Operating Partnership and the Company in connection
with the issuance and sale of the Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the Underwriters and counsel
for the Underwriters.
SECTION 6. INDEMNIFICATION.
(a) Each of the Operating Partnership and the Company agrees, jointly
and severally, to indemnify and hold harmless the Underwriters and each person,
if any, who controls the Underwriters within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever for which indemnification is
provided under subsection (i) above, if (subject to Section 6(d)
below) such settlement is effected with the written consent of the
Operating Partnership and the Company; and
30
<PAGE>
(iii) against any and all expense whatsoever (including, the
fees and charges of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever for
which indemnification is provided under subsection (i) above, to the
extent that any such expense is not paid under subsection (i) or (ii)
above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information contained in the
last paragraph on the front cover page, the first paragraph on the inside
front cover page and the third sentence of the fourth full paragraph in the
section of the Prospectus Supplement under the heading "UNDERWRITING" and
furnished to the Operating Partnership by any Underwriter expressly for use
in the Registration Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
PROVIDED FURTHER, that this indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, liabilities, claims, damages or
expenses purchased Securities, or any person controlling any Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Operating
Partnership shall have furnished any such amendments or supplements thereto,
but excluding documents incorporated or deemed to be incorporated by
reference therein) was not sent or given by or on behalf of any Underwriter
to such person, if such is required by law, at or prior to the written
confirmation of the sale of such Securities to such person and if the
Prospectus (as so amended or supplemented, if applicable) would have
completely corrected the defect giving rise to such loss, liability, claim,
damage or expense, except that this proviso shall not be applicable if such
defect shall have been corrected in a document which is incorporated or
deemed to be incorporated by reference in the Prospectus.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Operating Partnership, the Company, the Company's directors, each of the
officers of the Company who signed the Registration Statement, and each person,
if any, who controls the Operating Partnership or the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section 6, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information contained in the last
paragraph on the front cover page, the first paragraph on the inside front cover
page and the third sentence of the fourth full paragraph in the section of the
Prospectus Supplement under the heading "UNDERWRITING" and furnished to the
Operating Partnership by such Underwriter expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
31
<PAGE>
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have to the extent it is not materially prejudiced as
a result thereof and in any event shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. In the case
of parties indemnified pursuant to Section 6(a) above, counsel to the
indemnified parties shall be selected by the Underwriters and shall be
reasonably satisfactory to the indemnifying person(s), and, in the case of
parties indemnified pursuant to Section 6(b) above, counsel to the indemnified
parties shall be selected by the Operating Partnership and shall be reasonably
satisfactory to the Underwriters. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that counsel
to the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for the reasonable fees
and expenses of counsel, such indemnifying party agrees that it shall be liable
for any settlement of the nature contemplated by Section 6(a)(ii) effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient (other than by
reason of the indemnified party not being entitled to indemnification in
accordance with the specific terms of Section 6 hereof) to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Operating
Partnership
32
<PAGE>
on the one hand and the Underwriters on the other hand from the offering of
the Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Operating Partnership on the
one hand and of the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Operating Partnership on the
one hand and the Underwriters on the other hand in connection with the offering
of the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses but including
any expenses reimbursed by the Underwriters) received by the Operating
Partnership and the total underwriting discount received by the Underwriters,
bear to the aggregate initial public offering price of the Securities.
The relative fault of the Operating Partnership on the one hand and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Operating Partnership or the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Operating Partnership and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 7.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
discount received by it exceeds the amount of any damages which it has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
33
<PAGE>
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Operating
Partnership or the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, shall have the same rights to contribution as the
Operating Partnership .
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of the general partner of the Operating
Partnership or the officers of the Company submitted pursuant hereto, shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters or controlling person, or by or on
behalf of the Operating Partnership or the Company and shall survive delivery
of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Underwriters may terminate this Agreement, by notice to the
Operating Partnership and the Company, at any time at or prior to the Closing
Time (i) if there has been, since the date of this Agreement or since the
respective dates as of which information is given in the Registration Statement,
any Material Adverse Effect, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or elsewhere or any
outbreak of hostilities or escalation thereof or other calamity or crisis the
effect of which is such as to make it, in the judgment of the Underwriters,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Operating
Partnership or the Company has been suspended by the Commission or if trading
generally on either the New York Stock Exchange or the American Stock Exchange
has been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of said
Exchanges or by order of the Commission or any other governmental authority, or
if a banking moratorium has been declared by either federal, New York or Arizona
authorities.
(b) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and provided further that Sections 1, 6 and 7
shall survive such termination and remain in full force and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one
or more of the Underwriters shall fail at the Closing Time to purchase the
Securities which it is obligated to purchase under this Agreement (the
"Defaulted Securities"), the other Underwriters shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, such arrangements have not been completed
within such 24-hour period, then:
34
<PAGE>
(a) If the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder, each
of the non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) If the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, the Underwriters or the Operating Partnership
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements. As used herein, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters c/o Merrill Lynch, Pierce,
Fenner & Smith Incorporated at Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York 10281-1201, attention of Equity
Capital Markets and notices to either the Operating Partnership or the Company
shall be directed to it at 6991 East Camelback Road, Suite A-200, Scottsdale,
Arizona 85251, attention of Stephen O. Evans, Chairman of the Board and Chief
Executive Officer.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Underwriters, the Operating Partnership and the
Company and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Operating Partnership, the Company
and their respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 hereof and their successors, heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
35
<PAGE>
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof and thereof are intended to be for the sole
and exclusive benefit of the Underwriters, the Operating Partnership, the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from the Underwriters shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
36
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Operating Partnership a counterpart
hereof, whereupon this instrument, along with all counterparts, will become a
binding agreement among the Underwriters, the Operating Partnership and the
Company in accordance with its terms.
Very truly yours,
EVANS WITHYCOMBE RESIDENTIAL, L.P.
By: Evans Withycombe Residential, Inc.,
General Partner
By
---------------------------------
Stephen O. Evans,
Chairman of the Board and
Chief Executive Officer
EVANS WITHYCOMBE RESIDENTIAL, INC.
By
---------------------------------
Stephen O. Evans,
Chairman of the Board and Chief Executive
Officer
37
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
J.P. Morgan Securities Inc.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
2004 NOTES
PRINCIPAL AMOUNT
NAME OF UNDERWRITER OF 2004 NOTES
------------------- ----------------
Merrill Lynch, Pierce, Fenner &
Smith Incorporated . . . . . . . . . . . . . . . . . $
-----------
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . .
-----------
J.P. Morgan Securities Inc. . . . . . . . . . . . . .
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $75,000,000
-----------
-----------
2007 NOTES
PRINCIPAL AMOUNT
NAME OF UNDERWRITER OF 2007 NOTES
------------------- ----------------
Merrill Lynch, Pierce, Fenner &
Smith Incorporated . . . . . . . . . . . . . . . . $
-------------
Goldman, Sachs & Co. . . . . . . . . . . . . . . . .
-------------
J.P. Morgan Securities Inc. . . . . . . . . . . . .
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . $50,000,000
-------------
-------------
SCHEDULE A-1
<PAGE>
SCHEDULE B
1. The initial public offering price of the 2004 Notes and the 2007 Notes
shall be ______% and ______% of the principal amounts thereof,
respectively, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Underwriters for the 2004 Notes
and the 2007 Notes shall be _____% and _____% of the principal amounts
thereof, respectively.
3. The interest rate on the 2004 Notes and 2007 Notes shall be ____% and
____% per annum, respectively.
SCHEDULE B-1
<PAGE>
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- -FOOTER 2-
s:\rstrulso\evans\debt-97\ purchase.005
- -FOOTER 3-
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- -FOOTER 4-
SCHEDULE A-1
- -FOOTER 5-
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- -FOOTER 6-
SCHEDULE B-#
SCHEDULE B-2
<PAGE>
March 24, 1997
(213)229-7000 C26181-00024
Evans Withycombe Residential, Inc.
Evans Withycombe Residential, L.P.
6991 East Camelback Road, Suite A-200
Scottsdale, Arizona 85251
Re: Registration Statement on Form S-3
(Registration Nos. 333-19879 and 333-19879-01)
Ladies and Gentlemen:
We have acted as special counsel for Evans Withycombe Residential,
Inc., a Maryland corporation (the "Company"), and Evans Withycombe
Residential, L.P., a Delaware limited partnership (the "Operating
Partnership" and together with the Company, the "Registrants") in connection
with (A) the preparation of the Registrants' Registration Statement on Form
S-3, as amended (the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), for (x) the registration of the sale by the Company from
time to time of up to $125,000,000 maximum aggregate initial offering price
of (i) shares of the Company's Preferred Stock, par value $.01 per share,
(ii) shares of the Company's Common Stock, par value $.01 per share,
(iii) Warrants to purchase Preferred Stock or Common Stock ("Warrants") or
(iv) unconditional guarantees of the Company of unsecured non-convertible
debt securities of the Operating Partnership; and (y) the registration of the
sale by the Operating Partnership from time to time of up to $200,000,000
maximum aggregate initial offering price of debt securities of the Operating
Partnership ("Debt Securities"); and (B) the issuance and sale of the
Operating Partnership of $75,000,000 principal amount of its Notes due 2004
(the "2004 Notes") and $50,000,000 principal amount of its Notes due 2007
(the "2007 Notes" and
<PAGE>
Evans Withycombe Residential, Inc.
Evans Withycombe Residential, L.P.
March 24, 1997
Page 2
together with the 2004 Notes, the "Notes") under the Registration Statement
and pursuant to an indenture (the "Indenture") to be entered into between the
Operating Partnership and Bank One, Columbus, NA, as trustee (the "Trustee").
The Notes are to be publicly offered and sold by Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., J.P. Morgan
& Co. and J.P. Morgan Securities Inc. (collectively, the "Underwriters"). The
Notes will be acquired by the Underwriters pursuant to the terms of a
Purchase Agreement (the "Purchase Agreement") to be entered into among the
Company, the Operating Partnership and the Underwriters. Terms not otherwise
defined herein shall have the meanings given to them in the Registration
Statement.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have made such inquiries as we
have deemed appropriate for the purpose of rendering this opinion.
We have assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents submitted to us as
originals, and the conformity to original documents of all documents
submitted to us as copies and the authenticity of the originals of such
copied documents.
On the basis of and in reliance upon the foregoing examination,
inquiries and assumptions, and such other matters of fact and upon the
examination of such other questions of law as we deem appropriate, and
subject to the assumptions, exceptions, qualifications and limitations
contained herein, we are of the opinion that:
(i) The Notes, when executed, issued, delivered and paid for in
accordance with the terms of the Indenture and the Purchase Agreement
(assuming due execution and delivery of the Purchase Agreement and the
Indenture and authentication of the Notes by the Trustee and payment for the
Notes by the Underwriters), will be binding obligations of the Operating
Partnership; and
(ii) When the Operating Partnership and a trustee execute and deliver
an indenture and the specific terms of a particular Debt Security have been
duly authorized and established in accordance with such indenture, and such
Debt Security has been duly authorized, executed, authenticated, issued and
delivered in accordance with such indenture, against payment therefor or upon
exchange in accordance with the applicable underwriting or other agreement,
such Debt Security will constitute the valid and binding obligations of the
Operating Partnership.
<PAGE>
Evans Withycombe Residential, Inc.
Evans Withycombe Residential, L.P.
March 24, 1997
Page 3
Our opinion in (i) above is subject to (a) the effect of applicable
bankruptcy, insolvency, reorganization, moratorium, arrangement and other laws
affecting creditor's rights, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances, fraudulent
transfers and preferential transfers; (b) the limitations imposed by general
principals of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity); (c) our assumptions that
there exist no agreements, understandings or negotiations among the parties
to the Indenture or to the Purchase Agreement that would modify the terms of
either thereof or the respective rights or obligations of the parties
thereunder; and (d) the Registration Statement shall have been declared
effective and such effectiveness shall not have been terminated or rescinded.
Our opinion in (ii) above is subject to the following assumptions,
qualifications, limitations and exceptions being true and correct at or
prior to the time of the delivery of any such Debt Security:
(a) the Board of Directors of the Company, in its capacity as general
partner of the Operating Partnership, shall have duly established the terms
of such Debt Security and duly authorized the issuance and sale of such Debt
Security and such authorization shall not have been modified or rescinded;
(b) the Registration Statement shall have been declared effective and
such effectiveness shall not have been terminated or rescinded;
(c) the applicable indentures, if any, shall have been duly authorized,
executed and delivered by the Operating Partnership and the applicable
trustee shall have been qualified under the Trust Indenture Act of 1939, as
amended, and properly filed as an exhibit to the Registration Statement;
(d) in the case of an indenture, Debt Security or agreement pursuant to
which any Warrants are to be issued, there shall be no terms or provisions
contained therein which would have the effect, under applicable law, of
vitiating the validity and binding nature of such instrument; and
(e) there will not have occurred any change in law affecting the validity
or enforceability of such Debt Security.
We have also assumed that none of the terms of any Debt Security to be
established subsequent to the date hereof, nor the issuance and delivery of
such Debt Security, nor
<PAGE>
Evans Withycombe Residential, Inc.
Evans Withycombe Residential, L.P.
March 24, 1997
Page 4
the compliance by the Operating Partnership with the terms of such Debt
Security will violate any applicable law or will result in a violation
of any provision of any instrument or agreement then binding upon the
Debt Security, or any restriction imposed by any court or governmental body
having jurisdiction over the Debt Security.
This opinion is limited to the present laws of the State of New York as
presently in effect, to the present federal laws of the United States and to
the present judicial interpretations thereof and to the facts as they presently
exist. In rendering this opinion, we assume no obligation to revise or
supplement this opinion should current laws, or the interpretations thereof, be
changed. We understand that you have received an opinion of Ballard Spahr
Andrews & Ingersoll with respect to the Common Stock, the Preferred Stock, the
Warrants, the Guarantees and certain other matters.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption
"Legal Matters" in the Registration Statement, the related Prospectus and the
Prospectus Supplement relating to the Notes. In giving these consents, we do
not admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations
promulgated by the Commission under the Securities Act.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
GIBSON, DUNN & CRUTCHER LLP
<PAGE>
EXHIBIT 12
STATEMENT REGARDING COMPUTATION ON RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EARNINGS
- -------------------------------------------------
Income (loss) before minority interest and
extraordinary item............................. $ (6,709)(1) $ 6,612(2) $ 11,581(3) $ 20,826 $ 18,570
Interest......................................... 6,001 7,091 10,190 17,040 26,160
Less: interest capitalized during the period..... (92) (730) (2,724) (5,048) (2,714)
Amortization of deferred financing costs......... 208 336 370 658 779
Interest portion of rental expense............... 93 93 95 99 119
--------- --------- --------- --------- ---------
Total Earnings................................. $ (499) $ 13,402 $ 19,512 $ 33,575 $ 42,914
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
FIXED CHARGES
- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest......................................... $ 6,001 $ 7,091 $ 10,190 $ 17,040 $ 26,160
Amortization of deferred financing costs......... 208 336 370 658 779
Interest portion of rental expense............... 93 93 95 99 119
--------- --------- --------- --------- ---------
Total Fixed Charges............................ $ 6,302 $ 7,520 $ 10,655 $ 17,797 $ 27,058
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of Earnings to Fixed Charges............... (0.08)x 1.78x 1.83x 1.89x 1.59x
</TABLE>
- ------------------------
(1) During 1992, the Company negotiated a discounted payoff of a mortgage loan
secured by an apartment community, the excess of the amount owed for
principal and interest over the amount paid to pay off the loan was recorded
as an extraordinary item-gain on extinguishment of debt. The Company
determined that the carrying value of the community was in excess of net
realizable value. The excess of $10,284 was charged to write down of real
estate assets and was recorded in the income (loss) before minority interest
and extraordinary item. Consequently, the computation of the ratio of
earnings to fixed charges for such year indicates that earnings were
inadequate to cover fixed charges by approximately $6,801.
(2) During 1993, the Company negotiated a discounted payoff of a mortgage loan
secured by an apartment community, the excess of the amount owed for
principal and interest over the amount paid to payoff the loan was recorded
as an extraordinary item-gain on extinguishment of debt. The Company
determined that the carrying value of the community was in excess of net
realizable value. The excess of $1,361 was charged to write down of real
estate assets and was recorded in the income (loss) before minority interest
and extraordinary item.
(3) In connection with the repayment of existing indebtedness at the time of the
initial public offering, prepayment penalties and lender participation
(additional interest) totaling $2,594 were paid. Prior to the offering, an
Executive Incentive Deferred Compensation Plan was canceled and the $2,639
that was funded by the Company was expensed during 1994.
<PAGE>
EXHIBIT (23.1)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 3 to the Registration Statement (Form S-3 No. 333-19879) and
related Prospectus and Prospectus Supplement of Evans Withycombe Residential,
Inc. and Evans Withycombe Residential, L.P. for the registration of various
securities described therein and to the incorporation by reference therein of
our report dated January 31, 1997, with respect to the consolidated financial
statements and schedule of Evans Withycombe Residential, Inc. included in its
Annual Report (Amendment No. 3 to Form 10-K/A) for the year ended December 31,
1996, and our report dated January 31, 1997, with respect to the consolidated
financial statements and schedule of Evans Withycombe Residential, L.P. included
in its Registration Statement (Amendment No. 3 to Form 10/A) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Phoenix, Arizona
March 24, 1997
